Visionary or Over-Extended?

 To all who have continued to check back for updates on my blog, you truly are a committed follower! It was a hell of a summer-- we lived in paradise in southwest Florida, spent almost every day outside. Ted was real sick and we were both getting ready for school to start. Our journey in equitable consumerism has continued nonetheless and you can check back (after you read this amazing post, of course) in November for a list of "My Favorite Things." I found some great things this summer including green and fair watches, shoes and goodies. The fair trade market is growing--more products are arising!

I'm absolutely loving my MBA in Sustainability program. In the past 2 months I have learned a ton about what makes a business great, how "mighty businesses fall" and how challenging it is for corporations to take on corporate social responsibility standards. (We are digging deeper into that now in my Foundations of Sustainable Business class). One of our recent assignments in this class was to compare why one business fell and why one made it during the recent recession. I jumped on the opportunity to compare Equal Exchange with a company called ForesTrade. ForesTrade was an organic spice and coffee company who didn't realize their potential in the Sumatran coffee or fair trade spice industry. The founder was scattered and unorganized. They were at one time, the fastest growing fair trade industry- but because the founders failed to build a company, and over-stretched themselves-- they fell apart.


Have a read if you like and by all means, leave your awesome thoughts!

More than Passion

Succeeding in the fair trade coffee industry is neither easily achievable nor easily sustainable. Not only does it demand an expertise in the system of fair trade and organic procedures, but it also requires a solid understanding of doing business in developing nations. A company who sets out to be a leader in this industry must be highly idealistic and highly pragmatic. Both people and profit must be part of their core DNA. Because of their clock building founders, core ideology and keen ability to care about equitable profit, but profit nonetheless, Equal Exchange has maintained its leadership in the fair trade industry throughout the recent recession and has watched a local competitor, once the fastest growing fair trade company, ForesTrade, go bust.

A tour through the coffee roasting plant of Equal Exchange in West Bridgewater, Massachusetts will turn the most devout Mormon into a coffee bingeing addict. Their coffee is smooth. Their chocolate is creamy. But it’s the indistinguishable cult-like culture and devotion among Equal Exchange employees that converts the multitudes from the $1 Hershey bar to the $4 Equal Exchange bar. Equal Exchange was started in 1986 by Rink Dickinson, Jonathan Rosenthal, and Michael Rozyne with the vision to fix the broken food system. For three years prior to the launching of the company, the men met to converse about how they could change and improve the system and how they could empower farmers (equalexchange.coop). By 1986, the men had come up with their core ideology which 25 years later, continues to define who they are:

• A social change organization that would help farmers and their families gain more control over their economic futures.
• A group that would educate consumers about trade issues affecting farmers.
• A provider of high-quality foods that would nourish the body and the soul.
• A company that would be controlled by the people who did the actual work.
• A community of dedicated individuals who believed that honesty, respect, and mutual benefit are integral to any worthwhile endeavor (equalexchange.coop)

This core ideology isn’t framed and hung in the offices of the department heads. In fact, Equal Exchange probably isn’t the only fair trade company with this set of values. But what sets Equal Exchange apart, what makes them a truly visionary company, is that these values represent who they are. Employees of Equal Exchange live and breathe their commitment to the company because not only do their employees believe 100% in the positive impact of fair trade but also because every employee is a shareholder of the company or “worker-owned cooperative”. The cooperative is serious about good products; mainly for the customer, but also because they love the taste of their products so much too. As described by Lucas Conley in an article of Fast Company, Grounds for Rejection, quality control at Equal Exchange is a spiritual experience:

“In a session of coffee bean testing, Beth Ann Caspersen, the director of quality control at Equal Exchange, asked an employee standing in a corner, sucking on a breath mint to leave the room. Cupping--the subtle art of testing coffee beans for flavor defects--is a near-religious affair [at EE],” (Conley, 19).

And it isn’t just the quality control or marketing departments talking about their coffee and other delicious commodities. Members of the Equal Exchange co-op love their chocolate and coffee so much that they hang out buzzing on caffeine in their comfy, employee café which hosts an endless, free buffet of their products. They love what they do and they can’t help but educate others about their work because their work is who they are.  

Similar to Merck & Company, Equal Exchange has displayed throughout most of its history both high ideals and pragmatic self interest (Collins and Porras, 47). The founders and current CEO’s of Equal Exchange have built into their identity the priorities of both people and profit, but people first. The clock-building founders knew that long term success in the fair trade coffee industry would only be a result of healthy and nurtured relationships with their international coffee cooperatives (not simply extensions, but independent cooperatives) and with their US-based team. As part of the worker-owned cooperative, every employee, from the coffee pickers in Uganda to the CEO, shares in the profits and losses of the company which creates equality within the company. Other benefits of the worker run cooperative include the freedom to share feedback to higher ups, a democratic voting process, open financial information and the equitable distribution of income (equalexchange.coop). In fact, the cooperative is set up so that the highest paid position will never make any more than four times the amount of the lowest paid position.

Just as it’s no coincidence that Merck is the largest pharmaceutical company in Japan, the long term benefit of their decision to give away streptomycin during World War II, it is also no coincidence that Equal Exchange is highly profitable. Equal Exchange has made it their main objective to preserve their core and stimulate progress and it shows. Their revenues have grown an average of 34 percent annually, reached S13 million in 2003 (McKone-Sweet, 55) and jumped to $36. 5 million in 2010 (Dinkison and Everts, 1) Equal Exchange pioneered the way in the fair trade coffee industry and was the first U.S. company to espouse the international fair trade requirements. Their commitment to both profits and people have ushered them to the top of the fair trade, coffee industry. But the “both and” is exactly what ForesTrade Inc. neglected to do.

