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June 6, 2006

Ethical consumerism moves into the mainstream

The launch of fairtrade products by mainstream multinational food companies has been dismissed by some as the cynical exploitation of ethical consumerism. But does the fact that fairtrade is now attracting such interest underline the growing importance of ethical concerns to consumers? Chris Brook-Carter reports.

The launch of fairtrade products by mainstream multinational food companies has been dismissed by some as the cynical exploitation of ethical consumerism. But does the fact that fairtrade is now attracting such interest underline the growing importance of ethical concerns to consumers? Chris Brook-Carter reports.

Last year, a very strange thing happened in the UK. A pressure group called Baby Milk Action, which campaigns against the aggressive marketing of baby milk in the Third World, blacklisted a product bearing the ethical trading Fairtrade symbol.

It is perhaps not so baffling given that the product concerned was Nescafé Partners Blend, produced by Nestlé whose activities in the baby milk market have attracted most opprobrium from such campaign groups. However, what this event did demonstrate most cogently was just how mainstream ethical consumerism and faitrade have now become.

In numerical terms, the market may still be classified as a niche but the days when this area was solely the domain of offbeat and marginal operators are long gone. And it is perhaps a testament to the success of those early pioneers and campaigners that mainstream operators such as Cadbury Schweppes, Kraft and Nestlé are now showing such interest in this sector of the market.

According to a new report on ethical consumerism by just-food.com, Global market review of fairtrade and ethical food – forecasts to 2012, labelled fairtrade generated an estimated US$100m in producers’ additional income in 2004, thanks to global retail sales (of all fairtrade goods) of an estimated US$1bn. This represents growth of 49% over the previous year.

Moreover, the increasing involvement of large, mainstream companies is likely to signal an acceleration of this growth going forward. Last November, a spokesperson from Kraft Foods, the world’s second biggest food company, predicted that within the next decade, 60% to 80% of the coffee market would be taken up by products with independent certification for fairtrade issues.

Cadbury Schweppes’ acquisition of leading fairtrade and organic chocolate company Green & Black’s has prompted speculation that future M&A activity will focus on grabbing a share of the ethical market. Large multinationals such as Cadbury can increase their profits, and their ethical reputation, through the acquisition of a smaller, established, ethical company. The acquisition of the Body Shop by L’Oreal is another non-food example of such activity.

Sceptics argue that large companies such as Nestlé view ‘ethical consumerism’ as the next marketing buzzword, a trend that is worthy of investment. But what is clear is that faitrade as an idea has moved on considerably since it was first introduced in the Netherlands more than 20 years ago.

The major driver behind the development of the ethical and fairtrade market is education. Consumers in many countries worldwide are now aware of the unfair treatment of developing world producers, and are keen to show their support by purchasing the occasional fairtrade product.

Consumers want to see companies becoming more ethical, caring and compassionate about the product, the consumer, the world we live in and the environment. Research conducted by Moxie Design Group found that 25% of New Zealanders are classified as “solution seekers”, a term used to describe a desire on the part of consumers to feel environmentally and socially responsible about the products they purchase.

Ethical consumerism is gradually becoming a hot topic for consumers, retailers and manufacturers. The typical response of “there is nothing I can do” is becoming increasingly invalid – and unaccepted. Fairtrade and organic products are just two examples of how consumers are contributing to what has been termed the ‘quiet revolution’. Purchasing a fairtrade product enables consumers to make a stand against the problems we hear about every week, such as global warming, species extinction, animal testing, factory farming, human rights abuse and unfair trade.

The Fairtrade Labelling Organisation (FLO) is the parent body overseeing the development of around 19 fairtrade labelling organisations around the world. The producers who work under the FLO banner receive a minimum and fair price that covers the cost of production and includes a premium for investment in the local community. Aside from the issue of fair costs, farmers under the FLO scheme can also access a much wider, international distribution network than would ordinarily be achievable.

While this all sounds extremely positive, many consumers are yet to be convinced, and those that have bought into the fairtrade idea appear reluctant to increase the frequency and volume of purchases. Supply currently outstrips demand, unlike the organic market, which is experiencing a surge in value.

Is there room in the average consumer’s shopping basket for both fairtrade and organic products? Or, is it still too expensive for the majority of consumers to be ‘ethical’, regardless of good intentions?

Without a doubt, the development of new categories under the fairtrade banner would help to attract new consumers and provide further value to the market. However, sceptics of fairtrade argue that there is only so much the movement can achieve, while others believe a future cut in prices is inevitable in order to increase demand. In turn, it is believed that this will have a negative, long-term impact on the producers.

Other fairtrade detractors point to the need for a general free trade, rather than fairtrade, deal. According to them, reducing the barriers to entry for exporters from the developing to the developed world would make more of an impact on the global food market and provide a positive boost to producers.

Ethical considerations are starting to dictate food purchases for more consumers, and companies are advised to consider their role within this emerging market. In today’s ethically minded society, companies are assessed on a number of factors such as the provenance of ingredients and products, how these products are sourced, the environmental impact, and the treatment of the producers/workers.

Provenance is an important term in today’s food and drink business. Organic used to be a niche market but is now entering a more mainstream positioning. Fairtrade is in its early stages, but optimistic commentators point to the potential replication of the success experienced to date by the organic movement.

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