In 1959, before the term "Third World" had been invented, a group of youth members of a Catholic political party in the Dutch town of Kerkrade, shocked by reports of the poverty and hunger on Sicily, started a campaign to collect milk powder for shipment to that Italian island. Their campaign was the start of the fair trade movement in Europe, which today encompasses thousands of World Shops, hundred thousands of producers and millions of customers. In 1994 the total retail turnover in fair trade products in Europe exceeded 200 million ECU.
What has turned 'fair trade' from a milk powder campaign into a trendsetting international business? What is the impact of fair trade in Europe today? What are its perspectives?
In the 1960s and 70s, when in progressive circles capitalism was held responsible for just about anything wrong anywhere, fair trade proudly called itself 'alternative', meaning: communitarian small-is-beautiful, not-for-profit, anti-capitalist and showing the way to a better world. Buying in a Third World Shop was as much an act of political faith as it was a means to indentify with a movement which deliberately drew a sharp dividing line between capitalist consumerism and conscious consumption. The producer organizations often exported exclusively to alternative trade importers who themselves were the only importers of alternative products, and the products were sold almost exclusively in Third World Shops. The alternative coffee, tea, honey and handicrafts represented a niche market.
The chapter, "Trade not Aid" in this Yearbook describes the turn of the tide in the 1980s. The progressive ideologies gradually lost their attractiveness because of disappointment with their 'performance' when put into practice (like in the Soviet Bloc, China or Cuba). Simultaneously, the capitalist world had started making education, health care and minimum welfare accessible to all. Both developments eroded the raison d'être of an isolated alternative. The alternative trade changed its name to fair trade and was no longer content to stick to its niche market. The fair trade organizations are now increasingly making penetration into 'mainstream' markets a priority. Moreover operators on the commercial 'capitalist' markets that formerly frowned up the 'alternatives' are discovering that with the rapidly increasing public popularity of 'ethically sound' products, there is good money to be earned by going 'fair'.
Just as the turn of the tide in the 80s explains the metamorphosis from 'alternative' to fair trade, the trend of the 90s to seek new values to guide one's existence may help explain the rapidly increasing consumer interest in fair trade products. There is a pervasive willingness to let ethical criteria, like safeguarding the environment for future generations ...or Southern producers' right to a decent existence, determine one's daily life. According to analysts, consumers nowadays want 'honest' products. They are interested in 'sustainable and responsible consuming'.
Recent consumer surveys all over Europe document the increasing appeal of fair trade products. Some survey findings:
With market surveys pointing to substantial public sympathy for fair trade, both formerly 'alternative' and mainstream traders and retailers see opportunities to increase turnovers.
Fair trade organizations generally lack the means to stage major market offensives. Instead, they try to make optimal use of their traditional strengths: a sympathetic image, personal contact with consumers, expertise in communication and trade with producers in the South, and their readiness to experiment with innovative marketing (see box Voluntary sales reps).
Mainstream traders and sellers, who have hitherto been less than enthusiastic about intruding 'fair' products that implicitly insinuate that their other products are 'unfair', are more readily selling 'fair trade' since the fair trade labels (TransFair, Max Havelaar and the Fair Trade Mark) differentiate these products from the rest. The fair trade labels have lowered the threshold for mainstream traders and retailers to enter this new and still somewhat 'strange' market. Most wholesalers and retailers initially buy the fair trade products from one of the fair trade organizations. Once their turnovers start reaching commercially significant levels, it becomes interesting for the mainstream companies to start importing the products themselves and/or to start selling them under their own brand names. This process has advanced furthest with coffee which in half a dozen European countries is being bought from producers, imported, roasted, packaged and sold mostly by mainstream commercial companies. Because these companies generally have a better organizational infrastructure and distribution network than do the fair trade organizations, they can achieve a relatively higher market penetration and higher turnovers. In early 1994, the market penetration of fair trade coffee in Germany was ca. 75%, in Switzerland 85% and in the Netherlands 90%.
Still, accustomed as they are to daily visits from company representatives offering them new products, most mainstream retailers only seriously start considering putting fair trade products on their shelves when a concrete product offer is made to them. Here again, the fair trade organizations are playing the pioneering role, visiting supermarkets, making sure the products are attractively presented to consumers, regularly organizing promotional activities. In the Netherlands Fair Trade Organisatie has been gathering extensive experience in luring store managers into trying fair trade; it has found that a multi-year investment is needed - which does then pay off (see box Fair Trade in mainstream markets).