ForesTrade Inc. was started by a husband and wife team, Thomas and Sylvia, in response to the need for work for the farmers they met when they lived in Sumatra. Within two years of incorporation, ForesTrade had contracts with approximately 3,000 farmers in 45 communities in Indonesia and 30 communities in Guatemala (Farrell, 24) to outsource organic spices and fair trade coffee. In fact, according to Ian Diamondstone, the former Operations and Customer Relations Manager of ForesTrade Inc, ForesTrade was the first company to import organic coffee from Sumatra. While many companies were unable to do business with this region of the world because of war, the founders’ previous relationships with the farmers proved very profitable for ForesTrade. However, while Equal Exchange was deeply investing into and monitoring the success of their international coffee coops ((each new US-based employee is required to make a trip to a farmer co-op within his or her first 30 months at the company, (Conley, 19)), ForesTrade was missing the opportunity to market their rare, Sumatran coffee; coffee that was bringing in 75% of their profit. Diamondstone describes the time-telling founders of ForesTrade as “true entrepreneurs with passion and good intentions, but absolutely not good managers.” He said that it was quite frequent for Thomas to get stuck on an idea, commission the staff to research it and then jump on a plane to Indonesia to make it happen without even knowing if there was a market. “Both Thomas and Sylvia lived far from reality. They were very innovative but demonstrated no control over their thoughts and actions because they wanted to see things happen,” (Diamondstone).

Jumping all over the place is exactly what ForesTrade Inc did. ForesTrade took out loans to invest into organic spices. They used investors’ money to maintain their coffee production and took out more loans to spend a year researching the Ramon nut; which was never capitalized because of limited capacity. The continuous expansion of ForesTrade spread their resources so thin that they not only lost an opportunity to market their Sumatran coffee, but also lacked enough resources to label their spices as fair trade; an industry that, like the Sumatran coffee, had yet to be maximized. “Although there was no one else in the fair trade, organic spice industry, they thought it was too cumbersome, too much for where they where and they never set goals around this,” said Diamondstone. While Equal Exchange set and met a big, hairy, audacious goal to build the largest worker-owned coffee roasting operation in the U.S in 2005 (equalexchange.coop), ForesTrade was losing the opportunity to do what it did best: fair trade coffee and fair trade spices. Already considered a leader in the organic spice industry, according to Diamondstone, with their name printed on every bag of spices sold in Europe, it would have been quite an easy transition into the fair trade spice industry. But ForesTrade missed this opportunity and slowly but surely, lost the interest of their farmers.
            Equal Exchange has established cooperatives with farmers in over nineteen nations spanning 4 different continents and they are deeply connected to each of them. Each month, Equal Exchange employees visit the cooperatives to see how they are progressing, check on the quality of the coffee beans and assess future needs. Instead of dropping vendors for the slightest infraction, or pressuring them to offer lower and lower prices, Equal Exchange forges closer, more-forgiving relationships with its farmers in the interest of providing better products (Conley, 98). Often many of the farmers will spend time at the Bridgewater location, learning about coffee and how to grow tastier beans. Equal Exchange always communicates product quality trends and market pricing data to farmers and assists them with credit needs, understanding the market, and acquiring the skills and resources to meet changing market need (McKone-Sweet, 56). They care about the farmers, the quality of their product and growing profits. “With this feedback," says Caspersen, "farmers are able to provide a better bean," (Conley, 98). But the clock builders didn’t stop there. Equal Exchange provides farmers with more than $1 million in pre-harvest financing which provides food and the essentials and the pre-harvest financing provides Equal Exchange with the best beans (Conley, 99). The better the beans, the better the profit: yet another example of how the founders created the company to be both highly idealistic and highly pragmatic.

ForesTrade, on the other hand, visited their farmers only two times per year and no staff were designated to build the relationship long distance.  The farmers lacked proper instruction and support they needed to become self-empowering (Porter, 35) and eventually, the farmers decided they didn’t need ForesTrade to act as a middle man. Diamondstone explains, “ForesTrade plaid a critical role in fair trade, coffee farming, but with technology the farmers figured out how to get their coffee to market without us. This happened in Guatemala. We should have had 20 field staff on the ground.” A lack of relationships with farmers brought a lack of business which brought a lack of profit. By January 2011 the company was operating out of Diamondstone’s home, after the bank had taken over and a wealthy, “hippie-hating,” VP of Sales from Boca Raton tore the company apart.  

            Unlike Equal Exchange, core ideology at ForesTrade was neither solidly defined nor clearly communicated to staff.  In fact, Diamondstone, an employee of ForesTrade for seven of their eleven years and the main touch point for every customer, could not remember the mission or vision of ForesTrade. Thomas and Sylvia lacked an understanding of clock building and nurturing both profit and people. Dickinson, Rosenthal, and Rozyne, however, spent three years creating a company before they ever responded to their passion. They developed a strong organizational framework and a worker owned cooperative which ensured that employees are aligned with and excited about the company’s mission. This in turn provides leadership continuity and thus a longer-term perspective (McKone-Sweet, 55). And indeed, a longer term perspective is what they created. The worker owned cooperative agreed that their goal for the next 20 years would be to create "a vibrant mutually cooperative community of two million committed participants trading fairly one billion dollars a year in a way that transforms the world,” (Dickinson and Everts).

            The clock builders of Equal Exchange knew that a passion for creamy chocolate and smooth coffee wouldn’t be enough to create a sustainable business. In fact, they knew that passion for justice in the food system wouldn’t do it either. They knew that to be sustainable you have to stick to your core, invest into your people, and keep an eye on the dollar too.