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For Wal-Mart, Fair Trade May Be More Than a Hill of Beans
On Rosevaldo Jose Pereira's farm, workers separate the leaves and twigs from the coffee cherries, which will yield coffee beans.
(By Ylan Q. Mui -- The Washington Post)
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Brazil produces roughly 30 percent of the world's coffee, exporting 26.4 million bags weighing 132 pounds each in 2004. About half of that is grown in the southeastern state of Minas Gerais, known for its iron mines and orange-red earth.
Pereira's village is there, the farms connected by dusty dirt roads. Donkeys plod along the cobblestone streets of the town center next to cars. About an hour and a half away is the air-conditioned headquarters of a company called Cafe Bom Dia.
Bom Dia is Pereira's link to the global economy, buying beans from the co-op and selling them to Wal-Mart. It counts itself among the five biggest coffee roasters and exporters in Brazil. Much of its production includes organic and fair-trade coffee from small growers such as Pereira.
Bom Dia buys beans directly from farmers and roasts them, eliminating a middleman. The company, run by the wealthy Marques de Paiva family, also grows, roasts and exports beans from its own farm.
To Hoffman, that all meant one thing: cheaper prices.
"I really didn't think five years ago when I was down there that I'd be talking about a national organic or fair-trade program," he said in an interview from Bentonville. "That had not crossed my mind."
Sam's Club already was selling fair-trade coffee from Millstone Coffee but wanted to work directly with Bom Dia to create a new line that could undercut the prices of the big names, controlling a supply chain from the ground up.
"Here was a company that first of all made a fantastic product," Matt Kistler, vice president of product and packaging innovation at Sam's Club, said in an interview from company headquarters. "But also it was a really direct-to-the-farmer opportunity for us. It eliminated or bypassed some of the traditional layers."
Supporting fair trade presents a paradox for Wal-Mart. It is a tacit admission that there is a point at which no more efficiencies can be squeezed out of the system without harming the people who make it work. Fair-trade beans are sold at a minimum of $1.26 per pound, compared with the world average last month of 90 cents. But Wal-Mart is still determined not to pay more than it must.
The company has forged partnerships with hundreds of social and environmental groups to develop sustainability initiatives. TransFair USA, which certifies farms as fair trade, is working with it on Pereira's coffee. The Rocky Mountain Institute is helping reduce the fuel consumption of its trucking fleet.
But Wal-Mart remains a lightning rod for criticism, and some groups are stepping carefully. The National Resources Defense Council has quietly worked with the retailer on everything from consumer electronics to alternative fuels over the past eight months. But a few weeks ago, organization President Frances Beinecke reminded staff in a memo that the group's name could not be used publicly in association with Wal-Mart without express approval.
"Trust is built over time," Andrew Ruben, Wal-Mart's vice president for corporate strategy and sustainability, said in an interview from Bentonville.