Today, at least 100 fair trade organizations and commercial companies in at least 20 European countries import fair trade products from the South. Some of them have mail order catalogues and own or franchise World Shops or gift shops. Others concentrate on wholesaling to World Shops and, increasingly, to institutions. There are labelling organizations in eleven European countries, each belonging to one of the three existing fair trade labels: Fair Trade Mark, TransFair and Max Havelaar. Consumers can buy fair trade products in ca.3.000 World Shops, stores of 30 supermarket chains, hundreds of other shops, and from thousands of Church, solidarity and community groups. In early 1995, the total number of selling points of fair trade products in Europe was estimated to be 45.000, their retail turnover for 1994 exceeding 200 million ECU.
These and many other facts and figures can be found in the report 'Fair trade in Europe' a survey of the extent and impact of fair trade commissioned by EFTA, the European Fair Trade Association. Some highlights of the report are given below:
The report also documents that the fair trade labels are a prerequisite for penetrating the mainstream retailing market, but that such penetration is dependent on active efforts to convince stores and supermarkets to put the fair trade products on their shelves. Where larger numbers of stores have started doing so (in Austria, Germany, the Netherlands and Switzerland), fair trade retail turnovers are highest.
Nowadays, fair trade is a well-known concept in almost all Western European countries. In most of them, turnover in fair trade products is growing by 10 to 25% a year. The potential for further growth is significant. Consumer surveys document that sizeable consumer groups not yet buying 'fair trade' are prepared to do so and say they are willing to pay 10 to 20% more for fair trade products. These surveys also indicate that these consumers are generally not doing so yet because of their limited access to fair trade products: the stores where they regularly shop do not offer fair trade products, and World Shops are not located in their usual shopping areas and/or have limited opening hours. In other words, marketing continues to be the main bottleneck to the expansion of fair trade in Europe.
On the one hand, fair trade organizations, World Shops and the labelling initiatives need to adopt (more) modern professional marketing techniques. In fact, many of them are trying to do so, but find themselves limited because of insufficient investment capital. On the other hand, more mainstream commercial traders and retailers need to be persuaded to start including fair trade products in their range.
Both these ways of promoting the market penetration of fair trade stand to gain enormously from the introduction of a European-wide uniform fair trade label. Since June 1995, the Economic and Social Committee of the European Parliament is investigating how the European Union could create and promote such a label. The EU's public recognition of fair trade as a positive quality of products sold on its markets could be the decisive incentive for fair trade's transition from a market niche to a selling argument in mainstream retailing.
Voluntary sales reps in Britain |
The British fair trade organization Traidcraft plc uses the most original means of trying to solve the marketing problem: a small army of "voluntary sales representatives" or "reps".
Its ca. 10 million ECU (1994) turnover makes Traidcraft one of the larger fair trade organizations in Europe. The company has specialized in mail order retailing, producing six catalogues a year, Traidcraft also supplies products for the mail-order catalogues of Greenpeace and Amnesty International. It also wholesales to some 200 retail outlets. Yet most remarkable, without a doubt, is the company's 'army' of "Voluntary Reps". Reps are volunteers who promote fair trade through local advocacy and educational activities and who retail Traidcraft products on a private basis. Traidcraft supplies the Reps with products at a discount and with generous credit facilities; the Reps then sell the products to end-consumers at fairs, markets and cultural and festive events, in their Churches and from their homes. Many make profitable use of the 'party plan'-idea, talking about fair trade and showing their products at private get-togethers for coffee or tea. These house-parties prove extremely suitable to stir interest in the background of fair trade - and often motivate attenders to become active in the movement themselves.
At the same time, the Reps represent Traidcraft's most important marketing channel. There are currently over 2.000 Reps all over Great Britain, purchasing an average of 1.500 ECU from Traidcraft in 1994 and together accounting for almost half of the company's retail sales. Although the Reps earn a gross profit on their sales, it is common practice to invest any surplus over costs in development education. For a modern-day commercial marketeer, Traidcraft's army of Reps must exceed his sweetest dreams; for Traidcraft and its thousands of supporters, it is nothing else but a -cherished - consequence of an ethically sound business practice.
Fair trade in mainstream markets |
The Dutch Fair Trade Organisatie's retailing base are its own 6 shops and over 350 World Shops in the Netherlands. These stores cater to some 100.000 regular customers and maybe another 200.000 occasional buyers. This relatively stable and reliable niche market constitutes the organisation's roots in the consumer retail market. To reach the country's other 10 million or so retail consumers, however, the products have to be available in the country's department stores, supermarkets, chain stores and neighborhood shops.
Fair Trade Organisatie first penetrated this mainstream retail market in 1990 when Albert Heijn (AH), the Netherlands' number one supermarket chain with an incredible 74% of the national market, decided to start buying coffee with the Max Havelaar label from Fair Trade Organisatie. After a few years of experience with the new product, which by then had captured several percents of AH's coffee market, AH introduced a coffee with the Max Havelaar label under its own brand name.
