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Fair Trade & Ethical Consumer Buying Advance in UK

SIMON CAULKER, THE OBSERVER:

02/05/03

Last week, Nestle quietly dropped its $6 million compensation claim against famine-stricken Ethiopia, accepting the country's $1.5 million offer and donating it to hunger relief. Nestle's embarrassment, occasioned by a well-orchestrated outcry at the actions of the largest coffee producer against one of the world's poorest countries, is a small triumph for fairtrade campaigners.

But more significant, it is testimony to the growing assurance of the ethical consumption movement in playing the brands game. Fairtrade was not always that adept. 'We used to think that because we had the moral high ground we could ignore the business case for buying or not buying a brand,' says Sylvie Barr, head of strategic development at tea and coffee supplier Cafedirect.

But the world is changing. As consumers become ever more sophisticated, brands grow in power --- but also in vulnerability. 'All major brands are potentially exposable,' writes Wendy Gordon in Brand Green: Mainstream or Forever Niche? To play on this fertile but risky terrain, says Barr, ethical marketers need to completely understand the rules of the game.

Turning the power of brands back against themselves is one important trick the ethical movement has learnt to use to raise awareness and edge fair trade towards the mainstream. After all, the ultimate aim is that all products should be produced fairly.

And, although this is a long way off, progress is steadily being made. For example, the Ethical Trading Initiative, a tripartite project to promote human rights in global supply chains, now claims membership of UK companies with a combined turnover of more than �100 billion, including most big retailers, along with trade unions and NGOs.

But there are important opportunities at product level, too. As a new breed ,of activists is enthusiastically discovering, ethical products that are carefully nurtured have increasingly valuable marketing assets. Although relatively tiny --- the combined UK market share of ethical products over seven food and non-food segments is around 1.5 per cent --- this made �7bn in sales in 2001, according to the Co-op Bank's Ethical Purchasing Index.

And the totals are growing fast: the Index is up by 25 points since the 1999 baseline, double the growth rate of the equivalent non-ethical basket.

The figures conceal some instructive individual success stories. On the producer side, Caf*direct, as its name suggests, sources all its coffee and tea direct from growers at better than Fairtrade standards, and has found domination by major multinational brands leaves an inviting space for an agile newcomer.

Its Cafedirect 5065 brand is the fastest-growing freeze-dried coffee product in the UK against a decline for the overall sector. Its speciality roast and ground products are also strong contributors to an annual growth rate of 20%.

The secret? Understanding that great quality and a reasonable price come first, says Barr. 'Only then do you get to tell the story of the origins and the sustainable business model behind it.'

That then develops into the classic brand virtuous circle: the more people who buy it, the more can be invested in raising awareness, which then feeds back into the brand - and into Fairtrade as a whole.

'It's the same for the growers,' says Barr. 'They're not asking for charity; they want a relationship in which their heritage of expertise accumulated over the generations is valued because it produces a better product. It's a business case.'

The same reasoning underpins the growth of Fairtrade-labelled products at the Co-op, which around four years ago decided to lead the retail sector in making a real effort to bring the concept into the mainstream. Starting in 1999, it put Fairtrade-branded products into all its 2,300 stores, then introduced the UK's first Fairtrade bananas, followed by a Fairtrade own-label chocolate bar and a slew of other products: coffee, wine,� mangoes, pineapples and chocolate cake.

In November, the Co-op scored a major coup by switching the sourcing of all its own-label chocolate to Fairtrade - at the same time affirming its ethical 'brand' and severely embarrassing an industry discomfited by persistent allegations of slavery on cocoa farms in West Africa.

'Everything about Fairtrade fits with the Co-op,' says group head of brand and corporate marketing Terry Hudghton --- a judgment which is borne out by the expansion of the group's Fairtrade sales from �100,000 to �7.5m in four years. This is faster than originally expected and, for Hudghton, is an indicator of the potency of the Fairtrade message.

'If you are competitive at the quality and price thresholds, the social side is a great differentiator,' he says. 'It also strengthens our overall brand stance of responsible consumption against the other chains, which seem hellbent on competing on price and squeezing suppliers to the limit.'

Lusty it may be, but the ethical consumer movement is still an infant. How far along the road to mainstream adulthood can the present momentum take it? Participants believe that as long as they don't forget the rules, the potential is huge. Cafedirect expects to double in size over the next three years; Hudghton, although shying away from specific targets, also expects healthy growth to continue, fuelled by a further range of product introductions.

While the supermarket chains at least give space to organic and Fairtrade products, and to that extent help to spread the message, the next big step will be to with the major manufacturers. Starting with coffee and chocolate, then moving on to non-food items such as textiles, the big brands need to source responsibly. Oxfam is pressing the larger coffee companies to start buying Fairtrade as a means of bringing demand and supply into balance.

'At present, prices paid to farmers are less than the cost of production, and quality is deteriorating. That is not sustainable,' says the charity's Sophia Tickell.

Why do companies hesitate? Partly because they worry what buying Fairtrade would say about their other sources, and partly because they can still maintain that ethical business is a minority interest. But the brand game may be running away from them. Consumers are beginning to learn that buying Fairtrade and ethical products can create a feelgood factor rather than a guilt trip.

'There may be a ceiling on the size of the market somewhere,' says Ian Bretman, of the Fairtrade Foundation. "But I don't feel we're anywhere in sight of it yet if we're doing our job properly."


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