4.4.1Two visions of fair trade
Initially, fair trade aimed to create its own supply chain that operates in parallel to and bypasses the existing mainstream supply chain. It assumes the exclusion of middlemen and the use of alternative shops to distribute fair trade products in order to provide greater benefits to producers (Hira & Ferrie, 2006). Advocates of this model see ethical purchasing not just as a part of consumerism, but as a political act that helps put pressure on traditional multinational corporations to change their business model (Waridel, 2002). They believe that fair trade products should not be available in supermarkets and criticise, for example, Max Havelaar France for its collaboration with multinational companies such as Nestlé (Özçağlar-Toulouse, Béji-Bécheur, Gateau, & Robert-Demontrond, 2010).
However, a drawback of the aforementioned model of fair trade is that relatively few consumers visit alternative shops and consequently, a very limited number of producers in developing countries can benefit from fair trade. In order to increase a demand for fair trade products, some organisations (e.g. Oxfam) therefore proposed a more reformist vision of fair trade and called for the promotion of more equitable trade through working within existing distribution channels, including mainstream retail chains (Hira & Ferrie, 2006). As fair trade products became available on the supermarkets’ shelves alongside their non-fairly traded counterparts, it was necessary to distinguish these two types of products. This necessity was likely to trigger the inception of fair trade labels as means of differentiation.
4.4.2Sales of fair trade products 4.4.2.1Dynamic of sales growth
In 2009, Fairtrade certified sales reached approximately €3.4 billion (over NZ$6 billion) worldwide and were produced by over 1.2 million producers (Mohan, 2010). Despite the current small share of Fairtrade certified commodities in the total food and beverage sales of only 0.01%, the annual growth of Fairtrade sales was impressive (Mohan, 2010). Between 1998 and 2007, the sales grew at 40% rate a year (Mohan, 2010). The pace of increasing sales of Fairtrade products is perhaps most visible through the example of the UK market: while in
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2003 Fairtrade sales were worth less than US$160 million, 8 years later they reached US$2.1 billion (Doherty, Davies, & Tranchell, 2013).
4.4.2.2Current figures of fair trade sales
In 2015, global sales of Fairtrade products reached €7.3 billion (almost NZ$12 billion), a 16% increase compared with 2015 (Fairtrade International, 2016b). Europe and North America are the main destinations for fair trade goods (Mohan, 2010) with the UK leading the market (Fairtrade International, 2016c). Significant sales are also observed in other regions. Australians and New Zealanders spent almost €218 million (nearly NZ$330 million) in 2015 on Fairtrade certified goods (Fairtrade International, 2016c). In New Zealand only, sales reached NZ$89 million in 2014; a 28% growth compared with sales figures a year before (Fairtrade International, 2016c). Coffee and chocolate products dominated market share, growing by 16% and 22% respectively (Fairtrade Australia and New Zealand, 2016).
4.4.3Major Fairtrade certified products
In the early days of its existence, fair trade aimed to find markets for handcrafts, coffee, and tea produced in the countries of the South (Renard, 2003). It further expanded to other product categories, such as cacao, honey, bananas, cane sugar, rice, fruit juice, chocolate, dried fruits, vegetables, nuts, seeds, wines, beers, flowers, sport balls, and cotton used in clothes and textiles (Doran, 2009; Mohan, 2010; G. Moore, 2004). Coffee is considered the most valuable product within the fair trade system and became the most commonly fairly traded product (Mohan, 2010). In 2007, coffee accounted for a quarter of fair trade sales, and despite the extension of Fairtrade certified product lines it remained the most important fair trade product (Mohan, 2010). Many multinational corporations, for example Nestlé, Kraft, Procter & Gamble, Chiquita, Del Monte, Dole, Cadbury, Starbucks, and Costa have launched fair trade lines of their products (Mohan, 2010). Fair trade certified products can be found in all major supermarket chains, with some retailers introducing their own brands under which they sell Fairtrade certified products (e.g. the Cooperative Group in the UK sells Fairtrade certified coffee and chocolate under its own Coop brand, while Sainsbury’s sells only Fairtrade certified bananas; Mohan, 2010).
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Despite being a virtuous idea in principle, fair trade is not without criticism. A number of researchers raise several issues associated with fair trade. Perhaps the most criticised aspect of fair trade is that the premium paid by consumers does not reach producers. For example, Valkila, Haaparanta, and Niemi (2010) found that fair trade empowers coffee roasters and retailers in developed countries more than it does producers in developing countries. Similarly, Mendoza and Bastiaensen (2003) concluded that only up to 18% of the price paid by UK consumers for fair trade coffee reached the grower, while Sidwell (2008) claims that just 10% of the premium consumers pay for fair trade goods actually reach the producers.
Moreover, fair trade farmers can be disadvantaged due to the production methods they are encouraged or forced to employ. Sidwell (2008) argues that fair trade discourages diversification and mechanisation, keeps the poor in their place and sustains uncompetitive growers on their land. Valkila (2009) adds that fair trade farmers are often encouraged to grow their produce organically and as organic farming tends to be of a lower intensity, farmers are unable to benefit from economies of scale. Higher prices paid for fair trade commodities do not compensate for losses resulting from lower yields. Other issues with fair trade concern (i) an oversupply of fair trade products meaning that most of the produce grown as fair trade is sold as non-fair trade (De Janvry, McIntosh, & Sadoulet, 2015; Hira & Ferrie, 2006; Sidwell, 2008), (ii) corruption in the fair trade marketing system (Valkila, 2009; Weitzman, 2006a, 2006b), and (iii) the high cost and expanded bureaucracy of obtaining certification, which is a burden (Booth & Whetstone, 2007).
However, some economists contest these critiques. For example, Mohan (2010) concludes that fair trade is a part of the market economy and it is not in opposition to free trade as demand, supply, and competition for fair trade products are the same as for other, non-fair trade products. Moreover, fair trade works not because someone subsidises goods that no one wants, but because some well-informed consumers on a free market wish to support it. Therefore, as Mohan (2010) concludes, criticism of fair trade may be exaggerated.
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