Corporate Reputation Review, Vol. 12, No. 2, pp. 159���176 �� 2009 Palgrave Macmillan, 1363-3589 Corporate Reputation Review Volume 12 Number 2 www.palgrave-journals.com/crr/ ABSTRACT There are numerous retailers in the specialty coffee market that sell Fair Trade Coffee (FTC). Some retailers sell FTC to meet the demand of socially responsible consumers, some are motivated by their own concern for small coffee producers and others sell FTC because of the taste profile of a particular FTC grow- er ��� s coffee. A critical question facing these re- tailers is how best to position FTC: as good tasting or as socially responsible? This study examines consumers ��� coffee preferences, their comprehension of labels, the price they are will- ing to pay for FTC and tests the effectiveness of advertising socially responsible consumption as primary benefit of purchasing FTC. The implications for managing company reputation and communication of social responsibility for FTC are discussed and suggestions are given for advertising strategy and management of Fair Trade products Corporate Reputation Review (2009) 12, 159 ��� 176. doi: 10.1057/crr.2009.11 KEYWORDS: brand reputation corporate social responsibility fair trade coffee socially responsible consumption INTRODUCTION Numerous retailers in the specialty coffee market sell Fair Trade Coffee (FTC), includ- ing Starbucks, Green Mountain Roasters, Peet ��� s Coffee & Tea and Equal Exchange. Some sell FTC to meet the demand of so- cially responsible consumers, some are mo- tivated by their own concern for small coffee producers and others sell FTC be- cause of the taste profi le of a particular FTC ��� Taste Great or More Fulfi lling ��� : The Effect of Brand Reputation on Consumer Social Responsibility Advertising for Fair Trade Coffee Carl Obermiller Department of Marketing, Albers School of Business and Economics, Seattle University , Seattle , WA , USA Chauncey Burke Department of Marketing, Albers School of Business and Economics, Seattle University , Seattle , WA , USA Erin Talbott Department of Marketing, Albers School of Business and Economics, Seattle University , Seattle , WA , USA Gareth P. Green Department of Economics, Albers School of Business and Economics, Seattle University , Seattle , WA , USA

Taste Great or More Fulfi lling Corporate Reputation Review Vol. 12, 2, 159���176 �� 2009 Palgrave Macmillan 1363-3589 160 grower ��� s coffee. Peterson (2006) and Scott (2001) fi nd FTC usually competes with spe- cialty coffees because they sell at a similar price point and to a similar demographic. However, specialty coffee retailers tend to be more concerned with the quality of their coffee because taste is a critical attribute to coffee consumers ( De Pelsmacker et al. , 2005 Donneta et al. , 2007 and Rice and McLean, 1999 ). To compete, it is necessary for FTC to have a taste profi le comparable to specialty coffees. Unfortunately, as Rice and McLean (1999) have discussed, FTC is perceived by some consumers and retailers as having inferior taste and quality inconsist- ency when compared to specialty coffees. A critical question facing these retailers is how to best position FTC: as good tasting or as socially responsible? Bacon (2005) and Jaffee (2007) have shown the FTC market provides signifi cant benefi ts to small coffee producers, helping to alleviate poverty by providing funds for schooling, health care and community sup- port in regions that have been devastated by the dramatic variations in coffee prices. Brown et al. (2001) report that 70 percent of the world ��� s coffee is produced on small- scale family farms that could be eligible for Fair Trade certifi cation and that most of these families live in conditions of poverty. But as Lewin et al. (2004) have shown, the demand for FTC is much lower than the potential supply, indicating the FTC market is helping only a small fraction of impover- ished coffee growers ( Dicum and Luttinger, 1999 and Pendergrast, 1999 ). Further, Lewin et al. (2004) and TransFair USA (2007) have estimated that a signifi cant por- tion of the coffee produced under Fair Trade conditions is sold in conventional coffee markets, which usually bring a much lower price than the FTC market. The limit on FTC sales is not production capacity it is demand. As McCluskey and Loureiro (2003) discuss in their study of labeling, determin- ing how best to position a product like FTC will increase consumers ��� awareness and ul- timately the demand for FTC. If the FTC market is to reach its full potential for reduc- ing poverty, it is critical that retailers deter- mine how best to position FTC. Fair Trade Coffee Fair Trade is an alternative market approach that aims to improve the well-being of small producers in developing countries ( Gresser and Tickell, 2002 and Talbot, 2004 ). The FTC market was established in 1988 when world coffee prices began a sharp descent. It was branded ��� Max Havelaar, ��� after a fi c- tional Dutch character who opposed the exploitation of coffee pickers in Dutch col- onies ( Jaffee, 2007 ). In 1997 the Fair Trade Labeling Organizations International (FLO) was formed as an umbrella organization to expand the scope and monitor Fair