With the recent arrival
of mainstream coffee chain Starbucks into the US market for fair trade food products,
there are clear indications that fair trade is changing. No longer the preserve
of charity organisations, fair trade brands are highly visible in the major multiples
and sales are growing fast. What does this mean for the market? Hugh Westbrook
reports
Starbucks is selling a fair
trade blend in their more than 2,300 outlets across the States. The company’s
appearance serves to highlight some of the issues surrounding the market as
a whole and gives us an idea of why bigger companies may start to become involved
in the sector.
Go deeper with GlobalData
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“Consumers prepared to pay a premium for ethical involvement“ |
The ethos behind fair trade
products is to ensure that farmers working in developing countries are paid
a fair price for their produce while also guaranteeing that working conditions
are fair and safe. The concept was originally associated with craft products,
and companies such as Oxfam and Traidcraft were at the forefront of developing
the market.
Food lends itself more naturally
to regulation than handicraft, and food labelling initiatives currently operate
in 17 countries, mainly in Europe. A fair trade mark is not legally binding;
rather it acts as a guarantee to the consumer that certain criteria are in place
in relation to the product. The original labelling body, Max Havelaar,
was set up in the Netherlands in 1988. Its success has been such that coffee
carrying its label is now available in more than 90% of Dutch supermarkets.
The Fairtrade Foundation followed in the UK in 1992 and TransFair
was set up in Germany in 1993. Offshoots of Max Havelaar and TransFair now operate
in other countries, while the umbrella body Fairtrade Labelling Organisations
(FLO) was established in 1997.
Tea, coffee, cocoa, honey,
bananas, orange juice and sugar are the only products which can currently carry
a fair trade label, while companies producing the retail products are typically
small specialists. Sales spiralled during the 1990s, with US$300m worth of produce
sold in Europe in 1999, and some growth has been spectacular. Fair trade products
in the UK had 1999 turnover of £21.8m, up 31% on the previous year.
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“Harnessing ethical and environmental concerns – organics and fair trade hand-in-hand“ |
Much of the growth is due
to fair trade tapping into consumers’ increasing interest in ethical issues,
as well as health issues shown up by the rise in organic food consumption. However,
Phil Wells, director of the UK’s Fairtrade Foundation, told just-food.com that
its growth would not be hit by health concerns since the products “only
have the ethical part” and are therefore not subject to the vagaries of
scientific research. “It has the same kind of fashionable demand, and the
same emotional issues though,” he added.
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By GlobalDataThe different speeds of
development in Europe and the US gives a good indication of consumers’ different
attitudes. Hans Bolscher, director of Max Havelaar, told just-food.com that
fair trade “developed in the Netherlands because we’re a country of traders.
Coffee, cocoa and tropical crops have always been traded through here. We were
also front-runners in the NGO (non-government organisation) movement, so the
two things simply came together. Consumers in Europe have a higher sense that
they are part of what goes on, that they are the solution,” he added, “There
is solidarity. Fair trade can work because consumers can feel that they are
including poor farmers in their everyday lives.”
Paul Rice, executive director
of TransFair USA, takes a different perspective. His group has only been actively
raising consumer awareness since last year. Acknowledging Europe’s head-start
with Oxfam and related shops and that Europeans are more “socially aware”,
he told just-food.com that Americans “are more knowledgeable on environmental
issues. We have tried to piggy-back our fair trade efforts to promote it using
the environmental concerns which are big here. Unlike in Europe most of the
coffee certified fair trade is also certified organic.”
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“Major players jumping on the fair trade bandwagon – a hindrance or a help?” |
The use of Starbucks points
up interesting facts about their approach. “We knew very early on that
Starbucks was a key company for this whole initiative, because of the 10,000
coffee houses in the US they have a quarter. The coffee bar has become the bar
of the 1990s, it’s where people go to hang out. So we’re positioning fair trade
as something which is socially and environmentally responsible but also as something
that’s cool. We want it to be cool – we want to reach young people. We want
it to be associated with that.” It could therefore be argued that for fair
trade to succeed in the world’s biggest market, it has been necessary to popularise
it in a way that would never have been attempted in Europe, where the message
does not need a gimmick in order to ensure widespread appeal.
This is not to say that
mainstream companies will not get involved. Phil Wells believes that large companies
will have to do so as a defensive measure, in much the same way that large companies
have been forced to climb on the organic food bandwagon. He expects supermarket
own labels to lead the way. Paul Rice believes that the recent segmenting of
the US coffee market into low quality ground products and gourmet whole-bean
varieties gives his organisation leverage, as they can approach the gourmet
subsidiaries of the large operations and hope to get involved with them that
way. Hans Bolscher on the other hand thinks it unlikely that the very large
companies will get involved, and for practical reasons. “Strategically
it is not possible to bind yourself to labels, external forces, prices and so
on,” he said, ruling out the largest producers. “But there is a gap
in the middle of the market which mainstream-type companies can come into.”
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“Supermarket |
Another issue causing concern
among bodies is whether there should be a single fair trade label. FLO is currently
engaged in considering this option, and there is no doubt that if there was
one internationally recognised fair trade label then consumers travelling in
a different country could feel confident if they wished to buy a fair trade
product. On a practical level, Paul Rice pointed out that the lack of a unified
label has meant that Starbucks has not yet been able to cross the border into
Canada as the expense of producing new packaging with the Canadian bi-lingual
label is not cost-efficient.
However, here are arguments
for retaining the existing labels, the most compelling of which is how well
established those existing labels are, primarily the Max Havelaar name. To replace
and lose that brand recognition is not seen as a viable alternative. “We
can’t do without it, it would cost millions and millions to lose it,” Mr
Bolscher concedes.
The future for fair-traded
products looks likely to be one of growth. With more producers and companies
coming on stream the whole time, as well as the likelihood of further foodstuffs
being included in schemes, this is to a degree inevitable, but all the labelling
bodies see education as part of their mission, so consumers’ desire to buy fair
trade products is also likely to grow.
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“There is a gap in the middle of the market which mainstream companies can fill” – Hans Bolscher, Max Havelaar |
In addition, the market
will always bring in good profits, as prices are higher than comparable non-fair
trade products. This is not just because farmers are paid a higher premium than
their non-fair trade counterparts. Organic producers have noted in the past
that consumers are prepared to pay more for their products, and the same seems
to be true of fair trade. Consumers expect to pay more for a product with an
additional selling point, the add-on in this case being the ethical involvement.
If prices were the same, consumers may well feel suspicious. Fair trade products
have also only recently entered the supermarket from small shops, where a premium
tends to be charged.
The growth of the fair trade
food market will be intriguing to watch over the next few years. What is highly
likely is that will increasingly become a part of the international food landscape,
while consumers will become ever more aware of the philosophy behind it.
Labelling bodies:
TransFair
Austria
Max Havelaar France
Max
Havelaar Belgium
TransFair Germany
TransFair
Canada
Fairtrade Foundation,
(UK)
Max Havelaar Fonden Denmark
TransFair
Italy
Fairtrade Mark Ireland
Max Havelaar Norge
TransFair
Japan
Reilun
kaupan edistämisyhdistys ry (Finland)
TransFair Minka Luxemburg
Föreningen för Rättvisemärkt (Sweden)
Max Havelaar (Netherlands)
Max Havelaar Stiftung
(Switzerland)
TransFair USA
By Hugh Westbrook
