2008 Annual Report

It’s out,
it’s beautiful and
it’s easy to download as a pdf.

If you would like a printed copy please email
emiles@equalexchange.coop

And for the curious, all Equal Exchange Annual Reports from 2000-2008 are also available at our website.

INTERdependance Day

Many in the US have  just celebrated Independence Day. Independence is a powerful word, and there is a strong American ethic around “rugged independence” and the values of the individual and self sufficiency.  While often noble, it’s not a good fit for global trade.

So Equal Exchange subscribes to a different ethos, “robust interdependence.”

If you invest in, work for, buy the products of, sell the products of, grow the products of, or generally support Equal Exchange you are part of that interdependence, and the good consequences of that participation in the common good are inescapable.

Enjoy.

2009? Vortex of Doom; Or Not.

In 2008 the financial services industry spiraled into a vortex of doom. How are we doing?

Well so far, at Equal Exchange the seas have been much calmer. We closed 2008 with over $34 million in sales, up from $29 million in 2007, keeping our 23 year record of growth intact. We got a little nervous in November and December as the economy dramatically slowed, but orders kept coming in. Like everyone, we’ll be affected by the recession but here are three reasons we believe we have a good platform on which to navigate 2009.

1: Good Products and Distribution
Our coffee is of excellent quality, is less expensive than many specialty coffees, and is an important part of people’s daily rituals. In fact we expect to hold on to most of our customer base – and maybe pick up some folks who find our competitors a little expensive for the times. Our chocolate bars, however, are a premium product and a discretionary purchase, so we’ll be watching this line closely. Chocolate and cocoa are now 16% of our business.

We also have varied distribution through food coops, natural food stores, cafes, universities, religious congregations and mainstream supermarkets – a diversity which offers security if (when) one group starts to decline. We’ll definitely have to manage our cash and expenses closely in 2009 to ensure an unexpected event doesn’t put the squeeze on our cash flow, but we have the means to do that, and we will.

2: Access to Credit:

Growth takes money; we need credit to purchase the millions of pounds of
coffee we buy each year. Fortunately the three main banks that provide us credit appear to be sound. Naturally the banks will be keeping a closer eye on us, and we on the banks. That’s good because Equal Exchange benefits from increased transparency. The more partners learn about us the more committed they are. And supporting it all are the investments made by people and organizations  committed to our mission and vision. That’s a great foundation.

3: Our Co-op Structure:

This is key. Equal Exchange is a worker co-op with two decades of experience, and because of that is an intrinsically prudent organization. The 90 or so worker owners have invested over $700,000 of our own money in Equal Exchange. If we make a loss, that money is at risk, which is partly why we’ve only made a loss once in the last 20 years. Being a worker co-op means we manage expenses personally and we take the mission personally. This is not just business, it is our livelihood, and as an economic democracy we have the means to set the co-op’s direction and work together to make it succeed.

So, is the catastrophic failure of international finance a time to be cautious or bold?

Both! The world can be changed for the better in good times and bad.  We will be frugal, but we don’t intend to step away from the breach, and in the company of those of similar heart and mind, we look forward to advancing the common good in 2009.

I’m Just Saying

A $10,000 dollar investment in Equal Exchange 10 years ago would be worth around $16,400 today (assuming dividends were reinvested). A $10,000 investment in the S&P 500 or Dow? Somewhat less. Perhaps $9,000.

Maybe slow and steady really does win the race? Over 20 years I’d take that bet.

Actually, I already have made that bet, and so have thousands of others. Thousands whose determination through triumph and disaster makes this all possible.

Cheers!

Welcome to our new blog

This blog is dedicated to investment in Fair Trade and cooperatives and to the investment community of Equal Exchange in particular. We hope to get to know each better other and explore together how we can advance our common wealth.

Business as usual is destroying our planet, so need some unusual businesses. At Equal Exchange we believe we’ve got a great alternative. You might agree, or not, but we’ve certainly managed to deliver results. Take a look around and please share you thoughts via the comments.

As to the title, Coin and the Common Wealth, well investing is about coin (which can mean general financing as well as little pieces of stamped metal) and the common wealth is our purpose. Not just your wealth or my wealth. Not just the farmers wealth or the merchants wealth. It’s about our common wealth: a mutual, equitable, democratic, uplifting common wealth.

Check out About Us All to learn more. Or read our delicious 2007 annual report (2Mb, pdf format) complete with audited financial statements. We grew 24% last year to over $29 million. That’s pretty good, and the stories are even better.

Cheers, Alistair Williamson

Coffee Cupping – breaking the crust

Two weeks ago, we did a coffee cupping at the offices of our friends and investors Trillium Asset Management. I joined Alistair, and Beth Ann and Mike from our Quality Control team, for a two-hour tasting.

Beth Ann Says: "Smell the Coffee"

Thinking about coffee cupping with Brokers and Bankers, I didn’t expect everything to be very relaxed and open. Yet beginning with my entrance into the office, I found an atmosphere unlike any of the Financial District offices that I have been in before. The office rang with positive chatter, earth improving slogans, a mild-coffee war and even laughter about the inner office challenges. I sat off to the side, observing, lending help when needed and running around with hot kettles of water.

As we set up for the cupping, we approached some technical difficulties: our seven kettles kept blowing the fuses, and our tasting wheel chart was in Spanish – but we moved on. Everyone gathered in the room and the cupping began, each person stooping low to watch the grounds rise to the top of their cup, glaze over with foam and then the clicking of the spoons as ‘crust’ was broken. You could hear the inhales of the aroma as it escaped from the cup. Comments and fragrant smells filled the air. Each person described what they could smell and wrote down adjectives as they popped into their heads. Soon the skimming of the foam and the gustation began. The slurping sounds echoed in the room and the funny part is that you wouldn’t expect how delighted they were to roll the coffee across their pallet to hit the back of their throat and then use their spittoon. Is this what you would have imagined at a Brokerage firm? I sat there soaking it all in with amazement.

