Demand accelerates for fair-trade ingredients

Demand accelerates for fair-trade ingredients

Once a tiny gleam in the eyes of activists who wanted to help level the playing field for the producers of goods, fair trade is becoming an international household word and a part of many progressive companies' business plans. K Jesse Singerman and Tony Olson survey the growing field.

 

Ben & Jerry's is well known for developing original ice-cream flavours, but it is also credited with developing a whole new line of business for Fair Trade Certified goods — the ingredients business. "Ben & Jerry's inspired us, and pushed us, into certifying fair-trade raw materials as ingredients in packaged goods," says Cate Baril, the director of business development for TransfairUSA, the only third-party certifier for fair-trade products in the United States.

"They asked us why they couldn't use Fair Trade Certified vanilla as an ingredient in their ice cream, since it was available in the marketplace." TransFair responded by expanding the scope of its certifying activities to include ingredients. Products such as Coffee, Coffee, Buzz, Buzz, Buzz, made with Fair Trade Certified coffee, soon followed.

Today, companies such as Stonyfield Farm and Ben & Jerry's continue to push the envelope to develop new products using Fair Trade Certified ingredients. "We're seeing a push for ingredients that go well beyond the traditional categories of cocoa, coffee and vanilla, to the development of unique flavours and inclusions, like those seen in ONE Cheesecake Brownie," says Greg Hecksher of Kerry Ingredients, the firm that helps Ben & Jerry's develop new products.

ONE Cheesecake Brownie is an ice cream that not only tastes good, it teams the company with Google and the grassroots campaign ONE to end extreme poverty and preventable diseases around the world. A component of the ice cream is the use of value-added and higher-end ice cream inclusions that are eligible for fair-trade certification.

U.S. consumers are seeing more and more Fair Trade Certified products appear on the shelves as established companies develop new categories and new channels, and new businesses open up. Innovative companies such as Sambazon and Zhena's Gypsy Tea have been instrumental in growing the market by adopting fair-trade practices as an integral part of their business model. Now fair-trade declarations are being embraced by more traditional companies seeking to differentiate their products in today's eco-conscious marketplace.

"Our customers see the use of Fair Trade Certified ingredients as an advantage," says Prescott Burgh of Ciranda. "There has been an increase in demand for all types of environmentally friendly and socially responsible certifications, including fair trade."

Grace Marroquin of Marroquin Organic International agrees. "It used to be the main question from buyers was about organic certification, now it's becoming customary to be asked if the ingredient is Fair Trade Certified as well, and ingredients companies are responding. For example, Mooreganics now has a line of Fair Trade Certified flavours and extracts."

International fair-trade standards currently exist for tea, coffee, cocoa, honey, juices, wine, grapes, fresh fruit and vegetables, dried fruits, nuts, and spices, and also for nonfoods such as flowers, soccer balls and cotton. In addition, the recent extension of fair-trade certification to 'composite-product' ingredients has opened up even more possibilities to manufacturers. Many of these categories are just entering the US market and it appears that we are poised for a major retail development in Fair Trade Certified goods.

"I estimate that the US is three to four years behind Europe in consumer acceptance and understanding of fair trade," says Mathieu Senard, CEO of Alter Eco Americas, a multicategory fair-trade firm whose parent company, France Alter Eco, is a European market leader. "But the US is such a large market that once a category is widely introduced, sales really take off. For instance, the US is the No. 1 fair-trade coffee market in the world right now."

Fair trade is so popular that eBay has even launched a new online resource, www.worldofgoodinc.com, devoted to creating shopping experiences based on information, trust and social impact. Media attention and consumer awareness are both increasing, and the future looks bright for fair-trade products and their global partners.

K Jesse Singerman is the president of Prairie Ventures, an independent business-consulting firm. Tony Olson is CEO of SPINS, a market-research and consulting firm for the natural-products industry.

What is fair trade?

Fair trade is a market-based model of international trade that helps producers develop business skills, and guarantees certain minimum floor prices and social premiums. Businesses involved in fair trade agree to operate according to internationally accepted guiding principles, set by the Fair Trade Labeling Organization, including fair prices, fair labour conditions and environmental sustainability.

How large is the fair-trade market?

TransFair USA estimates that 77,565,282 pounds of Fair Trade Certified (FTC) goods were imported into the US in 2006; 84 per cent was coffee1.

In 2007, sales of FTC goods in the US were estimated at $1.142 billion with 46 per cent growth2. Worldwide sales of FTC products were $3.593 billion in 2007, with the US holding the largest individual market3.

SPINS data show that within the four major Fair Trade Certified categories — coffee, cocoa, tea, and candy and sweeteners — growth rates exceeded 30 per cent in the past six months for food, drug, mass (FDM) retailers. Sales in FDM were $34.9 million as compared to $29.8 million for natural supermarket channels for a 52-week period ending Feb 2008. Sales for FTC goods in the mass channels were $34.9 million compared to $29.8 million in natural-grocery channels. FDM fair-trade sales are concentrated in the coffee and cocoa category (75 per cent), with the majority of sales in two brands — Newman's and Green Mountain. Sweeteners were the fastest-growing category with a 106 per cent increase, for the same 52-week period.

Natural-product supermarkets are showing deeper and more balanced item selection and sales. For example, for the same 52-week period, natural-product supermarkets sold FTC tea, coffee, cocoa and candy in roughly equal proportions. Tea was the fastest-growing category in terms of dollar growth with candy a close second. Sweeteners represented the lowest dollar sales, but growth was a robust 29 per cent.

References
1. TransFair, Fair Trade Almanac 1998-2006, page 4.
2. Fairtrade Labeling Organizations (FLO) International, Annual Report 2007, page 13.
3. Fairtrade Labeling Organizations (FLO) International, Annual Report 2007, page 13.

 

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