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The Fair Trade Movement in Historical Perspective

Explaining the “In and Against the Market” Predicament

 

SECTION 1.4:  DEVELOPMENT OF TRADING PARTNERSHIPS AND THE MARKETING OF THE FAIR TRADE BRAND

Alongside increased mainstreaming, at the turn of the millennium the emerging trend in fair traders’ business practices was toward more integrated partnerships between producer groups and importer/retailer organizations. As Tallontire explains, “in the past the ATO provided ‘producer services’, something for the benefit of the producer. This implied asymmetry in the relationship, with benefits flowing from the ATO to the producer. The concept of mutual benefits in trade evolved and became a broader partnership approach.”[110] This shift was reflected by a focus on creating new and innovative business models for fair trade organizations. In Europe, where the fair trade movement grew more rapidly, such partnerships have been more common than in North America and the Pacific Rim. A corollary development has been an increasing tendency to market fair trade on the level of a brand, which is examined further below.

Cafédirect is a leading example of a partnership-oriented fair trade organization. Set up as a for-profit company, Cafédirect was formed in 1991 by a partnership of four British ATOs—Oxfam, Traidcraft, Equal Exchange UK (no relation to the U.S. ATO), and Twin Trading—with a goal of entering Britain’s mass coffee market.[111] A unique feature of Cafédirect’s structure was that the producer cooperatives from which it imported were given representation on its board and a stake in the ownership of the company. From a single coffee offering in 1991, Cafédirect expanded its product line to include teas, drinking cocoa, and roast, ground, and instant coffee, and by 2001, its products had penetrated all major British supermarket chains[112], achieving an impressive 8 percent share of Britain’s roast and ground coffee market by the following year.[113]

In 2004, as its sales reached £20 million (accounting for 20 percent of all British fair trade sales)[114], Cafédirect issued shares through a special matched bargaining system and raised £5 million in capital. While the founding ATOs and producer-partners retained a controlling stake in Cafédirect, the share offering was a fair trade first, giving members of the public a new way to engage with and support fair trade.[115] Cafédirect also created what it calls a “Gold Standard” set of policies which exceed the minimum fair trade standards set by FLO in a variety of areas; one result of this policy has been Cafédirect’s Producer Partnership Programme, which re-invests a significant percentage of operating profits (86 percent in 2004-5, or £574,000) into training and support projects in the company’s 37 producer-partner cooperatives. Cafédirect has dubbed this practice “fairtrade plus”.[116]

The Divine Chocolate Company (originally Day Chocolate Company) is another example of the trend toward integrated trading partnerships in the fair trade movement. Its story begins with Kuapa Kokoo, a Ghanaian cocoa farmers’ cooperative founded by some 2,000 farmers in 22 villages in 1993 that now numbers over 40,000 members in 1,300 villages and is responsible for 1 percent of the world’s total cocoa output.[117] Kuapa already had experience selling its cocoa through fair trade channels when, in 1997, its members approved a plan to launch their own fair trade chocolate bar brand aimed at Northern mass markets. Kuapa turned to Twin, which had provided start-up finance and advisory support to the cooperative in its early days, as a partner for the project. The Body Shop, which sourced cocoa butter from Kuapa, also joined the venture. In 1998, Divine was formed as a private, limited company with shareholder owners: Twin (52 percent stake), Kuapa (33 percent), and the Body Shop (14 percent). The British charities Christian Aid and Comic Relief also assisted in the company’s creation and promotion, and the British government’s Department for International Development was instrumental in securing a one-off loan from a commercial bank.[118] In a first for the fair trade movement, producer groups gained a significant role in the operations of a company processing and retailing fair trade products: Kuapa officials are directors on the company’s board, one of every four Divine board meetings is held in Ghana, and Kuapa shares in Divine’s profits.[119] In mid 2006, the Body Shop donated its Divine shares to Kuapa, raising the latter’s stake to 45 percent and giving the cooperative even more say in the company’s governance.[120]

Divine has had considerable success in the British confectionary market. Its Divine and children-focused Dubble bars, launched in 1998 and 2000 respectively, were designed and priced to go head-to-head with conventional offerings from Britain’s big three chocolate bar lines (Cadbury, Nestlé, and Mars).[121] Despite significant barriers to entry and a miniscule marketing budget in comparison with the competition, Divine bars have edged their ways into the British mainstream market, sitting on shop shelves in over 5,000 supermarkets, convenience stores, and other retail outlets.[122] In 2004, its sales surpassed £5 million.[123]

All of the cocoa Divine uses is produced and purchased according to FLO’s fair trade standards, and the extra income and social premium payments Kuapa receives from fair trade have had a significant impact on communities in Ghana. Fair trade premiums have funded free medical care via mobile clinics for more than 100,000 Kuapa members and non-members, created scholarships for young people, built daycare facilities and four new schools, launched women’s income-generating projects, and increased villagers’ access to clean water through over 170 well-digging projects.[124] Some results are less tangible, as Kuapa member Helena Bempong explains: “Fair Trade helps to boost the morale of the farmers and helps us financially. We are very proud of the cocoa that we grow; it is the bridge that brings people together.”[125] At the same time, Divine has been credited with influencing several British supermarket chains including Sainsburys and Tesco to launch own-brand fair trade chocolate lines; in 2002 the Co-operative Retail Group switched all of its own-brand chocolate lines to fair trade cocoa also sourced from Kuapa.[126] More recently, Divine has begun selling its chocolate in the United States, Canada, the Netherlands, and Scandinavia. As Divine’s U.S. affiliate’s CEO explained, “the U.S. is a $13 billion chocolate market and even getting a small share of that back to cocoa farmers would really improve their livelihood.”[127]

