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February 23, 2010

COMMENT: Fairtrade commitments motivated by sales promise

Fairtrade bodies secured what seemed like another big coup last week (18 February) when Unilever-owned ice cream maker Ben & Jerry's said it would move to 100% Fairtrade. While the news is further evidence that the ethical movement is picking up steam, Katy Humphries suggests that the impetus behind Fairtrade sourcing remains a financial one for large food corporations.

Fairtrade bodies secured what seemed like another big coup last week (18 February) when Unilever-owned ice cream maker Ben & Jerry’s said it would move to 100% Fairtrade. While the news is further evidence that the ethical movement is picking up steam, Katy Humphries suggests that the impetus behind Fairtrade sourcing remains a financial one for large food corporations.

Fairtrade has long been the preserve of smaller niche food companies. The likes of Divine Chocolate and Traidcraft in the UK have demonstrated that ethically-sourced products have proven both popular with consumers and – significantly – profitable for the manufacturer.

As Harriet Lamb, executive director of the Fairtrade Foundation, told just-food last week, smaller companies have been the Fairtrade trailblazers.

However, Lamb suggests that the Fairtrade movement must extend its appeal to larger corporations in order to take Fairtrade certification “to scale”.

As the UK begins to celebrate Fairtrade Fortnight, it is clear that the larger food companies are now also looking for a slice of the Fairtrade pie.

Prior to its highly-publicised takeover by Kraft Foods, Cadbury made a much-heralded move into Fairtrade last summer with the announcement that it had moved its UK Dairy Milk production to Fairtrade sourced ingredients.

The UK confectioner said that Fairtrade Dairy Milk would then be rolled out to other markets, beginning with Canada and Australia. Its organic brand Green & Black’s is also committing to go 100% Fairtrade in the UK.

Not to be outdone, Swiss rival Nestle followed suit. In December, the group said its Kit Kat brand would make the switch in the UK and Ireland.

However, even as these global behemoths dabble in Fairtrade, it is notable that such forays have largely been confined the UK, where awareness is high and where sales have stood up well under the pressure of the economic downturn.

Globally, and certainly outside of western Europe, announcements on conversions to Fairtrade have been fewer and further between. In these markets, the risks and costs associated with signing up to Fairtrade schemes, intiatives that guarantee a minimum price for producers, outweigh the PR upside.

So, when Unilever-owned Ben & Jerry’s made its Fairtrade announcement last week, it was interesting to see that this commitment extended to the ice cream maker’s global operations.

Ben & Jerry’s first dipped into Fairtrade in 2005, when it started using Fairtrade coffee, chocolate and vanilla for some of its flavours. Under its new plans, the company plans to be fully Fairtrade-compliant in all its European products by the end of 2011, and in the rest of the world by 2013.

However, in a candid interview with The Times, co-founders Ben Cohen and Jerry Greenfield admitted that progress on the Fairtrade pledge would have been achieved faster if the business had not had to answer to “risk-averse” managers at Unilever.

The move, Cohen claimed, was slowed by the reluctance of Ben & Jerry’s management team in North America, where awareness of Fairtrade certification trails Europe.

“In the US, the upper-level management were not comfortable with taking a leadership position,” he revealed.

According to Carmen Iezzi, executive director of the Fairtrade Foundation in the US, while 71% of US consumers recognise the term “Fairtrade”, there is confusion over what the term means.

To this confusion can be added a certain amount of cynicism among US consumers, who have witnessed the manipulation of Fairtrade certification schemes by those companies looking to capitalise on the positive PR while sourcing Fairtrade products at a minimum cost.

Iezzi says certain companies in the US will make a minimal investment in Fairtrade, which will then be milked by their marketing teams for all it is worth. Examples include companies publicising Fairtrade products, which are then only available in selected markets.

Despite the work of organisations like the Fairtrade Foundation in the US, such confusion and cynicism means consumer awareness of Fairtrade issues – and therefore a willingness to pay a premium for Fairtrade products – is low.

“In the US, people are only just waking up to their power as consumers. In Europe and Britain, people have been aware for much longer,” Iezzi says. “The Cadbury launch in the UK, or the Starbucks Espresso launch, or Nestle’s Kit Kat launch – they are not going to happen in the North American context.”

The reason? Whatever the rhetoric, without the financial impetus – the promise of higher sales, or at least, a lot of positive PR – large corporations are simply not willing to commit to paying more for the ingredients they source.

Unilever, however, seems to disagree. Philippa Marshall, a spokesperson for Unilever, insists that the extension of Ben & Jerry’s commitment to Fairtrade demonstrates the food giant’s “commitment to implement values-led sourcing”, which is “in line with our ongoing corporate social responsibility programme”.

Marshall also hints at the possibility of extending that “values-led sourcing” to other brands in the Unilever stable. “While Ben & Jerry’s operates at the front end of sustainable sourcing of ice cream ingredients, with this commitment we are now even more able to continue building and strengthening our capabilities in this area,” she insists.

Nevertheless, Marshall reveals that Unilever does not anticipate the Ben & Jerry’s move having a negative impact on profits, although the ice cream maker has said that it will not hike prices.

“Our commitment to go fully Fairtrade represents an on-cost for the business, but we know its something that our consumers want and we believe it will contribute to our future sales,” Marshall says.

In other words, no matter how laudable a company’s intentions in its sourcing of ingredients, the bottom line remains the bottom line.

Before brand managers convert to Fairtrade, they must first be convinced that the upside – increased sales – will surpass the costs associated with the move. 

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