Cafédirect, the Fairtrade hot drinks company, started trading publicly today, offering investors a chance to buy shares in the socially-conscious company.
The UK's largest Fairtrade hot drinks company, Cafédirect plans to raise £5m by offering shares to the public to fund its rapid expansion. Over the past three years, the London-based has grown 20% a year at a time when the overall coffee market in the UK has been static or down.
"We aspire to grow and therefore we wanted more funds," Cafédirect's managing director, Penny Newman, told Guardian Unlimited. "As more and more people discover the benefits of ethically sourced products, the time has come to realise the full potential of our 100% Fairtrade brands."
Once the share issue - offered through Triodos bank's Ethex exchange.- is completed, the public will own 56% of the company, the founders 38% and the producers 6%.
Set up twelve years ago on the premise of guaranteeing a fair price to producers, Cafédirect is now the sixth largest coffee brand in the UK and boasts an annual turnover of more than £10m. By cutting down on dividends to its shareholders - which include Oxfam and Traidcraft - the company reinvests 8% of its gross profits into tailor-made programmes for its producer partners.
Cafédirect only controls 3% of the UK freeze dried instant coffee market, which is dominated by four companies. Top of the pile is Nestlé, the maker of Nescafé with command over half the world's instant coffee market. Kraft, owned by tobacco giant Philip Morris, accounts for 14% of the world's coffee sales through brands such as Maxwell House, Kenco, Kaffee HAG and Jacobs. Sara Lee, the owner of Douwe Egberts and the US brand Superior, accounts for 11% of sales, while Procter & Gamble takes 8% of the market, selling mainly in North America.
Although a minnow in the coffee market, Cafédirect hopes to spread the message of Fairtrade more effectively, partly through greater funds for marketing from its share offering. In contrast to the big four in the coffee market, the company seeks to balance profits with fairness to their producers, who have been hard hit by falling prices for growers.
In 1997, consumers spent $30bn (£16.4bn) on coffee and producing countries received $12bn or 40% cent. At present, consumers are spending $66bn a year - or more than twice the 1997 figure - while producers are receiving only $5.5bn or 9%.
The value of sales has doubled, while producer incomes have fallen to less than a quarter, as the leading multinational marketing firms hold on to their enormous profits at the expense both of growers and consumers.
Under its "gold standard" trading policy, Cafédirect, which was established in 1991 by Oxfam, Traidcraft, Equal Exchange and Twin Trading, pays on average three times the world price to growers and yet still manages to make a profit.
In 2002. the company invested £299,000 - or 8% of gross profit - into building stronger producer organisations as part of the company's own development programme. The money goes into ventures that include technical training for coffee farmers, water sanitation and children's education.
Cafédirect reckons that its fair trade premium payments of £1.9m on coffee and £196,000 on tea helped keep 1 million farmers and their families afloat. Last year, the company expanded its approach to tea, launching the first ever guaranteed minimum price for tea farmers no matter how low auction prices fall.
The company's dramatic growth is evidence of people's interest in where their food is coming from, says its head of strategic development, Slyvie Barr.
"The interest may spring from an individual desire for organic food or from wider concerns with the environment or social issues," she said. "But we are a commercial venture not a charity. We are here to develop a trading relationship with farmers who just want a decent income from the fruit of their labours."
