Is this the beginning of the end for Fairtrade?

On 16 February 2010, Sainsbury’s announced it had replaced Walmart as the world’s biggest retailer of Fairtrade products. £1 in every £4 spent on goods with the distinct blue and green roundel was at the supermarket chain. “I believe in Fairtrade for Fairtrade’s sake. But I also believe in Fairtrade because it gives my business a competitive advantage,” said then chief executive Justin King.

Not any more, it seems. “[Fairtrade] might have been fit for purpose 25 years ago, but we’re in a new world with new technology,” said current CEO Mike Coupe at the supermarket’s AGM on Friday (7 July), as he was forced to defend his controversial decision to start selling some own-brand tea under a new company-led ‘fairly traded’ label, rather than Fairtrade.

The experiment may only be a pilot for one product, but it’s a bold move and one critics fear could disempower farmers and leave consumers confused.

Indeed, more than 90,000 people have signed a petition demanding Sainsbury’s sticks with Fairtrade, and last week more than 40 MPs backed a cross-party parliamentary motion urging other supermarkets to “remain and strengthen their commitment to Fairtrade certification”.

Sainsbury’s is not alone in its move away from Fairtrade though. As companies look to make every aspect of their business more sustainable some of the country’s biggest brands are beginning to look beyond the current set of ethical and environmental trading schemes.

Cadbury owner Mondelēz International has evolved its relationship with Fairtrade meaning all Cadbury products now sit under its in-house Cocoa Life certification as part of a new partnership. And in a potential further blow to the organisation, there were reports – as yet unconfirmed – that Tesco would be switching all own-label coffee to a different ethical certification scheme, Rainforest Alliance.

People see companies as “inherently immoral, unless they can demonstrate otherwise” according to Mintel’s 2015 report The Ethical Consumer, so can retailer or manufacturer-led models work, and will consumers trust them?

While Sainsbury’s, Tesco and Mondelēz have outlined a clear alternative it could undermine the good work Fairtrade has done if other retailers and manufacturers drop the certification without implementing a robust and transparent alternative.

And if they do, will it be the beginning of the end for Fairtrade and the myriad other ethical badges?

New model needed

The Sainsbury’s argument is that the Fairtrade model isn’t fit for purpose in 2017. “It is 25 years old; the world was a very different place 25 years ago and it’s time to change,” says David Nieberg, the retailer’s head of media relations and chief firefighter as the negative headlines persist.

The firm is “extremely disappointed” by the public lashing dished out by Fairtrade. There were years of talks to try and deliver a new partnership and Nieberg claims some of the public statements coming from the not-for-profit have been misleading, while others are contradictory.

This isn’t something [completely] new we are trying – we are taking all the benefits of Fairtrade and building more support on top of that.

David Nieberg, Sainsbury’s

Take Oxfam, he says, one of the most vocal critics of Sainsbury’s in-house pilot. The charity cited that 42% of children in the tea growing regions of Malawi are undernourished and 11% die before their fifth birthday. “Surely that reinforces the point that we need to try something new,” Nieberg says, however, “the message [Fairtrade is currently pushing] is ‘do it our way or not at all’”.

Nieberg asks whether farmers really are the main concern for Fairtrade, or if it’s the future of the organisation that’s the bigger worry? The foundation, however, which receives a licence fee from the brands that carry its badge, says it is “not put at risk in a financial sense by the Sainsbury’s decision”.

But would this change if the pilot is rolled out more widely? Tea could be the first of up to 35 commodities and ingredients to be brought under Sainsbury’s new scheme. And what if other retailers and manufacturers follow suit?

Impact on Fairtrade

Rumours of Fairtrade’s impending demise have been “exaggerated”, said James Bennett, head of commercial partnerships, earlier this month. Indeed, retail sales of Fairtrade products climbed 2% to £1.65bn in 2016 as the movement’s simple message continued to hit consumers in the heart and in the pocket. It was the first increase since 2013.

Chief executive Michael Gidney noted the “unstinting support from the public” and sensed that businesses were committing to Fairtrade.

This is certainly the case at Waitrose, which earlier this week (10 July) confirmed that 100% of its own-label tea will be Fairtrade come October.

Waitrose didn’t mention Sainsbury’s when making the announcement but clearly stated that independent certification was the way to go.

Rupert Thomas, commercial director at Waitrose, says: “The Fairtrade mark is one of the most recognisable indicators that farmers behind products are getting a good deal. It’s an easy way for shoppers to identify food and drink which has been produced to high ethical standards.”

