Who Captures the Value

Goal: After this lesson you can describe the value-distribution pattern that repeats across every commodity and name its colonial parallel. Subject: Economics | Run time: about 7 minutes

Quick recall

Last time we looked at the long fight for justice. Two quick questions. One: name one of the justice alternatives that tries to send more money back to growers. Fair trade, or direct trade. Two: in what year was the WIPO Treaty on traditional knowledge agreed? 2024.

Why this matters

Pick up any of the six things this season followed. A bag of coffee. A bar of chocolate. A bowl of kava. Whatever you paid for it, ask one question. Of that price, how much actually reached the person who grew the plant? The answer is almost always the same, and it is almost always small.

The idea

Every one of these products travels the same road from farm to shelf, and at each stage a different group takes a slice of the final price. Walk the road with me.

First, raw material production. This is the farmer in the field, the family that tends the plants, the community that does the growing. For their work they capture only about 5 to 25 percent of the retail price. That is the smallest slice on the whole road, and it goes to the people who do the part nobody else can do.

Second, processing and refining. This is roasting, fermenting, refining, turning the raw plant into something usable. It takes about 15 to 30 percent, and the people doing it are often outside the growing country.

Third, branding and marketing. This is the logo, the advertising, the name you trust. It takes about 20 to 40 percent, the biggest slice of all, and it goes to corporations based in the wealthy nations that drink and eat these things.

Fourth, retail and distribution. This is the shop, the shipping, the shelf. It takes about 15 to 30 percent, and again it lands in the consuming nations.

Now stand back and look at the whole road. The person who grows the plant gets the least. The companies far from the farm, the brand and the retailer, get the most. Across six very different plants, grown on different continents by different peoples, the same shape appears every single time.

Here is the part to sit with. This shape is not new, and it is not an accident. It maps almost exactly onto the old colonial pattern. The historian Sidney Mintz showed how, in the story of sugar, the places that grew the crop got the least and the markets back in the home country got the most (Mintz, 1985). The colony did the growing. The trading company took the brand and the profit. The metropolitan market set the price. Swap in modern words, raw production at the bottom, branding and retail at the top, and you are describing the same machine. The faces and the flags have changed. The split has not.

Picture it

Picture a single dollar laid out flat, and four hands reaching for it. The hand of the farmer reaches first, but it is allowed only a corner, somewhere between a nickel and a quarter. The processor's hand takes a bit more. Then the brand's hand sweeps across the middle, taking the widest part. The retailer's hand takes a slice near the end. The farmer, who made the dollar possible, walks away with the smallest piece. That single dollar is the whole season in miniature.

Remember this

The fact to carry out: across all six commodities, raw production captures only about 5 to 25 percent of the retail price, while branding and marketing alone takes about 20 to 40 percent. The people who grow the plants almost always get the smallest slice, and that pattern is the old colonial split wearing new clothes (Mintz, 1985).

Quick check

Quick check. Which stage of the value chain takes the biggest slice of the retail price, and where do those companies tend to be based? Branding and marketing, at about 20 to 40 percent, and the companies are based in the wealthy consuming nations.

Key Takeaways

Every commodity travels the same road: raw production, processing, branding, retail.
Raw production captures only about 5 to 25 percent; branding and marketing takes the most at about 20 to 40 percent.
The farmer who grows the plant almost always gets the smallest slice.
This split repeats the colonial pattern, where origin communities got the least and metropolitan markets and trading companies got the most (Mintz, 1985).

Sources

Mintz, S. W. (1985). Sweetness and power: The place of sugar in modern history. Penguin Books.