The whole new experience of meeting with Brokers and Bankers to introduce the cupping to them was an extraordinary learning event. Their feedback showed how well-versed each individual was in the coffee industry and in excellent coffee. For two hours, traders, roasters and investors came together to enjoy and acknowledge the fruits, benefits of Fair Trade. The crust was broken.

A Social Capitalist Award – for us

Back in April, I went to Washington, D.C., to collect a Social Capitalist Award presented by Fast Company. There were 10 for-profit companies and 35 non-profits that met the Award’s criteria: check them out. Two of our financial friends, Calvert Foundation and Root Capital, were also winners.

The Award has been around for five years, but this is the first year they considered for-profit companies. Good. I think we’re past having our money choices framed as either profits or philanthropy. Perhaps there’s another way. As Fast Company Contributing Writer Keith Hammonds says:

“This year we’ve seen an explosion of diverse experiments, many of them engineered by onetime Wall Street heavies, that attempt to bring new capital – and capital-market dynamics – to the realm of social good. Through these deals, social entrepreneurs and businesses are raising the stakes, creating both business and social impact, and changing old-style capitalism as we know it.”

O.K., “Wall Street heavies,” so that’s not quite us; we were founded by poor idealists from a New England food co-op. But hey, we’re really glad to have a company, there’s lots of work to do. Pitch in your coins and let’s get going.

Thanks for the Award, guys. Hope to see you next year.

The nickel is coming. Thank you.

On June 1, 2008, the official Fair Trade minimum price for coffee goes up five cents.

Didn’t it go up last year? Why, yes it did. In 2007, FLO (the Fair Trade standards body) raised prices 5-10 cents. But Equal Exchange and many of our 100% Fair Trade colleagues felt that wasn’t enough. We could have argued for more (and we did) but we could also simply show the way. So we raised our prices by 10 -15 cents, as did Just Coffee, Co-op Coffee and a handful of other Fair Trade veterans.

Well, FLO’s coming around. As Green L.A. Girl says in a great article on the issues:

As you can see, now the FLO minimums and the minimums set by the super-fair trade companies are more or less converging. It seems, by and large, that the super-fair trade companies have succeeded in pushing FLO in their direction.

It’s your support, dear investor, that allows us to take a lead. It gives us margin to do what’s right.

And what is a nickel per pound? Well, for a typical small farming family that’s perhaps $100 – which translates as a visit to the hospital for a family member, an education for a child or a part investment in a sugar cane mill.

For the 66 million pounds of Fair Trade coffee imported in the U.S. in 2007, that would mean another $3 million into the pockets of small farming families. A good return on investment.

Across 20 years, and now?

First, a quick introduction. I’m Rob Everts, one of Equal Exchange’s co-presidents and a first-time guest blogger. Welcome to our new blog.

Two decades ago we started engaging Americans in how their food overseas was sourced and committed to building an alternative vision of international trade from the prevailing “race to the bottom.” This early attempt to give meaning to “fair trade” pre-dated even the entrance of “free trade” into the public dialog. Similarly, our capital model represented the idea of “slow money” before its time had come. In the same way we commit to long-term trade relationships with farmer co-operatives, we have sought long-term, mutually beneficial relationships with our investors.

When the current Equal Exchange capital structure was created, we knew that our model would not attract everyone, not even all who considered themselves socially responsible investors. For starters, there would never be a blockbuster return. Shares would not increase in value. Shareholders would not have a formal vote in the affairs of the business. Rather, they would share a seat at the table with other valued stakeholders to build an alternative to capitalism-as-usual. Farmers, consumers, Equal Exchange worker-owners, food co-ops, independent café and natural food stores, faith communities, investors… all of these constituencies joined together to play a critical role in enabling Equal Exchange to survive and ultimately thrive after its first decade.

And now, emboldened and yes, awed, by our 20 year vision adopted by the worker owners…

a vibrant, mutually co-operative community
of 2 million committed participants
trading fairly $1 billion dollars a year
in a way that transforms the world.

we move into the next chapter of the Equal Exchange experience. We are in uncharted territory. What we know for sure is we will continue to take risks and to more directly challenge the industrial food system over its central role in keeping millions impoverished around the world. We will also engage in political action where we believe trade or other policies negatively impact our farmer partners or perpetuate corporate control of agriculture.

One thing for sure is that we will need to collaborate with many other like-minded people and organizations to accomplish any of this. Looking forward to vigorous debate—and action—in the months and years to come.

Our CD, loved by farmers and bankers alike

So it’s oldish news, but this is a new blog, so below are a few links to articles about our innovative Equal Exchange CD (certificate of deposit). Offered through Wainwright bank, it’s a simple direct way to invest $1,000 or more in Equal Exchange and Fair Trade, and receive a competitive rate of interest. Farmers get to farm (and feed their families), bankers get to bank (and pay you interest), you help change the world. It’s all good.

	“Wainwright CD Producing Line of Credit for a Client”(pdf) American Banker Online, August 30, 2006
	“Bank CD to help farmers in Third World: Sold by area bank, it’s tied to Equal Exchange” The Patriot Ledger, June 12, 2006
	“Wainwright Bank and Equal Exchange Partner to Offer the First Branded Certificate of Deposit” SocialFunds.com, June 1, 2006