Retail Sales of Fairtrade Products Now £1.5bn. Is Success Due to Consumer Demand or Manufacturer and Retailer Push?

The issue of whether Fairtrade’s success is due to consumers or to manufacturers and retailers is worth some thought. All products should be traded in a way that provides a fair price for the farmer, whether that farmer resides in Ghana or Gloucestershire, Caracas or Cumbria and any learning that can make farmer returns fairer merits consideration.

A look at Fairtrade figures shows that 90% of the £1.5 billion retail turnover of Fairtrade products is accounted for by sugar, chocolate, coffee, tea and bananas, and by big food manufacturers and major supermarkets.  Every banana sold in Sainsbury's and Waitrose is Fairtrade, as is every bar of Cadbury’s Dairy Milk Chocolate, every bar of Nestle’s Kit Kat, and Mars Maltesers. All of Tate and Lyle’s sugar products are sold under the Fairtrade banner. All the big supermarkets have a range of Fairtrade teas and coffees.

 Indeed it is hard to avoid buying a Fairtrade product at some point in the weekly shop.

Not only have big companies pushed Fairtrade, they have done so in a way that requires little sacrifice on the part of the shopper, for no major player has added a price premium to their Fairtrade products, electing instead to sell at the same price as they did prior to adopting the logo.

There is a lesson here – big companies are prepared to swallow a hit to their margins if they see a benefit, and in Fairtrade they saw a way to polish their ethical credentials at relatively little cost.

Mostly therefore the success of Fairtrade has little to do with consumers demanding fairness for third world farmers. What the Fairtrade people have done well though is to build a recognisable brand with a simple message that appeals to consumers and allows them to feel good when they purchase a Fairtrade product. Ten years ago few had heard of Fairtrade, but now, according to the IGD, four out of five shoppers recognise the logo, and just over a third say they have specifically chosen to purchase a Fair Trade product

 And it is this undoubted consumer appeal that companies are harnessing when they adopt Fairtrade accreditation.

So what about fair trading for British farmers? The tide does seem to be turning. Scarred by the horsemeat scandal, and conscious that the British public views farmers and home produced food in an increasingly favourable light, manufacturers and retailers are slowly embracing closer, more transparent relationships with producers. This is vital for as the Fairtrade story shows, the lead has to come from players with clout and the ability to make big, transformational decisions.

The Fairtrade story also illustrates the value of strong branding, and here is where British farming could help itself and make a real difference to the way in which the industry is perceived by consumers and retailers alike. Replacing the Red Tractor with a recognised logo and brand which stood for exceptional production standards, not just the bare legal minimum would be a good start, as would tough policing of the standards.

The twin aims should be to move consumers from a vague feeling that they should be buying British into state of mind where they understand exactly why they should support British farming; and to build a system that retailers feel they must be part of to be credible with their customers.

A change in ethical food buying - consumers now "want value for their values"

Joanne Denney Finch of the Institute of Grocery Distribution in her keynote speech to the Consumer Goods Forum stated that consumers now "want value for their values". The conclusion is based on research they carried out in Britain, France ,Spain and Germany, and its interesting because it indicates that consumers are once again raising the bar on what they expect when they buy food.

Cynics would say that consumers have always wanted more than they are prepared to pay for, but I think there is a subtle shift of emphasis here. Yes, in the past a sizeable minority have been prepared to pay for what they believe in, but what seems to be happening now is that people expect higher standards but don't expect to have to pay for them. As Mary Vizosa of Waitrose said in the Times, consumers expect their retailers and suppliers to act ethically and sustainably, and not present ethics as an extra which commands a premium.

We can therefore expect a change in consumer behaviour, as they shop around to find the outlets that offer both value and values for a given product. Those who fail to deliver will lose custom.

This could be why Sainsbury took full page advertisements in today's papers to say that they have been named as "Best large supermarket 2010" by Compassion in World Farming, and put a value offer in the advert too ( 2 packs of sausages for £4, and 20% off Freedom Food chicken). Waitrose stopped short of adding a value twist to their communications but the front page of this weekend's newsletter features a very handsome beast with the caption "Farming with Compassion - Waitrose wins award for putting animal welfare first".

