Fair Trade Comes to Wine

Global farmer-assistance program extends help to grapegrowers in Argentina, Chile and South Africa
May 9, 2013

When a small grapegrower in Argentina's Luján de Cuyo district needed a kidney operation, his fellow farmers dipped into a shared fund to help pay for it. When another grower's donkey died, the fund was tapped to buy him a new one. These 19 farmers, some of whom own as little as 3 acres, also invested in their vineyards, replaced roofs on their homes and provided supplies for the local school.

At a time when so many of their fellow small growers in Mendoza have been squeezed out, how did the landowners and vineyard workers, part of a group called Viña de la Solidaridad, manage all that? Viña de la Solidaridad had earned an extra $40,000 for these projects by participating in a fair-trade program, intended to fight poverty in developing nations, keep families on small farms and empower workers. Working with Bodega Furlotti, the growers earn a premium above-market price by supplying grapes for fair-trade wine lines, including Neu Direction Malbec, which was picked up by retail giant Sam's Club.

"There was a real need from these communities for additional revenue to help improve their situation," said Dave Leenay, executive vice president for sales for Prestige Wine Group, the U.S. importer instrumental in developing Neu Direction, along with Wandering Grape Merlot-Malbec, carried by Target. "And there was a need from the big corporations to talk about their commitment to helping be more sustainable and improving people's lives."

Best known for coffee, as well as bananas, tea and cocoa, the fair-trade movement is taking hold in the U.S. wine market, with a tiny but growing presence among imports from Argentina, Chile and South Africa. Purchases by large companies such as Whole Foods Market, Wal-Mart and American Airlines have helped give the category momentum.

"We had some demand from importers and wine brands wanting to invest in a different type of product"—socially and environmentally responsible, said Maya Spaull, director of new category innovation for Fair Trade USA, which introduced wine certification in the U.S. in 2008. "The wine shelves are completely saturated," Spaull added, and a fair-trade label can help a brand stand out. Consumers have seen the label on coffee and chocolate in grocery stores and, she believes, the story about supporting poor communities is easier to grasp than sustainability.

"It's an all-around, feel-good for us as a retailer and for when the consumer comes in," said Tom Feaster, assistant manager at Beacon Wines & Spirits in Manhattan, which stocked its first fair-trade wines, from the newly imported South African brand House of Mandela, this spring. Beacon's customers had not been asking for fair trade, Feaster said; many who showed up at the first tasting hadn't even known it existed for wine, but they responded positively enough that the store increased its order.

No single organization regulates fair trade globally; instead, a network of international and regional organizations—some working with artisans, some with farmers—guides the movement. In North America, wines primarily carry one of three labels: "Fair Trade Certified" from Fair Trade USA, "Fairtrade" from Germany-based Fairtrade International (FLO) and the newer "Fair for Life" from Switzerland-based Institute for Marketecology.

While the details differ among the organizations, all the certifications require onsite inspections and audits, with annual updates. Wineries must provide a living wage and safe conditions for workers, and must pay growers a fair price for their grapes to cover the cost of production. Environmentally friendly viticulture—to protect the local ecosystem and workers' health—is a key requirement; for example, pesticide use is restricted and genetically modified organisms are banned.

What really sets fair trade apart from "sustainable" wine certifications is that, on top of paying for the grapes, the wineries pay an extra premium for each ton harvested—or about 16 cents per bottle, according to Fair Trade USA. That may not seem like much, but this money goes into a communal fund, and as it adds up, the workers or growers vote on how best to use the earnings to improve their communities or their farms.

"When you have workers who were not regarded as equals sitting around a table saying, 'We have this amount of money, and we'd like to use it this way,' out of it comes an incredible sense of pride," said Spaull. "They are more invested in the producer. They tell me, 'Please go sell as much fair trade as you can; we want people drinking our wine.'"

Competing certifications can make it hard to pinpoint how big fair trade wine has grown. Globally, the nonprofit Fairtrade International reported that more than 1.3 million cases of "Fairtrade" wine were sold in 2011. Since it added wine, Fair Trade USA has certified around 50 wine and spirits products (some overlap exists with the other certifications); those sales of nearly 212,000 cases have earned more than $345,000 in premiums for community development. Fair trade is also moving into spirits—the first certified brand is called FAIR, which incorporates fair-trade quinoa, sugar and coffee into its vodka and liqueurs.

