An analysis of costs and margins in the value chain of Fair Trade coffee: is Fair Trade fair to the consumer?

In this Bachelor Thesis, we research the role of the different actors of the value chain of coffee and their share of the value of the coffee that is finally sold to end- consumers. We then analyse and compare the various costs and margins incurred by Fair Trade and regular coffee. The aim of this research is to better understand how value is allocated in the final retail price of coffee sold in Swiss supermarkets, find out how much coffee farmers were paid for the coffee contained in a particular pack of coffee and most importantly if we notice differences between the allocation of value in Fair Trade and regular coffee. Is the premium paid by consumers for Fair Trade coffee entirely going in the pockets of coffee producers or do some other actors of the value chain capture some of that premium? To achieve this goal, we created a model to compute the various costs and margins in the value chain of coffee. This model was built around the study of financial statements of the various actors involved, the academic literature published on the subject, the publications of large organisations related to coffee trading, and the interview of a junior coffee trader. Our research found that in one case, the margins applied to Fair Trade coffee increased by 24.03% compared to a comparable regular coffee, while in a second case, the margins decreased by 10.38%. Our results also highlight some of the most well-known realities of the coffee value chain such as the amount of value that remains in coffeeproducing countries versus the amount of value that is captured in consuming countries. Finally, our results show an increase in gross household income of 1.06 USD/lb. for Fair Trade coffee growers which equates to an increase in net profit in a range of 0.078 USD/lb. to 0.254 USD/lb