Natural Foods Merchandiser

Will fair trade become the next growth wave?

Rodney North, spokesman for Massachusetts-based Equal Exchange, which sells fair-trade coffee and cocoa, says U.S. fair-trade foods growth will likely mimic European growth.

A couple of years ago, as the final version of the U.S. Department of Agriculture's organic rule inched toward adoption and implementation, natural products industry pundits waxed poetic about what the next step could be for natural foods.

One notion that emerged was the creation of a "certified sustainable" label for foods. Austin, Texas-based Whole Foods Market even briefly considered creating such a label for products it sold that met certain requirements.

But while "certified sustainable" has yet to materialize, something that might just fill at least part of that bill has emerged, and it's something most natural foods retailers already know about: fair trade.

More Than Just Java

Most natural foods retailers sell fair-trade coffee, the only fairly traded commodity they can obtain in any quantity. But that's about to change. Indeed, the field of fair-trade foods—those sourced from farmer cooperatives in developing countries at prices that provide them a living wage—is primed to expand exponentially to include cocoa, chocolate, honey, mangoes, bananas, cut flowers, rice, sugar, orange juice and more. That's largely because the United State's only fair-trade certifier, Oakland, Calif.-based Transfair, now is close to having the staff and infrastructure required to handle more than fair-trade coffee.

"Transfair's role is to raise consumer awareness and make a big deal out of fair-trade foods," says Haven Bourque, the organization's marketing and communications director.

Bourque says fair-trade coffee's introduction in the United States has primed the consumer pump and revealed an expanding definition of quality on the part of consumers—especially natural products consumers. "[The concept of] quality is expanding from just including the quality of what you put in your mouth to the quality of life for the farmer who produces it. That's where fair trade gets traction," she says.

Wild Oats Markets has seen that traction in action. Wild Oats exclusively carries fair-trade coffee in its bulk coffee section and has seen bulk coffee sales increase 30 percent since last year. Chief Executive Perry Odak told a conference in June that this increase came despite the Boulder, Colo.-based retailer raising coffee prices by nearly $3 a pound. "The customers will vote with their dollars, and they voted to buy more coffee," Odak said.

Not surprisingly, Wild Oats wants to expand its fair-trade offerings beyond coffee. The chain may start with bananas—selling them either regionally or nationally, depending on how they're distributed in the United States, says Corporate Communications Director Sonja Tuitele. Wild Oats' Canadian chain, Capers, already has ordered fair-trade bananas and will be selling them in stores by the end of the year.

Customers Want Fair Trade Goods

Smaller natural foods retailers also are clamoring for fair-trade fruit. "In our store, we want to focus on that in our produce section," says Wade Van Orman, produce manager at Blooming Foods' downtown store in Bloomington, Ind. He sees two major trends emerging in the organic and natural foods industry: growth in locally sourced produce and increasing customer interest in and conviction about fair-trade items. "This is an exciting time for organics," he says. "We're at another cusp of sorts."

Tuitele says Wild Oats execs believe selling lots of fair-trade merchandise will eventually give the chain a competitive edge. But, as with organics decades ago, quality and customer education will make or break the strategy. "Right now customers are just learning what fair trade means. They are making that connection with coffee. It's up to us to make the connection with other product lines," she says. "I think over time, when people understand that [fair trade] means a fair price to farmers, if we can keep our prices to consumers competitive, they will buy."

If Van Orman's customers and a recent survey are any indication, retailer attempts to make the link for its customers between fair-trade coffee and other fairly traded foods will not be difficult. According to Steve French, managing partner of the Natural Marketing Institute in Harleysville, Pa., consumers already are getting the heads up on fair-trade. In NMI's 2003 LOHAS (Lifestyles of Health and Sustainability) consumer trends study, 51 percent of the 2,000 general population respondents said that fair trade-certified ingredients were very or somewhat important in their purchase of a particular product. French says 32 percent of that general population is LOHAS consumers who base their buying decisions in part on the environmental or socially responsible characteristics of a product. And in that population, fair-trade importance jumps to 76 percent, French says. Some 63 percent of survey respondents who identified themselves as natural foods and beverages users said fair trade is an important factor in their buying decisions.

Looking at the data another way, 45 percent of the survey's respondents who identified themselves as concerned with fair-trade issues said they consumed natural foods and beverages. That's compared to 30 percent of the general total population. "The point is, those consumers who are concerned about fair trade are more likely to use natural products," French says.

While the numbers clearly are attractive for Wild Oats, fair trade has a leg up at the chain because of direct interest from the top. CEO Odak in February accompanied Transfair Executive Director Paul Rice to Mexico to visit farmers participating in fair-trade coops there. "He came back saying we need to do fair trade throughout the store," Tuitele says.

Europe Leads The Way

Rodney North, spokesman for Massachusetts-based Equal Exchange, which sells fair-trade coffee and cocoa, says U.S. fair-trade foods growth will likely mimic European growth. Fair-trade coffee penetration in Europe has reached 5 percent, and in Switzerland one out of every four bananas sold is fair trade. In the Netherlands, Oké-brand bananas, grown on "environmentally managed" farms in Ghana and Ecuador, managed to grab a 10 percent share of the Dutch market within just one month of their introduction.

In the United Kingdom, sales of fair-trade foods have more than doubled since 2000—to about $69 million. According to British newspapers, every day Brits drink 1.7 million cups of fair-trade tea, coffee and cocoa every week, and they eat 1.5 million fair-trade bananas. In addition, fair-trade chocolate increasingly is stocked in school vending machines, and whole communities have designated themselves fair-trade towns.

One Manchester, England-based retailer, the Co-operative Group, says fair-trade bananas make up 40 percent of its prepacked-banana sales. Last year the store switched all its private-label chocolate bars to fair trade—which basically doubled sales of fair-trade chocolate in the United Kingdom overnight, according to newspaper reports. The co-op says its fair-trade sales have grown from $150,000 in 1997 to more than $8 million in 2001.

In the United States, such substantial growth is yet to come. But Equal Exchange has seen its sales increase 34 percent in the past year and is expanding its product lines. The company introduced fair-trade hot cocoa mix in fall 2002 and now is introducing fair-trade powdered cocoa for baking. Sales of both those products are expected to hit the $1 million mark this year. Equal Exchange also has a distribution agreement with United Natural Foods and has expanded into such mainstream supermarkets as Safeway, Albertsons and Shaw's.

Rick Peyser of Waterbury, Vt.-based Green Mountain Coffee Roasters says fair trade is the fastest-growing segment of the company's coffee line. Green Mountain, which has developed a line of organic, fair-trade coffee for Newman's Own Organics, also handles Wild Oats' private-label coffee program. Peyser says the U.S. market for fair-trade coffee has just barely been tapped and that organic and nonorganic fair-trade coffee sales are growing about 50 percent a year.

Sales growth for other fairly traded foods can only be imagined at this point. Bourque says U.S. retailers will have to be patient just a little longer. "We're waiting for a forward-thinking partner to make it happen," she says.

Transfair may already have found one. The organization, Bourque says, hopes to have a distribution agreement in place as early as this year that will bring fair-trade chocolate, tea and fresh fruit to retailers from coast to coast.

Nancy Nachman-Hunt is a freelance writer in Boulder, Colo. Reach her at [email protected].

Natural Foods Merchandiser volume XXIV/number 9/p. 48-49

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