It would seem that ethical foods are just another example of what was niche gradually becoming the norm.

With the move to mainstream comes the loss of any price premium. The best example is Fair Trade, where volumes have rocketed but price stayed the same as the standard version, witness Sainsbury's Fair Trade bananas, and Cadbury's Dairy Milk.

Ms. Denney Finch argued that ethical products now offer competitive advantage, and that British business, which generally has a good ethical reputation, can use them as a springboard for growth internationally.

The notion that British business should raise the ethical bar is very welcome. The challenge of course to raise the bar without raising the price, and ensure in the process that all players in the food chain are treated ethically and sustainably.

Food 2030 – Can We Rely on the Consumer to Make Everything OK?

One new thread in a document generally viewed as big on aspiration but light on action is the role of the consumer in driving change.

By 2030, according to the document, consumers will be “aware of the origins of their food and understand the environmental and social impact of their choices.” They will “choose and afford healthy and sustainable food”. They will play a major part in achieving a low carbon food system. They will “express environmental concerns in the market place” and by demanding environmentally friendly products they will prod producers and processors into climate friendly innovation and invention.
They will be sufficiently educated to stop their current practice of wasting a third of the food they buy.

Net net, consumers will use their influence and spending power to support those who produce environmentally sound, sustainable, animal welfare friendly, healthy food.

It’s a lovely idea. How super to think that in just 20 years time Britain will be a nation of slim, fit, concerned individuals dedicated to spending their money only on the right type of food, bought in the right quantities, produced in the right way, and with a fair reward for those who produce it.

This is a massive attitude change, and raises the question of just how do you change consumer behaviour so radically.

It helps to have a following wind, and it is true to say that consumers are becoming more interested in eating healthily, want to know where their food comes from and how it is produced, and like to buy local foods. But it’s still a minority, and its an even smaller minority who are interested in things like the carbon footprint of their food. The document acknowledges that the topic of a sustainable diet is a “niche interest”.

The strategy document talks about encouraging change by putting information on the “eat well” website and make labelling more explicit. This is nowhere near enough. Getting the wholesale change described will require enormous advertising and promotional budgets, commitment from major retailers to disproportionately stock and display so called healthy and sustainable foods, and a situation where the price of the “right” food” is the same as, or only a few pence more than the “wrong” equivalent.

How big might the marketing and advertising budget need to be? In the year to March 2009, the government spent £540 million pounds on communicating anti smoking, climate change, anti obesity and road safety messages. This is a 59% increase since 2005, yet 25% of the population still smoke, and obesity levels do not seem to be falling. Big budgets do not guarantee success, particularly when it is government talking, and its interesting to note that one of the major shifts in consumer buying, the shift to higher welfare chicken, came about not through government action but through the efforts of celebrity chefs Oliver and Fearnley-Whittingstall.

Major retailers with their 80%+ share of grocery shopping will be crucial to consumer change. They are past masters at running with even a hint of consumer demand, but they are unlikely to support anything they see as overpriced or giving them a lower margin.

And on the subject of price, the search for the "right" food is unlikely to be accompanied by a major loosening of consumer purse strings. We know that consumers will pay a bit extra for something they value, but baulk at overpaying, as the recent collapse in organic sales has shown. One of the reasons Fair Trade has been so successful is that many of its products are sold at the same price as equivalents, such as bananas, Cadbury’s Fair Trade Dairy Milk chocolate, and Tate and Lyle’s Fair Trade sugar.

It will take alot to reach the Nirvana described in Food 2030, and at the end of the day one is left wondering what difference the attitude change, were it achieved, would make to producers. It would probably impact the actual foods that were produced, and how they were produced. It would not help the issue of how to produce more, and it would not address the issue of profitability. Which leads us back to the failure of the strategy document in that it is a social and environmental treatise, not a production plan.

Food Buying Habits - How, When, and Why Did It All Change?

Food shopping habits have changed. Consumers are changing where they shop, how they shop, and what they buy.

