Business Makes Sure Coffee Growers Get an ‘Equal Exchange’

In the 1980s, three managers of a Cambridge, Mass., food cooperative were becoming increasingly uncomfortable with the policies of the organization.

The co-op had good intentions. It bought food directly from producers around the world in order to cut out distributors, whom the co-op felt jacked up prices and reduced options for consumers. The co-op was owned by its members, who paid dues to buy the discounted food for themselves and helped decide what products would be sold.

The three men, who bought much of the food for the co-op, felt that they were being put under pressure by members to buy everything as cheaply as possible. They believed that the practice meant they were forcing farmers in developing countries, where much of the food was purchased, to accept low prices for their goods and continue to live in poverty.

“Within this system, as a buyer and contractor for this stuff, we were being asked to buy cheap and sell cheap,” says Michael Rozyne, one of the three. “But we began to say, ‘Wait a minute, something doesn’t make sense here.’ ”

“We were caught in this system, and we said, ‘Whoa!’ ”

The three men left the co-op to start an alternative organization that would buy products at higher prices from producers around the globe.

As they started planning, their first question was whether they should start a non-profit organization or a business?

Most “fair trade” organizations — groups that buy goods directly from farmers and crafts people in developing countries at prices that allow the producers to make decent livings — are non-profit organizations. In the United States, models include SERVV International in Westminster, Md., and Ten Thousand Villages in Akron, Pa.

But Mr. Rozyne and his colleagues, Jonathan Rosenthal and Rink Dickinson, had a sinking feeling about running a charity.

They wanted to change the market system. To do that, they felt that they had to compete within it and prove to other companies that they could buy products at higher prices and still turn a profit.

“It was about being in the marketplace,” says Mr. Dickinson. “That’s what it came down to.”

The three founded Equal Exchange here in Canton in 1986. The business, whose offices are decorated with Latin American crafts and with posters that boast the benefits of “fair trade,” only deals in coffee beans, though the founders hope to expand to other goods in the future.

Equal Exchange buys its beans directly from Latin American cooperative groups of farmers, rather than from intermediary companies. The farmers own the cooperatives, not unlike American food co-ops.

Equal Exchange pays farmers more than they would receive from corporate distributors who pay middlemen — or several middlemen — and who thus take a cut from farmers’ pay.

Because of the arrangement, Equal Exchange coffee is not cheap, costing typically about $7 a pound. It is sold primarily in the United States in gourmet markets and food cooperatives.

Equal Exchange struggled in the beginning, with the owners facing financial instability for three years before finally turning a profit. Last year, the company tallied $4.5-million in sales and $175,000 in pretax profits.

Because Equal Exchange is an employee-owned business, the profits are split among 19 people who own shares in the company. The three founders say they are doing well but are not millionaires.

Despite their difficulties in the early years, the founders are certain that they made the right choice to start a business. Since it has been successful, they say, they are sending a clear message to other coffee executives that they too can make a profit and do the right thing.

“We’re not saying from an academic or non-profit environmental vantage point that it could be this way theoretically,” says Mr. Rozyne. “We’re saying that we run a business and we do it this way. We have the same problems as you do — getting capital, getting people to show up for work, keeping them highly motivated, keeping stock, roasting properly, shipping during a U.P.S. strike.”

“I think that really proves it,” he says.

The founders say they have noted some changes among other coffee companies, with businesses like Thanksgiving Coffee Company in California offering their own line of “fair trade” coffee beans.

But they say they are a long way from solving world-trade problems since fair-trade coffee only makes up a tiny percentage of the overall multibillion-dollar coffee industry.

“We have really gotten a very sobering picture of how hard it’s going to be to amplify this movement to the mainstream,” says Mr. Rozyne.