The Dutch company AgroFair, which markets fair trade fruit, is an example of an ATO that shifted models to increase the involvement and benefits accrued to its producers. Founded in 1996, AgroFair was initially set up as shareholder limited company fully owned by the Dutch development organization and ATO, Solidaridad—the group that launched the Max Havelaar label in the late 1980s. Early on, AgroFair pioneered the importation of fair trade bananas, mangos, and pineapples. In 2004, AgroFair restructured its business, with Solidaridad and other NGO partners retaining half its shares, and the other half of the ownership entrusted to the Cooperative of Producers AgroFair (CPAF). CPAF membership is available to all of AgroFair’s producer-supplier cooperatives, from 12 countries in Africa and South America, and allows these farmers to have seats on the company’s board, attend shareholder meetings, and share in the company’s profits.[128] AgroFair sells fruit under its Oké brand in 13 European countries and the United States[129], logging successes including a 35 percent share of the Swiss banana market and 15 percent of Finland’s.[130] But despite a turnover of €45 million in 2005, the company showed only modest profits (€518,000) after considerable spending to launch lines of fair trade citrus.[131] Assessing whether AgroFair had been a success by its tenth anniversary, CEO Jeroen Kroezen responded “yes and no.” While able to say yes and point to several accomplishments,

we would also say “No”, because AgroFair is still a niche player in most of its markets. No, because the volumes sold in AgroFair’s home market of the Netherlands are now lower than they were in the first years. No, because the majority of producers and workers in the tropical fruit industry are still working under abominable conditions. No, because in several countries only a limited proportion of the consumers who said they would buy Oké Fairtrade fruit, is actually buying it.[132]

While innovative partnerships like Cafédirect, Divine, and AgroFair are by no means the norm for fair trade organizations at present, their successful models have caught the attention of other fair traders and conventional firms alike. Observers have begun to refer to such strategies as “commercial” fair trade and “responsible retailing.”[133] Some, like Cafédirect and AgroFair, are beginning to demonstrate the ability of fair trade to move beyond the niche segment that has thus far obtained in many markets. Placing producer ownership and a strong fair trade brand at the center of their approach and values, these sustained partnerships are pioneering a new approach to fair trade that has already proven itself capable of challenging conventional firms in the mainstream retail sector while continuing to uphold fair trade principles in a manner that is fully auditable, and even profitable (if such an end is sought).

Since the 1990s, the creation of fair trade marks by the national labeling initiatives, FLO, and IFAT has enabled the increased mainstreaming of fair trade. The marks have been prominently placed on the packaging of fair trade food products and the promotional materials of fair trade organizations, and the recurrent use of fair trade marks has helped to increase their recognition among dedicated “ethical consumers.” Nonetheless, fair trade marks were far from the only labels appearing on products and promotional materials. The 1980s green consumerism wave had seen a surge of product quality labels, some of which were independently certifiable and others of which lacked rigorous or auditable standards and were little more than corporate PR exercises.[134] This proliferation of labels left many consumers befuddled or dubious of labels’ claims.[135] To overcome this “label fatigue” fair trade has sought new ways to market its brand that go far beyond a label on the product packaging. This effort has included initiatives that allow towns, religious institutions, and universities to be accredited as “fair trade” by meeting specific criteria about the availability of fair trade products and the extent of awareness-raising about fair trade in the community; this concept has been particularly popular in Britain, where by mid 2006 there were over 200 towns, 2,850 religious congregations, and 34 colleges and universities accredited as “fair trade” (see Appendix 4 for the criteria).[136] Fair traders have also made efforts to promote fair trade procurement in public and private institutions, as well as in the catering industry.[137] Annual events like Britain’s Fair Trade Fortnight, combined with heavy promotion by anti-poverty groups (including Oxfam, an early ATO) have also raised awareness of the fair trade brand and the meaning behind it.[138] In conjunction with the launch of its FTO mark in 2004, IFAT began a “Global Journey” which combined educational and social events, marches, and endorsements by celebrities and political figures in a highly dispersed, round-the-world promotional campaign set to wrap up Europe in May 2007.[139] IFAT also organizes a World Fair Trade Day each May.[140]

At the same time, the fair trade movement is reviewing ways to improve its labels’ brand recognition. FLO is presently harmonizing the use of its certification mark among its 21 constituent national initiatives[141], and has entered talks with the International Federation of Organic Agriculture Movement, an association of organic certification bodies from over 100 countries, about the possibility of developing a joint certification process for products that are both fair trade and organic.[142] Such a move would certainly be welcomed by Southern producers, as the rigors and costs of passing two certification audits (one for organic production and another for fair trade) have been a locus of growing frustration for many producer groups.[143] FLO and IFAT have an ongoing dialogue about the feasibility of developing a label for fair trade handicrafts, and IFAT reports “the two organizations are also closely working together to develop one overall, integrated Fair Trade Quality system for Fair Trade Organizations and Fair Trade products.”[144] As noted earlier, the four largest fair trade associations formed an informal working group called FINE in 1998 which agreed on a common definition of fair trade and its strategic intent in 2001. What role FINE may play as a coordinating body for the fair trade movement in the future remains to be seen.



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Masters Thesis for:
New School, Graduate Program in International Affairs
May 2007
Advisor: Professor Stephen Collier
Reader: Professor David Gold

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