Are Fair-Trade Goods Recession Proof? Wal-Mart, Starbucks, and Cadbury Hope So

coffee beans

Global economic crisis. Financial collapse. The current climate. Whatever term you want to use to describe our present state of affairs, I've heard it in the halls and meeting rooms at the Skoll World Forum on Social Entrepreneurship. Funding is down, outlooks are uncertain, and people are worried. Except, perhaps, for the fair-trade folks. Demand for sustainably made, socially responsible products seems to be growing even as the global economy staggers.

A few weeks before the forum, candymaker Cadbury announced that, by this summer, all of its flagship Dairy Milk bars in Britain and Ireland will be made exclusively from fair-trade cocoa grown by Ghanaian farmers. By the end of the year, every cup of coffee that Starbucks sells in the U.K. will be brewed with fair-trade beans, and in 2009, the company plans to double the amount of fair-trade coffee it imports into the U.S. Sam's Club is quadrupling its purchases of fair-trade bananas this year, and eliminating non-FT bananas from dozens of its stores. Transfair USA is planning to certify up to a dozen new products in 2009, including avocados and olive oil, and will begin a pilot project for cotton apparel--its first beyond food. So is fair trade recession-proof?

Prices for fair-trade products may be higher, but one Harvard study has showed that consumers expect them to be: Sales actually increased when the price went up. "Not only is this consumer segment--which is growing, trend-setting--willing to pay a little more for products that speak to those values, but they expect to pay more," Transfair USA CEO Paul Rice said in a session at the forum. It's as if the higher price signals that the certification isn't just a marketing gimmick but guarantees the veracity of the claim.

Rice thinks that companies investing now are being particularly forward-looking. "Companies who are announcing big increases in FT product lines are really trying to position themselves for when we come out of the recession," he says. "They're positioning themselves now, at this unlikely moment, to establish credibility." He believes there's good reason to do so, citing studies that show up to 30% of U.S. adult consumers--some 60 million people--regularly shop for products "that are consistent with their values."

Earlier in the week, Oxford development economist Jim Cust told me "there's arguably no altruistic act in the world. Economists look at the underlying utility you derive from doing something." That's as true of the consumer, and especially the corporation, as it is of the social entrepreneur. Fair trade is certainly seen by corporations as a differentiator for marketing purposes. "We've done something that's far beyond what any coffee company in the U.K. has ever done before," Starbucks CEO Howard Schultz said last fall. "This long-term commitment … will give our customers the assurance that the coffee they're buying in Starbucks in terms of espresso-based beverages is at a price that will allow sustainability for those people who need it most."

The conventional wisdom here at the forum seems to be that the ranks of the ethical shopper are growing. The question is whether this is just what one of my acquaintances calls "an ethical corsage" (thanks, Dan McQuillan!) thanks to clever marketing and corporate strategy, or whether the growth in fair trade really presages some kind of permanent shift in the way we consume.

Maybe fair trade seems recession-proof because the people who tend to buy those products are less vulnerable to the rises and falls of the broader economy. The one problem with the Harvard study that Paul Rice cited was that it was done at ABC Carpet & Home, an upscale Manhattan home-furnishings store/yuppie magnet frequented by folks who are a little more insulated from recession than your average consumer. They're not living paycheck to paycheck. People using food stamps aren't buying fair-trade coffee. Let's say there comes a time when smarter, fairer shopping isn't just a yuppie lifestyle choice--not the only option, but the generally preferred one. That actually could mean that fair trade becomes less recession-proof, not more.

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7 Comments

  • Steven T

    How do we measure if something is "Fair Trade"? What are the standards? Are the big companies just beginning a new marketing scheme?

  • Robin Smith

    here's something i just stumbled across.

    The Rise of the Domestic Fair Trade Movement
    by Chela Vázquez
    In the past 40 years, nearly four million small farmers have gone out of business in North America while big agribusiness firms have continued to thrive. Since 1995, under the North America Free Trade Agreement, there has been a 40% decrease in commodity prices paid to farmers while U.S. consumers have seen food costs soar 22%.

    Against this background, more than 70 activists representing 41 organizations—farmers, farmworkers, traders, processors, retailers and fair-food advocates— gathered for the second annual meeting of the Domestic Fair Trade Association (DFTA) on December 7–8, 2008, at the Organic Valley Dairy in La Farge, Wisconsin.

    Fair Trade was born in response to the failed promises of “Free Trade,” which has left millions of small farmers in poor countries unable to reach international markets. Under Fair Trade, these farmers can now sell their products (such as coffee and cocoa) at better prices in the affluent markets of industrialized nations.

