Fair trade shows resilience in face of economic downturn
22 September 2012
Despite the global economic downturn, the turnover of fair-trade products increased by 12% in 2011. This was attributed to ‘ethical sourcing commitments from the food and drink industry and increased consumer awareness’. Worldwide fair-trade sales amounted to €5 billion in 2011. In terms of sales volumes, the fastest growing areas were fair-trade dried fruit and fruit juices (+42% and +52% respectively), with a 14% growth in volume of sales of established products like fair-trade certified cocoa.
In 2011, Spain, at a time of economic crisis, showed the largest growth in fair-trade sales, which rose by 39%, although this growth occurred from a very low base.
Some countries have higher rates of fair-trade spending than others: on a per capita basis, Switzerland leads the way. In 2011, Swiss spending on fair-trade products grew by 8%. In all, some 1,600 fair-trade certified products are on sale in Switzerland, twice the product range of 5 years ago. Fair-trade yoghurt and chocolate grew particularly strongly in 2011, with fair-trade chocolate sales doubling. Max Havelaar maintained that this was ‘mainly due to an assortment switch by wholesaler Coop’ (the second largest retailer in Switzerland). Significantly, revenues to fair-trade producers from sales of fair-trade products in Switzerland reportedly increased by some 17% in 2011, more than twice the percentage increase in fair-trade spending in the country.
As elsewhere, bananas are the most commonly sold fair-trade products in Switzerland, accounting for 55% of all bananas sold. In Austria, the share of fair-trade bananas out of total banana sales is 20%, while in Belgium, just under 18% of bananas sold in supermarkets are fair-trade. Worldwide, only around 2% of bananas exported are fair-trade certified.
The purchasing decisions of multiple retailers are central to the growth of fair-trade sales in the developed economies of Europe. For example, the decision 5 years ago of UK supermarket Sainsbury’s to convert to 100% fair-trade bananas was described by the chief executive of the Fairtrade Foundation as providing ‘a great boost for producers’. This has contributed to making the UK the largest overall consumer of fair-trade products, accounting for 30% of global fair-trade sales. The procurement policies of major companies and strong grassroots activism are seen as having been critical to the growth of fair-trade sales in the UK.
The decision of Tate & Lyle to convert all its direct consumption sugars to fair-trade labelled products is set to ensure that over half of all bagged sugar sold in the UK will now be labelled fair-trade.
In addition, corporate procurement policies have seen significant growth in fair-trade sales in some developing country markets such as South Africa (see Agritrade article ‘ New opportunities for fair-trade producers’, 2 July 2012).
Editorial comment
Growing complaints from farmers about alleged abuse of market power by multiple retailers during a period of economic austerity sits uneasily with the growing role of supermarkets in developing fair-trade sales. It would appear that, in the case of fair-trade products, multiple retailers believe there is more commercial advantage to be gained by visibly positioning themselves as ‘ethical retailers’, than from trying to cut costs by reducing supplier prices (see Agritrade article ‘ Debate on functioning of supply chain continues’, 7 June 2010).
This suggests that maintaining the integrity of the ‘fair trade’ label is important, since it is this integrity that generates consumer loyalty, even in times of economic austerity.
In this context, particular challenges would appear to be faced in two of the major fair-trade commodities, bananas and sugar. In the UK banana market, the periodic outbreak of supermarket banana ‘price wars’ is believed to be exerting downward price pressure on fair-trade suppliers, with the price differential between conventional bananas and fair trade bananas shrinking (see Agritrade article ‘ Retail price wars threaten long-term sustainable pricing for bananas’, 26 September 2010).
In the sugar sector the challenge is somewhat different, with the pending elimination of price guarantees for ACP sugar suppliers from 1 October 2012 potentially exerting a downward pressure on ACP sugar prices. This will be particularly the case if the EU moves towards abolishing both EU sugar production quotas and liberalising its sugar import regime. Fair-trade sugar suppliers may then benefit from the fair-trade premium, but within a context of a lowering of the basic price paid for their sugar cane. In markets where retail prices for fair- trade sugar are higher than conventional sugar (e.g. Belgian discount retailers), this could serve to undermine the integrity of the fair-trade label.
