Is the fairtrade ethic working?

The Fairtrade Foundation awarded its first mark to chocolate manufacturer Green & Black’s for its Maya Gold organic chocolate ten years ago. The Fairtrade Foundation has made significant progress in the ensuing decade – but amid the anniversary celebrations, questions are being asked about misguided consumer perceptions of the Fairtrade stamp and how the participating brands can increase their sales.

Observers question whether customers fully understand the principles behind the Fairtrade mark and whether they are aware that it is not a stamp of quality. These issues, coupled with the growing interest of the major food brands in the mark, could present headaches for the foundation and its original launch partners, as ambitious expansion plans are prepared.

The Fairtrade Foundation works closely with growers and brands, and now endorses more than 250 products. The UK market for fair trade products is the world’s second largest after Switzerland. It was worth an estimated £90m in 2003, up by 46 per cent on 2002 (Mintel). The roast and filter coffee market is one of the highest-penetration categories for the Fairtrade mark. It accounted for 18 per cent of the total roast and filter coffee market in 2002, and three per cent of all coffee sales. Cafédirect, which launched the first Fairtrade coffee in 1994, is now the sixth-largest coffee brand in the UK.

Not everyone’s cup of tea

The foundation now aims to double sales of fair trade products every two years, by expanding its work into new areas such as cotton, fruit and flowers. But the companies that were awarded the mark at its launch are now trying to compete against giants such as Kraft Foods and the Nestl̩ empire Рwith their mighty marketing muscle. However, despite the entrance of these large food companies, the Fairtrade Foundation may find its growth restricted by the public perception that fair trade products are a niche market.

Jeremy Torz, director of speciality coffee company Union Coffee Roasters, which has five Fairtrade coffees in its 27-strong portfolio, believes that in the early days of the Fairtrade mark, the products were largely seen as charity goods. He says: “At the start, it was altruistically led and not all of the products under the Fairtrade mark were good quality.”

In fact, the coffee market is one of the best examples of where the foundation’s work has made a difference at grassroots level. The world coffee market has been in crisis since the removal of the International Coffee Agreement, under which export quotas and price bands were agreed, in 1989. This led to a more volatile market and a collapse in prices in the mid-Nineties that in turn left the 25 million coffee farmers worldwide struggling against rising poverty.

This problem is aggravated by the fact that the amount of coffee produced is far higher than the amount consumed. According to Nestlé figures, in 2002/3 111 million bags of green (or raw) coffee were produced and of those 109 million were consumed. It is a major issue that all parties involved acknowledge needs to be dealt with at production level.

However, with the average price for a pound of coffee standing at $0.65 (36p), many farmers are not covering production costs and cannot move into producing other crops. On the other hand, the average Fairtrade price paid per pound is $1.26 (70p).

Torz is particularly vocal about how companies should be working more closely with growers to develop their businesses and to improve quality. He believes that this would help to raise consumer interest in the provenance of coffee beans and would add value to the market.

Sowing the seeds

Torz says: “If a grower gets a fair price for his coffee after years of not getting a fair price, are they going to spend it on improving quality? The foundation thinks that this will just follow. What we need to do is offer a fair price to growers while offering customer satisfaction to help the coffee market to grow.” Indeed, Torz believes that to build the fair trade market at the same rate over the next ten years, the foundation will need to get more involved in the idea of provenance to help add value to the coffee category. He wants quality to become one of the criteria for certification, as he believes that some consumers naturally assume the Fairtrade mark is a quality assurance mark.

Fairtrade Foundation head of communications Barbara Crowther says that the foundation’s role is to act as a central point for all stakeholders, rather than to act as a quality assurance scheme. “There is a debate about quality and they [Union Coffee Roasters] are right to say that if people are paying a premium for the product then they do deserve better quality. For us, the debate is how we link with quality assurances to Fairtrade.”