    Ronnie Cummins from the Organic Consumers Association stressed the need to convince consumers that, “instead of buying cheap, globally-sourced, throwaway [and] generally unhealthy” Free Trade products, Social justice and fair are powerful words. We need to be respectful and careful that, when claims are made about justice and fairness, they are strong, rigorous and meaningful— especially for people who are the most oppressed and most in need in our society. — Richard Mandelbaum, CATA“organic and fairly traded products should be the norm, with local and regional production for local and regional markets whenever possible.”

    Domestic Fair Trade incorporates principles that promote healthy, chemical-free foods that meet social justice standards. Elizabeth Henderson, a farmer from Peacework Farm in upstate New York and member of the Northeast Organic Farming Association, observed: “It has always been my understanding that organic means fair relations for everybody in the food system. Fair Trade offers an opportunity to ensure that workers and producers get fair prices, respect, and decent wages, and the people who buy our products also get a fair deal.”

    Grace Cox, from the Food Co-op in Olympia, Washington, said that DFTA membership helps distinguish the Co-op’s goods from giant food industry retailers that carry Fair Trade and organic products but oppose union organizing in their stores—a breach of DFTA principles. Cox (who is also a member of the National Co-op Grocers Association) added that, in some places, large retail organic stores have driven small co-ops out of business.

    Farmworker participation in the DFTA ensures that Fair Trade benefits also extend to field workers.

    Tirso Moreno from the Farmworker Association of Florida praised the DFTA for offering “the possibility that agricultural production can be sustainable and fair for both farmworkers and farmers.”

    “We represent the sector that grows and brings food to the table and yet we endure the worst conditions. For food to be socially just, society needs to address farmworkers’ issues,” said Luis Tlaseca, a farmworker and coordinator for El Comité de Apoyo a los Trabajadores Agrícolas (CATA), Pennsylvania’s Farmworker Support Committee. CATA President Carlos Diaz emphasized the importance of ensuring that fair food products also reach the tables of farmworkers. “Our work would be in vain if a high-quality product with social justice value enters the market and farmworker families cannot have access to it,” Diaz said.

    Erik Esse from the Local Fair Trade Network in Minneapolis said that the campaign for local foods and fair trade stands in solidarity between the people who produce the food and the consumers. Michael Sligh from the Rural Advancement Foundation International summed up the Domestic Fair Trade movement’s goal: “Now is the time to bring Fair Trade home to address justice as well as environmental sustainability.”

    PAN Campaign Coordinator Chela Vázquez represented PAN at the DFTA conference.

    --
    Robin Smith
    Founder
    Host Universal, No1 in ethical communications
    6-10 Lexington Street, Soho, London, W1F 0LB
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  • Robin Smith

    It is important not to forget that Fair Trade has been evolving over 60 years and will continue to evolve. Fair Trade is founded on values, beliefs and principles and has more in keeping with an ecosystem than it has a marketing concept. The label is just one component of the world of Fair Trade. Using traditional market research demographics and methods to understand it, tame it or manage it is a bit like analyzing a fingernail and thinking you understand the emotional and physical complexity of a human being. In the bigger picture Fair Trade is transforming consumers into investors, people who consciously put their money into businesses and organizations rather than people who blindly buy products. This is a major cultural shift and it will only get stronger because it is being driven by a fundamental need. Survival. It is great that some big businesses have started to invest in it, but it is not the point. The g20 closing statement confirmed a new drive for a Fair and Sustainable world economy, this is closer to the point. But what it didn't say was the old business structures have no place in the new model. They have failed as as marketing to deliver a sustainable solution to modern day living. Dee Hock, founder of Visa, has being saying so for years, it's not brands that need to change, it is businesses - the new model has to be fast, flexible, transparent and efficient and built on fundamental human values. This is what Fair Trade is about, a global network of direct trading relationships built on the idea of two way investment. Producers investing in consumers, comsumers investing in producers for the benefit of each and all. There is no place for bureaucracy, their is no place for conventional business models, they are simply not fit enough to survive. The stakeholder economy, or the sustainable fair Trade economy is here to stay, superarket or no supermarket, research or no research, fairtrade label or no fairtrade label.
    --
    Robin Smith
    Founder
    Host Universal, No1 in ethical communications
    6-10 Lexington Street, Soho, London, W1F 0LB
    T +44(0)2078494500 F +44(0)2078494545
    www.hostuniversal.com

