Having seen strong and resilient growth in established developed markets, the Fairtrade movement is increasingly turning its attention to ‘South-to-South’ trade. Ben Cooper reports.
The latest global figures from Fairtrade International were announced last week and for a change it was not the continued growth and Fairtrade’s impressive position in the UK which grabbed the attention.
Rather, it was the 283% growth in Fairtrade sales in South Africa in 2011 that took the eye. Of course South Africa’s total sales of EUR7.3m are dwarfed by the EUR1.5bn sales in the UK but it is the direction of travel in two senses that is significant.
Clearly the threefold increase in South African sales underlines the growth potential there and in other new Fairtrade markets. Fairtrade Label South Africa (FLSA) forecasts growth of between 250% and 300% for 2012 and a growth rate of around 200% for the two years after that. However, even more significantly it is the physical direction of the Fairtrade products that is critical.
For some years, strategists within the Fairtrade movement have been talking about the importance of ‘South-to-South’ trade to the campaign’s future, and the growth now being seen in South Africa represents the first major breakthrough in this respect.
FLSA executive director Boudewijn Goossens believes this form of trade to be “very important” for a number of reasons.
“The number one reason is that there are huge markets in the South, growing markets,” Goossens tells just-food. “Our economies in the south, in Brazil, Argentina, Chile, South Africa, India and China, are growing faster than European markets so if you are looking for market potential for Fairtrade products or any other products probably you have to be in those markets that are growing. So investing in Fairtrade markets in emerging markets makes a lot of sense.”
Goossens also says South-South trade makes the Fairtrade model “more inclusive”. Businesses in South Africa, he explains, are “buying into” the idea that southern-hemisphere countries can help themselves and not simply look to trade with northern countries as a means to grow. “People in the South are very much aware that they can help themselves and help their own people in their country and Fairtrade is maybe one of those ways to do that.”
In fact, as a trade-based development tool the idea of helping producers to help themselves has always been a critical element of Fairtrade but the addition of meaningful volumes of South-South trade takes this to the next level.
Barbara Crowther of the UK’s Fairtrade Foundation describes the establishment of the South African operation as a “very exciting” development for the Fairtrade movement globally.
Opening up developing countries from a consumer standpoint offers not only substantial volume potential but also allows Fairtrade to participate in the growing consumerism in those markets. Moreover, Crowther adds: “Fairtrade can be part of the growth of not just consumerism in those countries but an ethical approach to lifestyle for the emerging middle classes of those countries.”
Goossens points to the experience of Fairtrade wineries in South Africa to underline how “empowering” the development has been. A producer can now be a licensee in South Africa rather than just having products certified by the importer in a destination country like the UK. The producer then has “a finished product with a [Fairtrade] label and can sell to any importer”.
South Africa’s importance as a model for other southern-hemisphere countries cannot be underestimated. Describing Fairtrade Label South Africa as something of a “guinea pig”, Goossens says his organisation has “shown Fairtrade and the rest of the world that it can be done”.
Impetus and ownership at the local level is critical, he continues. “Wherever you want to create Fairtrade you need to have local people that are pushing it. It really must come from people in that country.” A Fairtrade marketing office was opened in Nairobi around six months ago, while Goossens is also in touch with people in markets such as Argentina and Brazil who are looking to establish Fairtrade organisations.
Barbara Crowther also points to the potential of both India and Mexico as strong consumer markets. “India I think we can see taking off,” she adds, which would “open up huge opportunities for rice and cotton”.
According to Goossens, if countries such as Brazil and Argentina were to follow a similar pattern to the South African organisation, they would first establish a marketing office, with the bulk of the administration being handled by Fairtrade International in Germany, with the potential to open a fully-fledged labelling organisation after another three years.
The South African experience also shows how the product range in south-to-south trade may vary significantly from the traditional Fairtrade product mix. For example, while wine has gradually become an important Fairtrade category in European markets, in South Africa it has been a major focus from the outset. Wine and coffee remain the country’s two leading Fairtrade categories.
According to FLSA, South Africans drank 255,600 bottles of Fairtrade wine in 2011 and more than 3.5m cups of Fairtrade coffee.
When the South African operation began there were five or six Fairtrade wineries in the country. There are now around 20. Another critical breakthrough has been the decision by Cadbury‘s South African operation, based in Port Elizabeth, to switch to Fairtrade. Goossens says FLSA is now working on developing sales of tea and sugar, while also expanding from the retail market into the out-of-home consumption channel. In this regard, the decision by retail group Woolworths Holdings in May to switch to Fairtrade coffee in its coffee bars was a notable step forward.
The product options are not only different from European markets: they are potentially broader. Any agricultural commodity produced and consumed in a southern-hemisphere country could potentially be certified for Fairtrade. “It will take a bit of time because it means we have to set standards for certain products that are more interesting for that market. So that is something we are working on,” says Goossens.
Also, the market profile for Fairtrade in South Africa is different. While in the UK for example Fairtrade products have broken through to the mainstream in significant volumes with little or no price differential between Fairtrade and non-Fairtrade products in many categories, Goossens explains that in South Africa the “market situation is totally different”.
For practical reasons, Fairtrade Label South Africa focuses its efforts on the top 20% to 25% of consumers in terms of purchasing power, based in the major cities of Cape Town, Johannesburg, Pretoria, Durban and Port Elizabeth. However, this still represents a population of between 10m and 15m people.
Crowther sees the development of South-to-South trade as going hand in hand with the change in the Fairtrade governance structure announced last October, which saw control shared 50/50 between producer networks and labelling organisations such as the Fairtrade Foundation. Crowther concludes: “I think seeing Fairtrade increasingly emerging as a global model that is equally shared between north and south is potentially very, very exciting.”