Fairtrade Foods January 2009

Key Themes Is product quality an issue? What are the main drivers behind double-digit growth? Will the market continue to grow at the same rate in the future? Is any confusion over what Fairtrade stands for holding back its development? How is the Fairtrade market being affected by the economic downturn? How does Fairtrade compete with emerging ‘rival’ ethical marks? Is Fairtrade a ‘middle class luxury’?

Summary Showing double-digit growth The market for Fairtrade food and drinks has posted enviable double-digit growth over the past few years and is expected to exceed £600 million in 2008. The Fairtrade Foundation continues to increase the number of products licensed as Fairtrade, and awareness of the FAIRTRADE Mark continues to increase, thus stimulating market growth. The Fairtrade consumer · Women, older and more affluent people are most likely to buy Fairtrade. UK demographic forecasts are for an ageing, more affluent population, which should help sustain growth in Fairtrade sales in the longer term. Fairtrade is one consideration among a range of ethical issues, such as local sourcing and organic production. There is potentially an element of conflict for Fairtrade with these other concerns. An understanding of Fairtrade is fundamental to consumers supporting it and wanting to buy more. Ethical issues are complex and consumers need to understand that by buying Fairtrade the intended benefit is fulfilled. What does the future hold? In the short term, the economic climate presents one of the biggest challenges. Continued strong growth in Fairtrade is by no means certain over the next few years. In the long term, Fairtrade faces a real challenge from the movement towards alternative ethical schemes and certification, especially from leading companies in its core commodity areas.

Internal Market Environment The FAIRTRADE Mark is not the only supporter of trading fairly, thus there is the potential for conflicting allegiances within the ethical trade movement. Fairtrade features on the political agenda and this has provided added support and exposure for the movement. Paying a premium usually guarantees quality, however, this is not necessarily the case with Fairtrade and quality assurance has been an issue.

Broader Market Environment Rising affluence and an ageing population should help sustain growth in Fairtrade sales The economic downturn is putting a squeeze on spending, undoubtedly placing constraints on good intentions, although, so far, support of Fairtrade is holding up. Economic pressures in the face of a choice of ethical and social causes may make consumers really consider what matters to them most.

Strengths and Weaknesses Increasing support from retailers - Grocery multiples have made significant commitments to retailing Fairtrade produce Synergy with other issues - Fairtrade goods can deliver other benefits (being healthy or organic) Political will for development of Fairtrade Media support as populist ideal - Ethical issues are receiving much media coverage, which further promotes the cause Ethical consumerism - Demand for products with ethical claims is rising despite the economic downturn Strong developments in Fairtrade own-labels - This has reduced the perception that a large premium has to be paid to be ethical Fairtrade enters new categories - A strong innovation - particularly in composite products- has helped the market to penetrate new categories. The economic slowdown may deter people from paying a premium for Fairtrade Rising commodity prices could undermine the Fairtrade model Emergence of rival ethical marks Growing interest in locally-sourced products – Locally grown can be in direct conflict and could cause Fairtrade products to lose out Confusion over understanding the benefits? Volumes demanded by supermarkets may create supply problems – Supermarkets require large volumes and consistent quality and smaller producers that need the support of Fairtrade co-operatives may not always be able to deliver this.

Who is innovating? Fairtrade is driving new interest and excitement across a variety of categories due to the use of Fairtrade ingredients in composite products. Initiatives by major retailers to only sell own-label fairly-traded products in key categories will deliver a significant move forward for the market. Although there are difficulties in aligning a celebrity with ethical issues, where the commitment is genuine it can add weight to the argument.

Market Size and Forecast (at current prices) The Fairtrade Foundation continues to increase the number of products licensed as Fairtrade, thus stimulating market growth. The market value has enjoyed double-digit growth over the past few years. There are expected to be further significant leaps forward in the value of the Fairtrade foods market as major brands and retailers continue their commitment to wholesale switching to Fairtrade in key categories. The awareness of the FAIRTRADE Mark continues to increase.

Segment Performance UK estimated retail value sales of Fairtrade Foods and Drinks, by category, 2006-08 Coffee has led the way in Fairtrade and has the most certified products but it is now being overtaken by bananas. Wholesale shifts by manufacturers and retailers to Fairtrade are creating fast development of key categories such as tea and sugar.

Food Brands Group -Percol Communication and Promotional Activities Mian monitored Media Advertising spend (£000) on Fairtrade Foods and Drinks, 2006-08 2006 2007 2008 £000 £000 £000 Manufacturers: Divine Chocolate 124 234 253 Food Brands Group -Percol - 39 47 Clipper Teas 116 120 2 Taylors of Harrogate 14 1 - Green & Blacks 13 - - Traidcraft 1 3 1 Supermarkets: Sainsbury’s 119 911 844 Co-op 21 28 700 Waitrose 21 241 - M&S 36 119 - Source: Nielsen Media Research/Mintel Total 465 1,696 1,847 Advertising on Fairtrade Bananas is the main way that retailers communicate their involvement with Fairtrade. Fairtrade Fortnight is the key promotional period. Retailers and brands work together for this event. Divine was the first company to have a Fairtrade TV ad.

Factors Considered When Buying Food and Drink Respondents were asked: “Which of these, if any, are important to you when deciding the type of food and drink products you buy at a supermarket/local store?” Health is the first claim that consumers consider when buying food and drink. When Fairtrade is most likely to be considered, this is alongside a number of other ethical issues eg. animal welfare, locally sourced. Older and more affluent consumers who have fewer concerns about price consider the wider implications of their food purchasing. Base: 926 main shoppers aged 16+ Source: BMRB/Mintel

Fairtrade Products Repertoire Respondents were asked: “ Which of the following Fairtrade food and drink products do you buy at the supermarket/ local store?” Fairtrade coffee is bought by more consumers than any other product. Although consumers are aware of Fairtrade they may not always know when they are or are not buying Fairtrade goods. Local Fairtrade campaigns can have a big impact. Base: 926 main shoppers aged 16+ Source: BMRB/Mintel

Target Groups Despite high awareness, real Fairtrade Enthusiasts make up less than a third of the population. Promotions are vital for driving extra sales. There is still more to be done in communicating the Fairtrade message.

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