Fairtrade business booming as consumers 'shop ethical'

The latest edition of the Co-operative Bank's Ethical Purchasing Index (EPI) shows that ethical food and drink sales in the UK reached £1.77 billion last year, with Fairtrade accounting for £59.5 million of this total.

Organic products, vegetarian or meat alternatives and free-range eggs make up the remainder of sales, the bank said.

Fairtrade products - which include coffee, chocolate, fruit, sugar and even manufactured food products - guarantee that producers are paid a fair price for their goods. In the case of coffee, for example, this is around three times the current market price for robusta beans and double the price for arabica.

Some Fairtrade products in particular have proven to be particularly successful, with tea and coffee purchases rising from £24.5 million in 2001 to £30.3 million in 2002. In fact, Fairtrade ground coffee now has more than 14 per cent of the UK ground coffee market.

Fairtrade honey, chocolate and bananas have also performed well, with combined sales rising from £23.8 million in 2001 to £29.2 million in 2002, growth of 23 per cent, the EPI data showed.

And the success of Fairtrade products is prompting increasing numbers of companies to stock them. For example, the Co-op retail chain - part of the same group as the bank - has in the last year switched all its own label chocolate and coffee products to Fairtrade.

But while the ethical benefits of such a move are clear, this cannot be the sole reason for a shift to Fairtrade products, as David Croft, head of Co-op brand and technical, told FoodandDrinkEurope.com​ after the company's recent switch to Fairtrade coffee.

"The important part of any Fairtrade business is that it has to perform in its own right - if it doesn't, then it is no longer trade but charity,"​ he said. "The challenge is to bring Fairtrade coffee into the mainstream and out of the niche which it has occupied for many years."​

So while the Co-operative Bank's survey would suggest that the market for Fairtrade products is likely to show further growth, the experience of the Co-op retail arm would suggest that there are a number of conditions to this growth - no matter how ethically minded consumers are, they must like the taste of the ethical products they buy, otherwise they will stop doing so.

Croft said that the Co-op had worked hard to ensure that the flavour of both its chocolate and coffee brands matched the tastes of British consumers. The chocolate, for example, tastes more like Cadbury's Dairy Milk brand than some other Fairtrade chocolates, which have more of a continental chocolate taste with a high cocoa content.

But price is also an important element in ethical shopping, with consumers prepared to pay a premium for such products - but only so far.

Paying producers a fair price for their coffee clearly meant that Co-op had to spend more on its own label coffee than it did before, an increase which was reflected in the retail price.

"A 100g jar of medium roast coffee granules under the Co-op brand will now rise in price from £1.24 to £1.39,"​ Croft said. "That increase is entirely the result of the increased cost of raw materials by buying Fairtrade coffee - there is no margin increase built in."​

But, he explained, since most own label products already retail for considerably less than their branded equivalent, there was room for such price increases. A 100g jar of Maxwell House or standard Nescafe instant coffee retails for around £1.60 - still considerably more than Co-op's own label, even with the Fairtrade-related price increase.

But if Fairtrade products can get it right in terms of taste profile and price, then the potential is significant, as the EPI data shows.

"In the year since we switched all our own label chocolate bars to Fairtrade, sales have increased by 23 per cent in volume terms,"​ Croft said. "At the same time, branded chocolate sales growth was 1 per cent."​

With Fairtrade sales growing steadily every year, the likelihood is that more and more major food producers and retailers will jump onto the bandwagon - but the move is likely to have more to do with the potential for increasing sales and profits than a fundamental desire to support farmers and growers in the Third World.