Paying a fair price

by Charlie Pye-Smith

If you wanted to buy fair trade tea or coffee ten years ago, you probably headed for the nearest Oxfam shop and rummaged among the second-hand kaftans and oriental wickerware. If you want to buy fair trade produce today, the chances are that there will be a supermarket near you that stocks at least some lines. Head for the Co-op, and you will find not just coffee and tea, the original fair trade staples, Ecuadorian mangoes, bananas from Ghana, Costa Rica, Ecuador and the Windward Isles, Ghanaian chocolate, Chilean wine, Cuban orange juice and a growing number of other products.

In 1994 fair trade products fetched under £3 million at the checkout. Today they are worth about £50 million. Among retailers, the Co-op has been the most enthusiastic supporter, and over the past five years its sales of Fairtrade (FT) produce - that is, goods which have been awarded the Fairtrade Mark by the Fairtrade Foundation, an independent charity - have risen from £100,000 a year to £5 million a year. In 2001, FT sales at the Co-op rose 189 per cent, compared to 40 per cent for all retailers. "The Co-op's commitment to fair trade is absolutely manifest," says Peter Collins of Traidcraft, a fair trade pioneer whose own sales now exceed £10 million a year.

Fair trade grew out of a belief, strongly held by alternative trading organizations like Traidcraft and aid agencies like Oxfam, that conventional trading arrangements are dealing a poor hand to producers in the developing world, especially to small farmers, and to those working on agribusiness estates. Wages for many are pitifully low, working conditions are often poor, and frequently workers are denied the right to join a trade union.


A level playing field

Fair trade seeks to level the playing field, as Collins puts it, by paying producers, generally small farmers, a guaranteed minimum price; by offering up-front payments and loans; and by paying a premium which is used to foster social and economic development among the producers and their families. Fair trade also seeks to raise awareness among Northern consumers about the problems which producers face. The hope is that they will exercise their buying power in a manner that promotes good practice and discriminates against the bad.


The benefits and limitations of fair trade can be illustrated with the example of Ghanaian cocoa, used in the manufacture of chocolate. Major confectioners buy their cocoa on the world market rather than direct from producers, who receive around £600 a tonne for their cocoa beans. In contrast, cocoa farmers who belong to the Kuapa Kokoo Cooperative, which is a part owner of the Day Chocolate Company, get a guaranteed minimum of £1,066 per tonne for their fair trade cocoa. On top of this, Kuapa Kokoo gets a premium of £100 a tonne, and this is used for community welfare and education projects in cocoa-growing areas.

"What we have proved," says Kate Wills of Day Chocolate, "is that it is possible to produce a delicious product which is both fairly traded and competitive in the market place." According to Wills, the latest brand of FT chocolate, Divine Chocolate, is now outselling many mainstream brands in the Co-op and other outlets.

Sounds too good to be true? Well, yes, in some ways it is. The FT cocoa may be making nearly twice as much for producers as non-FT cocoa, but the quantities sold are small. The Kuapa Kokoo Cooperative has 40,000 members, all small farmers in Ghana, and produces 1 per cent of the world's cocoa, but just 5 per cent of this is sold for £1,066 per tonne. The rest goes for around £600 on the conventional market.


Will consumers buy it?

If the benefits of fair trade are to be more widely shared, then more consumers must buy into the idea. That is one of the reasons why the Co-op decided to launch a fair trade wine in 2001. "Building consumer awareness is a key issue for us," says Terry Hudghton, the head of Co-op Brands and Corporate Marketing. "We need to get the issue talked about, to get column inches, and wine does exactly that." The Co-op's first fair trade wine received a very favourable press from wine writers, and much greater coverage than could have been expected for a new brand of fair trade coffee or another fair trade fruit.

"Our initial problem," recalls Hudghton, "was that there is no Fairtrade Mark for wine yet, so we needed a stamp of approval if we were to find and market a suitable product." The Co-op enlisted the help of Traidcraft. As it happened, both organizations were independently looking at the Chilean wines produced by Vinos Los Robles, a cooperative situated in the Curicó valley that already had strong trading links with the Belgian fair trade organization Oxfam WereldWinkels. Los Robles looked like a good bet, in terms of both the quantity it produced - 7 million litres of wine a year, grown by over 60 farmers - and the quality, which had already been good enough to attract Sainsbury's. Just as significantly, the Los Robles cooperative was working along fair trade principles. In 2001, its producers received 39 per cent more for their wine than they would have through conventional channels. Los Robles employs around 60 workers, who are free to join a trade union and have access to good facilities such as showers and a refectory.


The first bottles of Los Robles fair trade red wine, a Carmenère, arrived in the Co-op stores, with the Traidcraft logo rather than the Fairtrade Mark, in February 2001. During its first year, the Co-op sold over a quarter of a million bottles. A Los Robles fair trade white, a Semillion, became available in March 2002. "Sales have been excellent," says Hudghton, "and they continue to increase, month on month." In terms of retail value, the fair trade wines are now second only to fair trade bananas at the Co-op.

The fair trade wine market is already making a difference on the ground, according to Sergio Allard, the Vinos Los Robles export sales manager. "It's helping a great deal," he says from his office in Santiago. "It is selling well and it is definitely going to bring new benefits to our farmers and workers." Approximately 55 per cent of the Los Robles wines go for export, and 40 per cent of this is now fair-traded. Allard reckons that fair trade brings a premium of around one dollar a case, and this goes into the Ecological and Social Fund. "The first thing we are going to do is increase the wages of the fifteen lowest paid workers at the cooperative," explains Allard. The cooperative has also decided that it wants to waive the fees charged to the smallest farmers by the winery. The fund, established with the fair trade premium, will enable it to do that and much more.


Where to next?

So what is the future for fair trade? "Our ambition is to bring fair trade into the mainstream," says Terry Hudghton at the Co-op. "Some say that's an inspirational dream rather than a commercial objective, but look what we've achieved with bananas." Today 11 per cent of the Co-op's bananas, and 40 per cent of those which are pre-packed, carry the FT label. "If all major retailers did what we're doing," continues Hudghton, "then fair trade bananas would account for 10 per cent of the market, not just 1 per cent as they do at present. And I believe you could replicate that for many other products."

Hudghton adds that he is very disappointed by most retailers' response to fair trade. All the same, he believes that sooner or later consumer demand for fair trade produce will bring about a change in attitude. In the meantime, Co-op fair trade Los Robles red sells at £4.99 a bottle, around 10 per cent of which is the fair trade premium.

Charlie Pye-Smith


Updated: 20 Sep 2002

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