Morrisons, home of low prices, and Waitrose at the premium end of the scale, both published half year results a couple of days ago. Morrisons grew like for like sales by 7.6%, (like for like meaning sales in stores open at least a year), and profits by 19%. Waitrose grew sales by 2.5%, a third of the rate of Morrisons, were forced to cut some prices to compete and hold market share, and saw profits fall by 8%. ALDI, viewed as having the cheapest prices of the lot, is now said to be growing sales at about 30% versus last year. A confident statement from ASDA a few weeks ago indicated that they are doing just fine because they offer really low prices. And Sainsbury and the once the once invulnerable Tesco are losing out.

Consumers are changing what they buy. We know that organic sales are struggling, reportedly down 20% in August versus last year, that meat consumption is down 5% according to the latest figures published on the British Pig Executive website, and DairyCo says that milk consumption is down. Consumers are also buying more products in retailer's Value ranges. Morrisons showed a chart at their results presentation illustrating that across the whole of the grocery trade Value ranges were growing at about 8% in the spring, but have now rocketed to a growth of nearly 30%. By contrast Premium ranges growth has fallen from a high of 15% in March 08 to around 3% in August.

Other startling changes are happening. Sainsbury tell us that between July and August sales of tupperware containers have grown by 36%, and sandwich bags by 35%, as more people take sandwiches to work instead of buying ready made.

All in all, it seems that beleaguered Brits are leaving no stone unturned in an effort to spend less. The interesting thing though, is that although the credit crunch started almost a year ago with the Northern Rock wobble, the big changes in what and where people buy only started in the spring. Going back to Waitrose as an example, they were sailing along quite nicely until early summer.

Why the drop since then? Because that's when consumer confidence started to plummet,worn away by headlines about food price inflation, spikes in oil prices, mortgage worries, and warnings of rising energy bills Another chart from Morrisons shows that in March, consumers confidence levels were down by 18%, in August they were down by 40%. Or to put it another way, nearly half the country thinks things are going to get worse, much worse. If they are that worried, it's no wonder people are changing behaviour, battening down the hatches, and bracing themselves for what might be around the next corner.

What is clear though, is that doom mongers who say they always knew that all people want is cheap food are wrong. Despite the belt tightening, Premium sales are still growing albeit at a slower rate than previously. It does not look either as if shoppers are ditching ethical principles altogether. Waitrose says that consumers are still supporting welfare friendly food but choosing free range rather than organic to save some money. ASDA says its sales of organic produce have grown by 25%, and Morrisons reported that their sales of both Fair Trade and organic sales are growing.

As ever, it does seem as if those who offer good quality combined with good value (which is not the same thing as price) will ride out the storm, ready for an upturn in confidence.

Ethical Purchasing and the Credit Crunch... Continued

Concern about whether the credit crunch will bring ethical purchasing to a halt seems to be exercising many minds. The latest to publish a survey is The Times newspaper.

In answer to the question "In the next year are you likely to .....", the 1000 people surveyed replied as follows:
Buy more organic food - 34%
Buy more Fair Trade products - 59%
Buy healthier food - 64%
Buy food that can guarantee a better deal for farmers - 66%
Buy more locally produced goods - 71%
Buy food with less packaging - 80%

The same survey also asked the question "Given the growing economic uncertainty, which of the following best describes how you would be likely to respond if you had to cut back on your consumer spending?" Answers to this question have been tracked over time, and are as follows:

Still try to buy the most ethical and environmentally friendly products I could
Nov o7 - 65%
Dec 07 - 69%
Jan 08 - 63%
Feb 08 - 69%
Be more likely to buy products and services that represented the best value for money regardless
Nov 07 - 35%
Dec 07 - 31%
Jan 08 - 37%
Feb 08 - 31%
Mar 08 - 35%
Mar 08 - 35%

The way consumers anwer questions about their intentions should always be treated with a high level of scepticism. What consumers say they will do and what they actually do are two very different things. This is particularly true when it comes to questioning consumers about their ethics. The best way of interpreting the data is probably like this. In the first table, the answers show what issues are highest on consumers minds, and what messages are getting through to them. So, they are irritated about excess packaging, which we know from many other surveys, and they are thinking favourably about locally produced foods, and fairness to farmers at home and abroad. They are less sure about organic foods though. I'd say the second table has little value given that many consumers won't want an interviewer to think badly of them, and so are unlikely to agree that ethics will go out of the window in favour of a better price.