In keeping with the transparency principle of the Fair Trade movement, we are providing a public annual report summarizing the business activities of North Country Fair Trade during the year 2007. This is an opportunity for you as customers or potential customers to evaluate our business performance
- with regard to our social goals and additionally
- to give you some perspective on financial performance of the business. (This is referred to as a double bottom line in the social enterprise literature.) This report also provides us an opportunity to describe the direction of the business in a historical context: Where have we been? Where are we going?
First, a reference to our mission statement and a description of progress we are making to fulfill that mission:
“North Country Fair Trade is committed to improving wages and labor conditions for production workers in Latin America by expanding the market in the United States for basic goods produced by fair trade production groups in Latin America .”
We assume that the principal reason our customers purchase products from North Country Fair Trade is because they believe the producers are receiving higher incomes than those paid by established corporate businesses. Ricardo Hernandez, a staff representative of the American Friends Service Committee, has completed a comparative evaluation of wage rates that are being paid at our primary production partner Maquiladora Dignidad y Justicia with these conclusions:
There are 3 parameters to compare Dignidad y Justicia’s labor costs to other companies.
* The take-home wages paid at Dignidad y Justicia are sustainable living wages. Workers at Dignidad y Justicia are paid twice the average wages earned in most maquiladoras located along the Mexican/US border and they are paid four times more than the Mexican minimum wage.
* Our per-unit labor cost is up to 14 times greater than what Sara Lee (the corporation that owns the Hanes label) paid per unit in its Monclova maquiladora in Mexico a year before the plant was closed ($0.70 vs. $0.05 per t-shirt).
* Our labor rate at $0.80 paid per unit produced as a percent of our retail price (if we had a retail price of $14.97) is between 5 and 13 times more than the typical 0.4% to 1% labor cost for t-shirts made in other off shore manufacturing sites.
Members of the workshop are covered by the Mexican social security system which includes family health insurance, if they are not currently covered by social security provided to their family through the employment of another family member.
Based on this evaluation, we are proud to stand on the record we have established, and we are reluctant to respond to price competition from the general market by cutting the per unit rates we pay for production to Dignidad y Justicia. Further improvements in wage rates, however, will be dependent on improvements in efficiency at the production level.
Our other supplier, the Fair Trade Zone (COMAMNUVI) pays 30% more than the wages paid by corporate owned plants in Nicaragua, all of the members share in the profits of the business, all of the workers are covered by social security and health insurance, they receive 13 paid holidays and paid maternity leave.
Both producer groups operate workshops that are worker managed.
Another major step taken at Dignidad y Justicia during the course of 2007, was the start-up of a second workshop. The first workshop moved to its own location and incorporated as an independent business. A second group of workers established another workshop that is going through a start-up phase as a tenant of the Mexican non-profit, Comite Fronterizo de Obreras, which has been a local sponsor of the project. This step doubles the number of workers employed and doubles the production capacity of Dignidad y Justicia. Needless to say, it also doubles or triples the level of sales that need to be achieved to continue the growth of the project.
Secondly, we are offering a summary of financial operations of North Country Fair Trade in 2007. NCFT achieved sales of $67,000 in 2007 from 151 separate orders of approximately 10,250 t-shirts and 4,100 tote bags. The average order was approximately 95 pieces. Sales were up slightly from the 2006 figure of $ 65,000. NCFT lost $14,500 in 2007, which is almost identical to the loss experienced in 2006. The gross margin earned on sales was only 5.5% and uncompensated shipping costs were 30% of total expenses. Adjustments need to be made in these two areas for the business to reach a break-even level. Our goal in 2008 is to increase our sales to a level of $100,000, achieve a gross margin of 10% and to reduce the uncompensated shipping charges. This will require adjustments in product pricing and a change in our policy of free shipping to customers with large orders. These changes should allow us to approach a break even level in 2008.
During the course of 2007, we increased our percentage of sales of organic t-shirts to 41% of our sales in terms of units and 47% in dollar sales. Organic tote bags reached 19% of or sales in units and 26% of our sales in dollars. We expect these percentages will gradually increase during 2008.
Looking ahead to 2008, we will be making several adjustments to the business. We will be implementing a price increase on t-shirts effective April 1st. Fabric costs and shipping costs have been increasing which require this price increase. In addition, we must achieve a 10% gross margin (our prices must be at least 10% higher than the cost of the product we sell) for us to cover our operating expenses.
North Country has expanded its product selection to include a variety of other apparel products. We now offer fair trade sweatshirts produced from a hemp/organic cotton blend. They are currently available in a natural color, and we will soon add navy blue as an option. Hoodies are also in production! We are also offering organic canvas aprons imprinted with socially conscious messages.
Dignidad y Justicia has produced an initial run of organic cotton oxford style button shirts and blouses, which are available to retail stores. We are venturing into production of a women’s t-shirt produced from a bamboo/organic cotton/spandex blend which has received rave reviews for the select few who have had an opportunity to try out the initial samples. And we are producing the initial samples of a line of fair trade organic cotton blue jeans! While we expect that t-shirts and tote bags will continue to make up the majority of our sales in 2008, our goal is to diversify our production and our customer base to a much broader selection of apparel in the future.
We have also developed a series of printed products that we have begun selling to retail stores including 3 images promoting fair trade, fair trade coffee and a reduction in global warming. These will be available on t-shirts, sweatshirts and tote bags.
A major change in 2008 is that we will temporarily phase out our inventory of t-shirts from the Fair Trade Zone (COMAMNUVI) during the course of the year because of financial constraints. We cannot afford to carry overlapping t-shirts styles from two producers. The value of our total inventory increased dramatically in 2007 and we cannot continue to increase our inventory levels at the same rate. Hopefully we will be able to reintroduce the Fair Trade Zone label at a future date. If you have a particular interest in buying the Fair Trade Zone label, contact us to insure availability of product from that vendor.
