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New Fairtrade sourcing rules boost cocoa sector but could reduce market opportunities for Fairtrade-certified sugar

05 March 2014

According to the website Foodnavigator.com, pending changes to Fairtrade sourcing and labelling rules designed to boost sales of Fairtrade cocoa will allow manufacturers “to bulk buy a single commodity as Fairtrade”, rather than requiring companies to “source all ingredients for a brand on Fairtrade terms”. Companies sourcing single ingredients will be able to utilise a new Fairtrade mark. This would be different to the established Fairtrade mark, which would only be available to “brands that source all ingredients” on Fairtrade terms.

Nine major companies have already signed up for the new model of certification, which is seen as opening up new opportunities for Fairtrade suppliers of cocoa, while maintaining the same “Fairtrade standards on the ground for the producers”.

Fairtrade International is forecasting that an additional US$1.2 million in Fairtrade premiums will be paid to farmers in 2014. While the UK remains the main market for Fairtrade cocoa, new commitments will see a sixfold increase in Fairtrade cocoa sales in Germany and a 14% overall increase in Fairtrade cocoa sales in 2014 compared to 2013. Outside Europe, Fairtrade International sees “the markets of the south, such as South Africa, India, Brazil [and] East Africa as the markets for the future of Fairtrade”.

The organisation commented that in the past, “all-ingredient” sourcing requirements had discouraged many companies from purchasing Fairtrade-certified cocoa, since it “added too much to cost at the market end instead of delivering more benefits to farmers”, and that the new sourcing programme was intended to address this issue, starting with cocoa.

In addition to fair-trade purchasing commitments, major companies, including Mars, Ferrero and Mondelez, have all made commitments to, by 2020, purchase only cocoa certified as sustainable, either under third party certification schemes or, in the case of Nestlé, its own sustainability certification scheme. An organiser of the International Sweets and Biscuits Fair, which took place in Cologne in January, commented that the move to sustainability and fair-trade sourcing is seen as a major new trend in the European confectionery industry.

Some analysts have implied that the new commitment to sustainable sourcing is linked more to the projected 1-million-tonne shortfall in cocoa supplies expected by 2020 than to commitments to sustainability and child-labour-free supply chains. Fairtrade International, however, argues that corporate executives are increasingly aware that “unless the companies make sure the farmer gets a fair price”, the next generation of cocoa farmers simply will not emerge.

While increased volumes of Fairtrade-certified cocoa are largely coming from Côte d’Ivoire, Ghana, Dominican Republic and Peru, cocoa production is on the rise in Asia, and Fairtrade International foresees a need to invest more in supporting and certifying producer organisations in countries such as Indonesia. 

Editorial comment

The shift to single-commodity sourcing, while providing a boost for Fairtrade cocoa sales, could reduce opportunities for Fairtrade sugar sales. Currently, 79% of all Fairtrade sugar sold is used in composite products. While conceivably the new single-commodity sourcing rules could boost production of non-chocolate products using Fairtrade sugar as the main ingredient, it is unclear whether this will be sufficient to outweigh the elimination of the requirement to use Fairtrade-sourced sugar in cocoa-based composite Fairtrade products. This is particularly the case in the light of growing health concerns over “hidden” sugars in processed food products (which account for 75% of all the sugar consumed in Europe).

As a result, the new Fairtrade sourcing label, allowing single-commodity sourcing, could seriously limit growth in industrial demand for Fairtrade-certified sugar, at a time when there are growing volumes of ACP Fairtrade-certified sugar potentially available.

The absence of readily available markets for Fairtrade-certified sugar could then slow down the trend towards Fairtrade certification of sugar, or potentially lead to Fairtrade-certified sugar being sold as conventional sugar.

In Swaziland, for example, Fairtrade-certified sugar sales in 2013/14 are projected to reach 10,000 tonnes, with a possible further increase to 15,000 tonnes in 2014/15. However, this would still represent only 25% of the Fairtrade sugar potentially available. Given the difficulties faced in penetrating the fair-trade market, there appears to be little point in incurring costs of further Fairtrade certification of producer associations until there is adequate absorption of the existing certified tonnage.

Any limitation of future demand for fair-trade sugar by the food processing industry is a matter of concern, given wider trends in the EU sugar market. Between 2010 and 2023, sugar consumption in the EU is projected to fall by 10.5% (from 19.1 to 17.1 million tonnes). EU sugar production from beet, in contrast, is projected to increase by 11% between 2016 (the last year of production quota restrictions) and 2023, rising from 15.4 to 17.1 million tonnes. Isoglucose production is projected to more than triple over the same period, increasing its share of the EU sweetener market from 3.5 to 11.5%. In addition, a public health campaign aimed at reducing the use of ‘hidden’ sugar in processed foods is targeting a 30% reduction in sugar content. These factors are likely to increasingly restrict the market opportunities available to traditional ACP sugar exporters.

Fair-trade sugar is one of the few ACP sugar products that does not directly compete with expanded EU isoglucose production and sugar production from beet. Expanding overall EU demand for fair-trade sugar could thus be seen as an important priority for traditional ACP sugar exporters where production is based on smallholder farming systems. 


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