She points out that while quality is a consideration of the certification process, there are no prescribed quality standards. However, the foundation does ask growers to show that they have the means to bring products to the market that can meet the standards of export quality. Producers also set goals for the future such as improving quality control.

Phil Bloomer, head of advocacy at Oxfam, a major supporter of fair trade, agrees that quality is the key to ensuring growth is maintained. “The foundation needs to sustain an expansion in the areas where it has a consolidated base, such as coffee and tea,” he says. “You could expect there to be a slowdown, but the current level of growth should continue if quality is there.”

Growing support from retailers such as Sainsbury’s and Tesco, which launched a fair trade own-label range earlier this year, is also a key factor in bringing the products to a wider market. The Co-op is Fairtrade’s biggest retail champion, accounting for ten per cent of all sales, according to Mintel. It sells only fair trade coffee and chocolate in its stores and is also working on sourcing fair trade ingredients for own-brand products, such as cakes and cookies.

However, the retailer is realistic about how the category will develop over the next decade. David Croft, head of core brand and technical at the Co-op, says that there is a potential to make fair trade commodities mainstream products.

But he adds: “The Fairtrade Foundation has to market the issue and deal with the perception of quality. However, there could be a greater emphasis on the products and the message behind it.”

Wake up, smell the coffee

The marketing of fair trade and exactly who should be doing it is a grey area. The latest MORI research on the levels of consumer awareness about fair trade shows that 39 per cent of consumers can correctly identify the Fairtrade mark. Encouragingly, 42 per cent of people surveyed also cited that it meant a better deal for Third World producers. However, 21 per cent thought that it was the symbol of the Office of Fairtrade and another 21 per cent did not know what it stood for.

The main promotional work carried out by the foundation is the annual Fairtrade Fortnight, held in March. While it does raise the profile of the cause, it only happens once a year and the rest of the time the foundation relies heavily on PR and the advertising carried out by brands such as Cafédirect and Green & Black’s. Cafédirect spent £1.9m on above-the-line advertising for the period between 1998 and 2003, which pales into insignificance against the £29.3m combined advertising spend on coffee and tea that Nestlé, Kraft and Unilever Bestfood’s spent last year.

Union Coffee Roasters’ Torz believes the foundation needs to look at how it promotes its own brand. He says: “It needs to develop a marketing function, as it is difficult for the foundation to get attention for the cause. The foundation has tight resources, but when a brand comes under the umbrella, the brands should gain strength by binding together and I think that that is where the foundation can work outside the [Fairtrade] Fortnight.”

New role for the bad guy?

However, a key factor in raising awareness could be the entrance of multinationals into the market. Nestlé is understood to be “looking” at developing a fair trade version of its Nescafé brand but the Fairtrade Foundation says that it has not been approached about certification. The effect of the entrance of the big brands is hotly debated. It is true that their marketing budgets would be beneficial to the cause, but existing fair trade firms fear that the reputations of such companies, particularly Nestlé, could lead to a mistrust of both the legitimacy of fair trade and the motives of the company.

Sophi Tranchell, the managing director of fair trade confectionery business Day Chocolate Company, says that if the product fulfilled the criteria then it should have the mark. But other brands would want to see a long-term commitment to the fair trade cause.

The foundation does not believe that the mark should be seen as a brand, although Crowther concedes that the foundation has had to adopt the tactics of a brand to help reinforce what it stands for. However, she adds that marketing is really down to individual brands.

Heading for the mainstream

Fair trade is standing on the cusp of the mainstream market. However, it may well be the principles of ethical trading that become mainstream rather than the Fairtrade mark, which is more likely to be adopted as a gold standard of the market.

As Oxfam’s Bloomer points out: “Fairtrade is a necessary but insufficient condition for improving the way that the poor can do business. There are lots of things that the major corporations can do; although many are setting standards at a lower level, they are moving towards more ethical practices.

“Fair trade as a sector has got a major marketing job to do, but it needs to make sure that is it speaking to new consumers and not just to the converted.”