Trade with universal standards and labels. Fair Trade goods that display the FLO inspection label ensure the customer that farmers in developing countries are paid a fair price and earn a decent standard of living. FLO over- sees smaller organizations that monitor sales of Fair Trade goods in different regions. For example, TransFair USA is the only licensed organization that certifi es Fair Trade prod- ucts sold in the US ( Rice and Mclean, 1999 ). Although it also certifi es other produce, in- cluding bananas, cocoa, tea, sugar and rice, TransFair USA (2007) shows that coffee ac- counts for two-thirds of the total Fair Trade certifi ed goods. FLO (2007) gives the stand- ards that growers and importers must meet to receive Fair Trade certifi cation. In gen- eral, producers must be small, family-based growers that follow specifi ed ecological goals and are organized into democratic as- sociations. Importers must pay at least a minimum price established by FLO, offer pre-fi nancing and purchase directly from the grower associations using agreements that extend beyond one harvest cycle. The ob- jective of the FTC market system is to op- erate a socially and environmentally

Obermiller, Burke, Talbott and Green �� 2009 Palgrave Macmillan 1363-3589 Vol. 12, 2, 159���176 Corporate Reputation Review 161 sustainable market that allows small farmers to escape poverty and consumers to have high quality coffee. FTC market challenges TransFair USA (2007) has documented the dramatic growth in the FTC market in the US to be between 35 and 107 percent an- nually during the period 2000 ��� 2006. They also estimate FTC to be 2 percent of the total coffee market in volume and 3 percent of the retail value in North American mar- ket in 2006, indicating signifi cant potential for continued market growth. However, the FTC market faces challenges. Most FTC has been positioned on the social responsibility attribute, but Powell (2002) notes that social responsibility may not be the key to expand- ing demand for FTC. Lewin et al. (2004) show the majority of FTC is imported by countries that are also large importers of high quality specialty coffee. Unfortunately, James (2005) and Rice and McLean (1999) indi- cate that FTC may be perceived to be of lower quality than other specialty coffees. Coffee quality has several dimensions, in- cluding taste, relating to specifi c fl avors healthfulness, relating to being free of pes- ticides and herbicides and social-responsi- bility, relating to producer welfare, reducing environmental impact and maintaining wild- life habitat. FTC easily differentiates itself on the latter two features, but it faces a chal- lenge on taste. Ottman (1998) has found that consumers appear to have an a priori schema for so- cially responsible products ��� that they are somehow inferior, to compensate for their socially benefi cial aspects. We suspect this consumer belief runs deep. Consider com- mon advertising claims, such as ��� no pain ��� no gain ��� or ��� healthy food that actually tastes good. ��� Consumers may expect FTC to taste worse than specialty brands simply because it accomplishes a social responsible goal. James (2005) and Rice and McLean (1999) indicate there is some justifi cation for a bias. In some cases the taste quality of FTC has been objectively inferior to specialty coffee, primarily due to poor quality management and lack of knowledge and experience in selecting and roasting coffee when FTC was fi rst introduced. Whatever the reason, if FTC is to expand demand by positioning itself as comparable or better tasting than specialty coffee, it must meet the challenge of consumer skepticism. As mentioned, FTC is well positioned on the social responsibility dimension due to the benefi ts it provides FTC growers. In addition, TransFair USA (2007) has docu- mented that over 60 percent of FTC sold in the United States is certifi ed organic, so FTC can also be positioned as environmen- tally friendly and healthful as well. How- ever, Mclaughlin (2004) notes that there is signifi cant competition among labels that suggest you can help others by shopping: Fair Trade Certifi ed, Fairly Traded, Rain- forest Alliance Certifi ed, Certifi ed Sustain- able Local, Slow Food Snail, etc . Giovannucci and Koekoek (2003) and Rice and McLean (1999) , among many, have dis- cussed the likely confusion and uncertainty caused by competing labels and the likely blunting effect it has on consumers ��� under- standing of labels. If the FTC labeling does not clearly communicate the social respon- sibility and healthfulness attributes of FTC, it will surely have diffi culty competing against specialty coffees that promise good taste. As can be seen on the retail shelf and company web pages, FTC is generally more expensive than coffee from the convention- al market, but similar in price to specialty coffees. De Pelsmacker et al. (2005) , Lourei- ro and Lotade (2005) and McCluskey and Loureiro (2003) have shown that consumers are willing to pay more for Fair Trade, or- ganic and other certifi ed coffees. However, Devinney et al. (2006) have shown that the estimates of willingness to pay listed on sur- veys rarely match sales data. It is easy to