[Fair Trade] Wal-Mart brews fair-trade project

from The Redding Record Searchlight

Coffee farmers in Brazil co-op may get deal

By Ylan Q. Mui, The Washington Post

POCO FUNDO, Brazil -- Rosevaldo Jose Pereira has never been to Wal-Mart. The name doesn't mean anything to the lifelong coffee farmer in this remote village in southeastern Brazil.

But Wal-Mart Stores Inc. knows who he is. And the world's largest retailer is changing his life.

Wal-Mart is in the midst of overhauling its tightfisted image to win over shoppers searching for more than low prices. That effort has taken the company that built an empire on the principle of high volume and low costs into previously uncharted territory, into the realm of trendy apparel and organic food.

Now, with the help of Pereira, it is embarking on one of its most radical undertakings to date: fair trade.

Pereira, 40, is part of a small cooperative of growers living in the heart of coffee country, where the rolling mountains are lush with trees. The late afternoon sun is strong. Pereira wipes the sweat from his brow with his forearm as he works his six acres. Dirt is jammed deep underneath his fingernails. He has been picking coffee cherries since 5 a.m., stripping them off the branches with his bare hands. They will be dried, and eventually only the pit will be left -- the coffee bean.

Pereira gets a premium for his harvest. His co-op is one of only seven in the country that is fair-trade certified, charging above-market price for beans because it meets certain social and environmental standards.

Wal-Mart is considering bringing Pereira's beans into its namesake stores. It would be a novel arrangement for a company infamous for squeezing pennies out of its suppliers -- and a test of how deep its makeover will really go.

For Pereira, the deal could mean more money, new computers for the co-op or a bigger school for the village. Already some children talk about college and life away from the farm. But it also would inextricably bind the co-op's fortunes to the company from Bentonville, Ark. -- putting all its beans, so to speak, in one basket.

Wal-Mart executives are planning to visit Poco Fundo at the end of the month before making a decision. It's part of the new corporate philosophy outlined by chief executive H. Lee Scott Jr.: "Doing well by doing good."

It is a work in progress.

Wal-Mart discovered Pereira and his co-op five years ago when Mark Hoffman, a buyer for its Sam's Club membership warehouse stores, visited Brazil on a scouting trip. There was nothing particularly philanthropic about his visit.

Hoffman worked for the company's global sourcing team, a now-defunct group that traveled the world finding ways to buy products for less money. The Brazil list included beef jerky, cashews and, of course, coffee.

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.

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.