  • Jacqueline DeCarlo

    Jeff,
    I'd like to pick up on another misconception that the article alludes to. You note that "It's as if the higher price signals that the certification isn't just a marketing gimmick but guarantees the veracity of the claim." First of, as Nadine mentions there is a whole segment of the movement--handcrafts--that are not currently certified and are often not priced more than similar items. Also, some of us within the Fair Trade movement--I write as an independent educator--have been concerned that the "certification scheme" in the US is getting ahead of itself by NOT energetically verifying claims. This latest surge of newly labeled products is great in as much as it means a larger marketplace for Fair Trade producers, but the label really needs to back up claims to earn consumer trust and also the standards need to set high bars for participation in the system. I, for one, would like to slow down the process of bringing in products until we feel more confident that the "independent 3rd party certification" that TransFair represents is very robust. I'd also add we as advocates need to back up the grassroots organizations such as the Fair Trade Resource Network and Fair Trade Federation who work to educate about what the principles of FT are and how they are practiced. Within recessions or not, we need to build consumer commitment to sustainable living, and we need to do that through a movement we can trust.
    Thanks for considering,
    Jackie DeCarlo, author of Fair Trade: A Beginner's Guide

  • Jeff Chu

    Thanks, Nadine and Rodney, for your comments. Rodney, I will respectfully disagree, based on the academic literature about ethical consumption and fair trade, with your contention that a fair-trade shopper is just as likely to be 60 years old as 30. From a 2005 Journal of Consumer Affairs review: "People in the 31-44 year age group were dominant in the fair-trade lovers cluster. This was in line with the profile that fair-trade organizations see as their target group. It confirmed the findings of Littrell and Dickson (1999) and (to a certain extent) Roberts (1995). ... The highly educated, defined as indicated above, constituted a more than proportionate share of the fair-trade lovers. Also, "studies tend to conclude that the ethical consumer is a person with a relatively high educational status (Carrigan and Attalla 2001; Littrell and Dickson 1999; Maignan and Ferrell 2001; Roberts 1996)." That said, we're talking about millions and millions of people out there--among this large group, there will inevitably--and fortunately--be many people who do not fit the description of "yuppie."

  • Rodney North

    Jeff is on to something, but I'd respectfully suggest that he perpetuates some critical misconceptions about Fair Trade that cloud the picture.
    note: I speak as one of the employee-owners of Equal Exchange (the US co-op, not the Scottish Fair Trade co-op by the same name), the #1 U.S. brand dedicated to Fair Trade.
    The first misconception is that Fair Trade is a "yuppie lifestyle-choice". Far from it, and we should know as we helped introduce Fair Trade to U.S. grocery stores back in the '80's. For example, some of our most dedicated customers include retirees in small Midwestern towns or stay-at-home moms in Kentucky. A full 20% of our sales come from partnerships with faith-based organizations like Lutheran World Relief, The Presbyterian Hunger Project, and the Mennonite Central Committee. While their staff and the thousands of Fair Trade volunteers at ten thousand congregations across the country might include some that fit the "yuppie" sterotype more often are folks living outside the big cities, and are just as likely to be 60 years old as 30.
    But more importantly, society is thankfully continuing to undergo a transformation that is manifest by an ever-expanding sense of who "we" are, and therefore who deserves what we'd expect for ourselves. And the strong, continuing growth of Fair Trade is a small part of that.
    When you look at the last 200 years in Europe and N. America (not to exclude other regions, but I'm trying to stick to what I know) you see:
    - the abolition movement and emanicipation (a step towards looking past skin color and acknowledging another's previously denied humanity)
    - the suffragette movement (looking past gender)
    - the civils rights movement
    - the feminist movement
    - the world's rejection of Apartheid
    - the acceptance of homosexuality

    In each case there was a group that was in someway exploited, or excluded or marginalized and not deemed worthy of the same rules that applied to the rule makers.

    With Fair Trade you see another example of the circle widening. Just because we don't personally know that coffee or banana farmer it's getter harder and harder to look the otherway and pretend that:
    - we don't know about their reality & struggles
    - that their situation doesn't matter
    - and that our choices do not directly affect their lives.
    And this is where the recession issue comes in. Once these "other" people become a part of "our" circle of awareness and concern there's no going back, not even when you're neighbor got laid off or the non-Fair Trade bananas are on sale that day.

  • Nadine Rowland

    Fair Trade started with very small companies like Ten Thousand Villages and it continues to be the mainstay in many communities that wish to support not only Fair Trade but locally owned small business. As the owner of Topanien Gifts, Global Gifts that will make you smile, (for the last twenty years), we made it through the previous recession and will make it through this one because the community supports and believes in our mission; the exchange of multicultural gifts to the benefit of everyone. - Nadine, owner of Topanien Gifts located in Portland, Oregon and on-line at www.topanien.com