Fairtrade: A Balancing Act

Criticism has been levelled at Fairtrade for becoming mainstream, but is that necessarily a bad thing? Fairtrade Australia & New Zealand explores the role of the Fairtrade label and its future in sustainable supply chains.

Criticism has been levelled at Fairtrade for becoming mainstream, but is that necessarily a bad thing?

Whilst there is a need to remain relevant to the grassroots movement that underlies our system, we also need to adapt to market pressures to continue to grow the market for Fairtrade products.

At its heart, Fairtrade has committed partners that live and breathe the system of Fairtrade in their brand positioning, their packaging, the company behaviours, and their supply chains.

Companies such as Alter Eco, Etiko, Heart of Chocolate, Jasper Coffee and Republica are examples of these. However, one of the underlying tenets of Fairtrade is helping farmers to run successful businesses and this cannot be done without markets to sell to.

So in parallel, the partnerships we have formed with large multinational corporations are equally as important for Fairtrade. Mondelez (Cadbury Dairy Milk), Unilever (Ben & Jerry’s), Coca Cola Amatil (Grinders) and Coles have all made significant Fairtrade commitments, and the access to the market they bring with their size and market penetration are critical to the growth of Fairtrade.

Opening up mainstream channels such as conventional and I&C retail is critical to increasing brand recognition and further increasing the market for Fairtrade Certified products.

The Australian market for Fairtrade has continued to expand, but compared to Europe is still in relative infancy. Sales of Fairtrade Certified products in Australia for 2012 were worth $238 million, a rise of almost 17 per cent on the previous year. Recognition is at all-time high of 50 per cent but there is scope to grow this.

Based on 2012 retail sales of Fairtrade Certified products in Australia, $3.9 million of Fairtrade Premium (a fixed amount paid on top of the Fairtrade Minimum Price) was paid to producer organisations in the Pacific Region which was directly invested into improving communities through hospitals, schools, roads and infrastructure projects.

It can also be used by the farmers to improve the quality of their crops, switch to organic, and create processing efficiencies, all means to add more value and earn a higher price.

It is still too low but Fairtrade is at least a step in the right direction. This is particularly critical at a time when the government looks to, if not decrease, at least cap our level of foreign aid commitments.

Fairtrade is not about charity or market distortions. Fairtrade shows that it is possible to put social and economic values into the free market and still succeed.

Those business successes mean that it is the farmers’ organisations, through the Fairtrade Premium they receive, that are investing in vital social improvements in their villages.  

Fairtrade Premiums represent a payment for added value and recognise a differentiated, higher quality product, including the value of investing in the long-term interests of poor farmers and workers.

For capitalism to work well, businesses need capital and access to capital is the single greatest problem facing smallholder entrepreneurs; the Fairtrade is one step towards easing that problem.

It is a long and complex journey for smallholder farmers to improve their position in global commodity markets.

We know that the Fairtrade system isn’t perfect, but while many point to text books and theories, Fairtrade is rolling up the sleeves and putting a system into practice which works, and makes a positive step in alleviating poverty.