For Fair Trade Organisatie too, the experience was valuable because of the lessons learned about mainstream retailers' conditions and wishes, characteristics and idiosyncracies. Since 1993, the lessons have been put to good use in the organisation's offensive aiming to get into supermarkets under its own name. A newly employed retail sales manager personally visited various supermarket chains and 100 individual stores, proposing that they introduce a special display with fair trade coffee, tea, chocolate, honey, sugar, wine and nuts in newly designed, state-of-the-art packaging. Two years later, more than 50 individual stores and three chains (with a total of 350 supermarkets) have signed on. It is pioneering. Store managers need time before willing to jump into the unorthodox and cold fair trade water. But once having crossed the threshold, they are more often than not ready to give the products a real chance. In this respect, one small victory was particularly sweet: recently, a supermarket of the AH-chain decided to install a rack of fair trade products. One sheep follows another....
In the late 1980s Fair Trade Organisatie already entered another sector of the mainstream market: the institutional market. The institutional market includes the hotel, restaurant and catering industry, company, university and government restaurants, schools, hospitals - in other words all institutions that buy wholesale to offer and serve to its employees, students, and users. For a broad range of products, the institutional market constitutes the single most important marketing channel. In the Netherlands, for example, more than a third of the country's coffee is drunk in institutions.
For Fair Trade Organisatie the breakthrough in the institutional market came in 1987, when the Dutch national parliament, after a contest in which its fair trade coffee came out victorious as best-tasting coffee, decided henceforth to drink only fair trade coffee. The example worked: within a year, dozens of municipalities in the country had started serving Fair Trade coffee. A second coup followed a few years later, when the European Parliament decided to drink only fair trade coffee. By early 1995, about 250 (out of 800) municipalities, four provincial governments and more than 1.500 companies and other institutions had switched to Fair Trade coffee. Together, these institutions in 1994 served more than 100 million cups of coffee to nearly 200.000 people. Through company bulletins, video's and posters these people are being informed about fair trade and encouraged to start drinking Fair Trade coffee at home as well. Although nobody has studied the exact impact yet, it is certain that the low-profile success of fair trade coffee in the institutional market is an invaluable support to fair trade's efforts to make inroads on the consumer retail market.
Cooperative fair trade in Italy |
Italy's main fair trade organization Cooperazione Terzo Mondo or CTM was founded in 1988 as a cooperative union of ca. 100 World Shops. Right from the start, CTM posted astonishing growth figures and in 1994 realized a (wholesale) turnover of close to 6 million ECU.
Where most fair trade organisations have problems raising the working capital to finance their expanding operations, CTM has as much cheap capital at its disposal as it wants, thanks to another popular cooperative in Italy, CTM-MAG - for 'Mutua Auto Gestione'. CTM-MAG is an independent cooperative whose principal aim is to finance cooperative enterprises in social, cultural, environmental and economic sectors in Italy. It currently has over 2.500 members, who by 1993 had put up ca. 12 billion lire or 5.5 million ECU. The Mutua lends money to CTM to prefinance product orders and to support the World Shops by, for example, providing initial capital for the opening of a new Shop.
Part of CTM's and CTM-MAG's popularity can be attributed to the fact that Italians who entrust their savings to a cooperative instead of to a regular bank profit from interesting tax breaks. A more significant explanation for many Italians' favorable attitude towards cooperativism is probably that it offers people a concrete opportunity to act in accordance with one's ethics without passing up personal gain (Members of the Mutua receive a fair interest on their deposit in the coop). For CTM itself, the popularity of the Mutua not only solves all its needs in terms of capital, but because the interest on Mutua-loans is low, CTM's capital costs are low as well, leading to relatively lower retail prices of CTM products, thus contributing to the further growth of turnover of fair trade products in Italy.
| Country | Retail turnover millions ECU |
Turnover per inhabitant ECU |
|---|---|---|
| Switzerland | 30 | 5 |
| The Netherlands | 33 | 2.1 |
| Germany | 80 | 1.0 |
| Belgium | 10 | 1.0 |
| Austria | 7 | 0.9 |
| Denmark | 3 | 0.6 |
| Luxembourg | 0.2 | 0.5 |
| United Kingdom | 25 | 0.4 |
| Norway | 1 | 0,2 |
| Sweden | 2 | 0,2 |
| Italy | 9 | 0.15 |
| France | 2.5 | 0.04 |
| Spain | 1.5 | 0.04 |
| ---- | ||
| Total | 205 | |
| 1,0 ECU = 2,17 DGL = US$1.80 | ||
