Fair trade is a concept widely accepted in the world describing a business practice in which importers provide humanitarian benefits to exporters, who are usually in developing nations. Humanitarian benefits can mean anything from paying proper prices for high-quality products to helping the people in that country build social infrastructure, such as water supply systems and educational facilities. Global companies practicing fair trade are seen favorably as being socially responsible.
Zensho Holdings Co., Japan’s largest operator of restaurant chains, has been practicing fair trade with 12 countries, including four in Africa, since 2007.
The company conducts fair trade for a very simple reason: Zensho’s charter stipulates its mission is “to eradicate hunger and poverty from the world.”
“It’s that simple,” said Makoto Hirano, a director, member of the board and divisional head of Group Corporate Communications at Zensho. “The decision to begin fair trade comes from simply following the company’s mission.”
Hirano also emphasizes that Zensho does not conduct fair trade out of charity, but because it makes business sense since the company — which operates about 20 different restaurant chains, including Sukiya (known for its low-price gyudon beef bowls) and others serving steak, ramen, udon noodles, sushi, pasta and Mexican food — only buys high-quality ingredients.
“Sustainable business models provide continuous aid to developing countries. We consider our fair trade a long-term commitment,” he said.
Zensho’s fair trade
Zensho currently imports coffee, cocoa and tea from the 12 countries in which it practices fair trade. In Africa, it imports coffee from Tanzania, Rwanda and Uganda and tea from Kenya. It is also planning to begin importing coffee from Burundi this year.
In conducting fair trade, Zensho emphasizes the point that it sends its employees directly to producers to talk to them and visit their farms, which are usually located in the mountains, sometimes several hours of off-road driving from airports.
Zensho pays the farmers a 5 percent “social premium” on top of the appropriate prices for high-quality coffee, cocoa or tea. As Zensho signs contracts with local farmers, it does not only buy the products but discusses their needs, which can be to build supply chain infrastructure, schools or facilities that allow access to water. Together, Zensho employees and local farmers decide what social support to spend the premium on.
Zensho has identified two main pillars of social support:
• health and education for children;
safe food and water.
Regarding health and education for children, Zensho builds kindergartens, elementary schools and libraries and trains nurses for the sake of mother-child health care.
As for safe food and water, Zensho builds water supply systems, helps cows reproduce effectively and promotes pesticide-free agriculture.
Referring to Zensho’s charter, Hirano said, “We believe everybody in the world, rich or poor, has a right to food safety. That’s why we believe it’s our mission to promote food and water safety.”
The coffee business
Coffee is the main product Zensho imports through fair trade. Zensho’s fair trade partners are mainly “tiny farms in very rural areas,” Hirano said.
The business environment is generally not so friendly for tiny coffee farm owners because prices fluctuate greatly as large producers and buyers wield price-determining power.
Zensho sets fair and stable prices for the products because it deals directly with these small producers. Thus, the rates do not depend on market prices.
The company buys only as much as it uses for its restaurants. In 2012, the percentage of fair trade coffee beans Zensho uses rose to 100 percent.
Zensho also boasts strong food storage technology, allowing the company to check the humidity of coffee beans regularly to avoid mold.
“We know how much we consume,” Hirano said. “Therefore, we do not waste a single bean.”
Zensho will not buy coffee from the open market even if the company increases the number of restaurants it operates, meaning the company always has enough inventory, Hirano said.
The fair trade coffee beans are used in shops including Moriva Coffee, which sells a cup of highly-valued coffee, such as 100 percent Kilimanjaro, for a reasonable ¥180.
Asked how Zensho can manage to keep the price competitive while paying a 5 percent social premium and repeatedly sending employees to remote areas, Hirano said that this was achievable because Zensho does not pay unnecessary costs to distributors and other middle men as it does everything from purchasing ingredients to producing and selling the final products.
Zensho calls this business model the MMD (mass merchandising) system. The company procures ingredients, operates logistics and manages restaurants on its own, in a spirit to provide food of which it can take full responsibility for the safety and quality.
The MMD system is a concrete solution to the most important company motto: “To provide safe and delicious food at affordable prices to people throughout the world.”
On the ground in Africa
Zensho began importing coffee from Tanzania in 2009. The main partners are G32 and KNCU, two cooperatives located at the foot of Mount Kilimanjaro.
One of the main problems facing farmers in this region is high maternal and child mortality rates. Through the social premium, Zensho has established a program to educate and motivate farmers about healthy family planning and has seen a result of decreased rates of deaths for children under 5.
Coffee imports from Rwanda, which continues its recovery from the 1994 genocide, began in December 2011. Zensho went into a partnership with a coffee grower in Cyingwa.
There, the social premium is being spent on building water access facilities, among other things. Schoolchildren had often arrived at school late because some of them had to walk long distances to fetch water early in the morning. After the facilities were built, they go to school on time.
Zensho began importing tea from Rukuriri and Kangaita, Kenya, in December 2009.
Some of the social premium is being used to purchase agricultural equipment, pay for artificial insemination of cows and repair a day-care center for farmers’ children.
Fair trade with Kenya also helps Somalian refugees. Milk that Zensho delivers to Dadaab refugee camp in Kenya comes from a factory that buys surplus milk from cows owned by a tea farmer.
In June 2012, the company began importing coffee from Uganda.
The site of the coffee farms is on a mountain that had no hospital or clinic nearby. Thus, Zensho and the local farmers decided to build a clinic with proper medical facilities.(Publicity)