Miguel Torres has certified his entire Santa Digna line in Chile, which represents about 60 percent of its sales, or about 240,000 cases and growing. The company raised $230,000 for community projects in 2010-2011 and another $220,000 in 2012. So far, Torres reported, that has gone to reconstruct a school in Potrero Grande, buy audiovisual material for a school in Huerta de Maule, provide bicycles to workers, fund scholarships, and help growers improve their houses and vineyards. In addition, the company has founded the Asociación Chilena por el Comercio Justo, with growers and small cooperatives, to get more Chilean companies on board with fair trade and ensure the rules are well-defined.

In Chile, fair-trade wine mainly targets small farmers who grow grapes and sell to wineries—they have been struggling with the country's political history, land redistribution, fluctuating grape prices and the impact of the 2010 earthquake. Argentina has a mix of large wineries with hired labor and small growers, many of whom have been selling their vineyards as land values in Mendoza are going up, instead of farming. Fair trade prices make staying on their land make sense. In South Africa, the program aims mostly at hired labor, typically workers living on a wine estate, building on black economic empowerment laws passed after apartheid to encourage ownership and investment in businesses.

Photograph Courtesy of Emiliana Winery

Vineyard workers at Emiliana Winery tend a beehive financed by fair trade premiums. They sell the honey they make, adding more to their community projects fund.

Critics of fair trade question whether the costs of complying with the standards eat up any profit for small farmers, if those standards are enforced strictly enough to protect workers, how much of the money actually gets back to the farmers (especially if retailers raise prices for prestige products beyond what's needed to pay the premium) and whether the programs inadvertently harm non-participating farmers by forcing their prices down. Still, it seems fairly obvious why anyone earning a subsistence-level income would be interested in a fair-trade program.

But what's in it for the wineries, importers and retailers who can find other ways to differentiate their products? With Fair Trade USA, importers have to pay a 10-cent licensing fee for every 750ml bottle, which funds the organization's promotional efforts and the costs of certification and verification. Producers and importers submit all packaging and marketing material for approval and provide quarterly reports on imports and sales, so that Fair Trade USA can confirm the benefits are going back to the farmers.

José Guilisasti, cofounder and general manager of Emiliana, a publicly held company, sees it as an investment. Long-term relationships with growers and workers provide stability. "Without good people, nothing will be successful," Guilisasti said. "If you don't treat them well, they will not follow your goals." Emiliana has invested in university and technical scholarships for employees and their children, English-language classes, organic gardens for workers to grow their own vegetables and training workers to start their own micro-businesses, such as making honey and olive oil. These products are sold at the winery, and the employees get the proceeds. "This is for the future of Chile," said Guilisasti. "They need to have the opportunity."

For many of the small importers, it appears to be a reflection of their personal interest and values. "It's not the most profitable piece of our business by any stretch of the imagination, but we want to help and give back," said Leenay of Prestige, which has increased from 3,000 to 12,000 cases a year of its two fair-trade brands—priced from $11 to $13—out of 2.7 million cases total sales. The company has created its own fund, amassing another $40,000, for community projects.

Selena Cuffe, another of the eight wine importers who work with Fair Trade USA, launched Heritage Link Brands in 2007 specifically to bring South African brands with black ownership, such as M'hudi and Seven Sisters, to the United States. "For me, fair trade represented the deliberate intention to make a difference," said Cuffe, who was introduced to the concept by Rydal Jeftha, managing director of Koopmanskloof. The Stellenbosch winery was founded by a European family, but now workers own about 18 percent of the business, and Jeftha, one of the first black winery CEOs in South Africa, also holds a big stake.

Cuffe worked with them to bring in One World, which American Airlines carried as its first fair-trade brand in-flight. Sales are still small—Cuffe said fair trade makes up less than 5 percent of the 23,000 cases she imported in 2012—but the premiums have gone toward renovations of a daycare facility for workers' children. Now Cuffe and distributor Southern Wine & Spirits are making a big push with House of Mandela, whose Thembu Collection wines are made in conjunction with Citrusdal, a fair trade cooperative.

Fair trade is still not an easy sell, said Cuffe. Regardless of the customer, the wine has to stand on its own in terms of quality and value, she added, especially to counter any preconceptions. "Before a tasting, I'll hear people in the trade say, 'Oh I've heard fair-trade wines aren't that good because it's hard to source the grapes because there aren't that many fair-trade growers,'" Cuffe recalled with obvious frustration.

Still, as more people taste the wines and more marketing is done to raise awareness of fair-trade wine, she is optimistic about the potential for socially conscious brands. "This movement has already taken hold," asserted Cuffe. "It's up to us within the wine trade to be responsible about the way we source our products."

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