Shoppers decide Cafédirect is their cup of tea

Cafédirect, THE fair trade hot drinks company that raised £5m last year by opening its doors to private investors, saw sales rise by nearly 30 per cent as consumers warmed to its range of ethical teas.

Cafédirect, THE fair trade hot drinks company that raised £5m last year by opening its doors to private investors, saw sales rise by nearly 30 per cent as consumers warmed to its range of ethical teas.

Some 4,500 private investors backed the company last year, when its shares became available through the ethical trading exchange, Ethex. Sales rose 27 per cent to £17m, with its Teadirect brand the fastest growing in the business. Tea sales were up 30 per cent, and it has secured a 1 per cent share of the tea market with consumers spending more than £5m on its tea products. "We have been trying to put across the message that the tea people drink every day can be fair trade. That people can have extraordinary ordinary tea," Philip King, Cafédirect's finance director, said.

Cafédirect also saw strong growth through sales channels other than retailers. Sales to its "out-of-home" market, to eateries and bars, are now 8 per cent of total sales. "As our prominence and popularity grows in supermarkets, customers are then asking why they can't have fair trade products in their canteen, in vending machines, in restaurants, cafés and bars," Mr King said.

Cafédirect pledges to pay its farmers above market rates for their produce. But the strong US dollar meant the amount given to its 250,000 farmers was marginally below that in 2003, at £2.4m. As well as paying fair prices for produce, Cafédirect also invests its profits in a support and development programme for its producers, which goes towards building better producer organisations or on community ventures. It gave 8 per cent of its gross profits to the programme, about £540,000, a 40 per cent increase on 2003.

The advertising and promotional spend on its tea brands, however, took Cafédirect's costs up to nearly £7m, which hit its profits for the year. Profits before tax fell nearly 60 per cent to just under £200,000. "We told investors that we would be spending more on promotional and marketing activities this year as we tried to increase awareness of our tea brands, so this was to be expected," Mr King said. There will be no dividend to shareholders this year as a result of the investment in the company.

Mr King earned £55,460 for his position as finance director, and the chief executive was paid £72,660. The chairman, Martin Meteyard, was paid £8,000 for his services.

Run by the Bristol bank, Triodos Bank, Ethex is a matched bargain system, which finds buyers when shareholders want to sell. Less than 1 per cent of its shares changed hands over the year, and Mr King said there was a waiting list of prospective buyers.

Its investors own 55 per cent of the company, its founders 40 per cent and 5 per cent is owned by its producers.