Author: Calcalist (Israel) Posted February 13, 2014
Various fair-trade initiatives have begun in Israel over the past decade and even before; however, most of them have failed. Only a few stores in Israel sell fair-trade products (primarily, the Achoti shop in Tel Aviv). And the local movement that sought to promote the use of fair-trade vouchers has shut down business. The concept has not seeped in and has not been adopted by the major Israeli manufacturers, and contrary to the global trend, it is not used as a marketing tool locally. It seems that Israeli consumers do not really care.
Given the failure of the fair-trade cause in Israel, the success of Canaan Fair Trade, based in the West Bank Palestinian city of Jenin, is particularly notable. The fair-trade supplier of olive oil and other Palestinian agricultural products has clients all over the world, including international corporations like Ben & Jerry's, LUSH Cosmetics and the giant retailers Whole Foods, Williams-Sonoma and Sainsbury's.
A world renowned venture unknown in Israel
Canaan Fair Trade came into being and has grown and flourished entirely removed from the Israeli efforts in this domain, and it has actually surpassed the Israeli initiatives, going unnoticed by the local food industry. Canaan is virtually unknown in the Israeli arena of food companies and retailers. And if you wonder where it is known; well, the brand name is widely recognized among international bodies engaged in fair trade and social investments.
Since it began operations in 2005, Canaan Fair Trade has succeeded in bringing 2,149 Palestinian farmers under its umbrella. Its sales volume for 2013 reached 321 tons of olive oil, yielding revenues of $4.1 million. Yet, impressive as the figures may seem, they represent a certain decline compared to Canaan’s peak year of 2011, when its sales volume totaled 440 tons of olive oil, yielding revenues of $4.7 million. These figures make Canaan the largest fair-trade venture in Israel — or in Palestine — its officially announced base of operations. In fact, according to its founder and managing director, Palestinian-American businessman Nasser Abufarha, Canaan Fair Trade is the largest fair-trade enterprise in the Middle East, and the largest fair-trade supplier of olive oil in the world.
Canaan Fair Trade was conceived in 2003, at a conference organized by Abufarha on behalf of local olive growers in the Palestinian Authority. Many of the olive growers attending the conference voiced their interest in the model presented by Abufarha, who had been exposed to the model of fair trade in the course of his doctoral studies at the University of Wisconsin in the Unites States. Abufarha then went on to establish Canaan, basing it on three fundamental guidelines — the traditional principle of financial profitability, supplemented by the guiding principles of social profitability and environmental sustainability.
An increase in profits that makes all the difference for the growers and their families
Among the first investors financing the activities of Canaan Fair Trade was the American soap manufacturer Dr. Bronner’s Magic Soaps, a family-owned-and-operated company founded by Emmanuel Bronner, a scion of soap makers. The Bronners’ company was one of the pioneers of fair trade in the cosmetics industry (which rendered its products highly popular in the United States in the 1960s), and to this day it has remained a family-owned company that promotes business ethics. Through the years, Bronner emphasized the association between the family company and the establishment of the State of Israel, and he even painted his first product blue and white. What’s more, the company has taken care not to limit its purchases to Palestinian olive oil, but rather makes it a point to buy Israeli-made oil for the manufacture of its soaps.
Drawing on the capital it raised from the Bronners, coupled with the financial support it received from the Palestinian Authority and the funding by the Dutch government, Canaan Fair Trade was able to invest $5 million in infrastructures for the production, bottling and marketing of olive oil and other agricultural products. The funds were also used for the acquisition of a building in Jenin and the establishment of the Palestinian Fair Trade Association.
The branding strategy of the products it resells as fair-trade products has made it possible for Canaan Fair Trade to charge a higher price for the produce, and it has thus managed to triple the income of farming families taking part in the venture. Abufarha said that before Canaan entered into the market, the price per ton of olive oil was approximately NIS 9,000 [about $2,560] in the open market, while the Palestinian olive oil growers could get through Canaan no less than NIS 24,000 [more than $6,800] per ton. “For a farmer producing 4 to 5 tons of olive oil a year, these amounts can make all the difference,” he notes.
The price the farmer receives for his produce is the focal point of any fair-trade activity. As a matter of fact, the fair-trade movement was initially formed to tackle situations where farmers in the Third World could not receive a fair price for their produce that would provide them and their families with a dignified existence.
Setting a fair price for the farmer is the fundamental principle at the base of the social and economic activity of Canaan, which was a global pioneer in fair-trade marketing of olive oil. The price the farmer receives for 1 liter of olive oil is currently fixed at NIS 15 [roughly $4.25], and Canaan would never pay the farmer less than that.
Given that price, one can understand why the Israeli farmer operates as a rule under fair-trade conditions, even though no such framework has been officially defined in this case. The Olive Board in the Israeli Plants Production & Marketing Board sets a recommended price for the farmer, which stands at NIS 18 [just over $5.10] per liter. While Israeli farmers do not always get the recommended price, it seems that the Palestinian floor price is applicable to them. too, in the majority of cases, at least. That price is guaranteed to Israeli farmers primarily by virtue of import and customs barriers.
According to Abufarha, fair-trade ideology is not as relevant to the Israeli farmer as it is to his Palestinian counterpart, since it is an ideology primarily intended to strengthen Third World farmers who have to cope with global conglomerates, while the Israeli farmer lives in the First World.
The profits are used to buy computers for schools
Canaan’s business model involves the sale of products officially labeled as fair-trade products, enabling the company to collect a certain premium from the consumer. Its customers are for the most part socially aware consumers who are willing to pay a little more for the produce, realizing that their personal consumption serves to promote a social cause. In fact, 22.4% of the retail price set per a bottle of olive oil marketed by Canaan represents a “social premium.”
Of this the social premium, 50% directly forwarded to the farmer, 25% is funneled to the agricultural cooperative the farmer is associated with, while the remaining 25% is invested in upgrading the education system and other infrastructures serving the Palestinian farmers.
There is a whole range of infrastructures that benefit from the social premium — from farming tools to computers for the schools attended by the farmers’ children. The improvement of infrastructure has also helped to improve the olive oil quality. When Canaan launched its operations, only 15% of the olive oil marketed was extra virgin oil, whereas at present, 80% of the oil produced is of the highest (and most expensive) quality.
Canaan is also active in promoting the cooperatives of Palestinian women who find a source of income in handling agricultural produce. There are currently 200 such cooperatives organized under the auspices of Canaan, which produce a variety of products — dried tomatoes, hyssop and coconut soap, to name but a few. Over the years, Canaan has diversified its product offerings, and in addition to olive oil, it is currently marketing a range of other agricultural products, including canned food, spreads, sesame, honey and more.
Read More: http://www.al-monitor.com/pulse/business/2014/02/canaan-fair-trade-palestinian-venture-olive-oil-israel.html