Co-op has also made further commitments in recent weeks and there is little doubt that the discounters, Aldi and Lidl, will be watching developments with interest. Food service businesses could also up the ante. More than a third (37%) of consumers feel ethical labelling is important when choosing a cup of coffee, according to coffee research specialist Allegra, so it’s not surprising to see the likes of Gregg’s making further commitments to Fairtrade ingredients.

READ MORE: Co-op: Brits are tired of brands jumping on the ethical bandwagon

Cheryl McGechie, public engagement director at the Fairtrade Foundation, tells Marketing Week that other retailers are showing “intent” to support Fairtrade, which may be a response to the gap in the market created by Sainsbury’s.

She believes the supermarket has “taken a bit of a gamble” and that its decision is “a big backwards move” given the support the movement has in the UK. But looking on the bright side, she adds “there is a lot of profile around the issue at the moment. It’s given us the opportunity to reinforce [our message]”.

In February, Fairtrade launched a new platform to help it create a better emotional connection with consumers. “Fairtrade is often a rational purchase decision; something people feel positive about but in a passive way. We want it to be emotionally engaging,” McGechie told Marketing Week at the time.

READ MORE: Fairtrade hunts for emotional connection in strategy shift

More than one million people watched the campaign film when it launched during February’s Fairtrade Fortnight. This new wave of petitions, political support and publicity has given it a second wind though, and while McGechie says she can’t point the finger directly at Sainsbury’s as the cause, she calls the recent figures “encouraging”.

Still, she readily admits that it’s time for Fairtrade to evolve, which might mean fewer logos. “We need to change with times and be a partner to schemes rather than be on the front of every pack.”

Evolved approach

She’s referring to the new approach taken by Mondelēz, which will see its in-house Cocoa Life scheme featured on all Cadbury brands in the UK. Fairtrade will be a partner in the programme, holding the corporate to account, but the roundel will be relegated to the back of packaging while the Cocoa Life branding will be on the front.

Through the $400m programme, Mondelēz aims to help 200,000 farmers and one million community members in six cocoa growing regions “secure a positive future” by 2022.

The move sparked criticism and applause in almost equal measure, but those involved say it is a positive and necessary evolution.

But an on-pack sticker alone will not sell more products to increasingly discerning consumers, according to Steven Mann, external communications manager at Mondelēz International. It is among a number of big FMCG companies that now view a sustainable supply chain as a business imperative rather than a nice to have.

“Doing something for a logo makes no sense for a business,” he says. “It’s not something we would do… it’s about driving impact and the marketing follows.”

Given more than 50% of shoppers “think ethically” when they buy food and drink, a decent sustainability programme is a “sweet spot” for businesses, says Mann, who believes companies have no choice but to change and consumers need to see them doing so.

Still, it will take time and investment to grow awareness and understanding of Cocoa Life. The latest research by MMR, shown exclusively to Marketing Week, shows 43% of shoppers now look for the Fairtrade logo, compared to 31% a decade ago. Fairtrade’s most recent and yet to be published research shows 90% of shoppers are aware of the scheme and 78% trust it.

“It was always going to be a challenge to communicate [the new scheme] to consumers,” says Mann at Mondelēz. “Fairtrade is a very simple message and well-recognised brand. As Cocoa Life is only just launching in the UK it doesn’t have that yet; it is not something that people would instinctively understand.”

The brand has already launched Cocoa Life in other markets though, and it is well understood by consumers there, according to Mann, so he is confident people in the UK will get it too.

Doing something for a logo makes no sense for a business.

Steven Mann, Mondelēz

Sainsbury’s is facing a similar hurdle, or arguably a greater one given that the safety net provided by Fairtrade won’t be there.

Nieberg says Sainsbury’s has the track record in ethical procurement to convince its customers to trust ‘fairly traded’. “This isn’t something [completely] new we are trying – we are taking all the benefits of Fairtrade and building more support on top of that.” He insists the scheme will be better for farmers, but as Fairtrade has discovered, proving that isn’t so easy.

While there is no suggestion of a major marketing push for ‘fairly traded’ just yet, there will be “lots of information” available online and video messages from CEO Coupe.

Will it be enough to convince the critics or will consumers remain confused? Time will tell, but success or failure will depend on whether the scheme delivers on the ground – and that applies to the likes of Fairtrade just as much as in-house schemes.

“You can throw endless marketing budget at a product and if it’s no good, it won’t sell,” says Mann at Mondelēz. “Sustainability programmes are just like that too.”