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Cafedirect aims high with biggest ethical share issue

March 2004

Cafedirect, Britain’s largest fair-trade hot drinks group by market value, hopes to raise £5million ($9.4m) in the country’s highest-profile ethical share issue to date.

The fund-raising, which has a £300 minimum investment and is being carried out by Triodos Bank, is intended for ‘significant business growth’, and is seen by the company as a chance to offer a stake to consumers and coffee producers.

Cafedirect products are carrying advertisements for the issue, and the company also hopes to attract money from institutional investors.

The largest UK public share issue to date by a social enterprise, The Ethical Property Company, reached its full subscription of £4.2million with ease. The UK-based fair-trade company Traidcraft also raised £3.25million in this way.

Charles Middleton, Triodos Bank’s managing director, said the record of previous issues showed the ‘public appetite’ for alternative investment opportunities, and that ‘these types of off-market businesses attract capital precisely because they are run on sustainable lines’.

Cafedirect, which is 13 years old and unlisted, owns Britain’s sixth-largest coffee brand and has enjoyed growth averaging 20 per cent a year for the last seven years. It was founded in 1991 by Oxfam and three fair-trade organizations – Equal Exchange, Traidcraft, and Twin Trading. It has an annual turnover of more than £13million, works with more than 250,000 coffee, tea and cocoa producers in 33 countries, and guarantees to pay them ‘fair prices above market rates’.

The four founding bodies are reducing their stake to 39 per cent, and five per cent of the shares are being passed to producer groups, which will have the right to elect two directors. Investors will share the remaining 56 per cent. The share prospectus says that if the issue is successful, £2.7m will be used to repay debts and £1m spent on building the brand, with the balance invested in computer systems and working capital.

In the past year Cafedirect has reinvested eight per cent of gross profits for producers to make their businesses more sustainable. Its prospectus says the UK hot drinks market is worth around £1.25bn.




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