February 28, 2013 / 3:57 PM / 6 years ago

Fairtrade sales to grow as consumers demand better labelling

LONDON (Reuters) - Sales of ethically sourced Fairtrade products rose 19 percent last year and will continue to grow worldwide as firms seek to reassure consumers over food in the wake of Europe’s horsemeat scandal, the head of the Fairtrade Foundation said.

People are angry about being mis-sold and are demanding more transparency and fairness across the supply chain following the Europe-wide scandal that has seen horsemeat make its way into processed meals sold as containing beef, he said.

Tesco, the world’s third-largest retailer, has already pledged to buy more meat from its home market in Britain and to shorten supply chains after the scandal shook confidence in supermarket sourcing.

“The horsemeat scandal is just the latest bit of evidence that the food system is dangerously out of control,” Mike Gidney, chief executive of the Fairtrade Foundation, which manages Fairtrade certification in the UK, told Reuters in an interview on Wednesday.

“It makes the case for independent verification. Companies cannot be trusted on their own, they need to be able to prove their commitment,” he said, noting that mechanisms such as Fairtrade enabled companies to test their supply chains.

Fairtrade is a consumer label that supports shorter supply chains and guarantees farmers in developing countries a premium price to invest in economic, social and environmental projects and fight poverty.

While the label usually induces a slightly higher retail price, Gidney said economies of scale in a growing market meant retailers could easily internalise that cost to reassure shoppers about where their money goes and what food it buys.

“People are angry over being mis-sold. We have collectively confused value and price. Just because you’re getting something which is cheap doesn’t mean you’re getting value,” Gidney said.

“Take cheap beef burgers - they’re cheap, but where’s the value if you’re getting horse instead of beef?”

Richard Dodd, spokesman for the British Retail Consortium, said many of its members strongly supported Fairtrade products and that the relatively modest scale of the horsemeat scandal did not put in doubt the robustness of retailers’ supply chains.

“Clearly it’s a small number that’s too great a number, and there most certainly is action needed and action being undertaken to address processors’ systems and intelligence gathering to make sure that this can’t happen again. But it doesn’t indicate a supply chain that’s fundamentally failing,” he said.

“BROKEN FOOD SYSTEM”

Despite a sluggish economy and squeezed disposable incomes, British consumers spent 1.57 billion pounds in 2012 on Fairtrade products, more than in any other country.

Gidney hopes to see UK sales of Fairtrade products top 2 billion pounds by 2015. Worldwide 2012 sales figures are not yet available but were up 12 percent to $6.6 billion in 2011.

“Fairtrade has been strongly supported by the British public for many years and we’re now seeing more and more companies committing to Fairtrade because they know there’s a market,” Gidney said, speaking on the sidelines of a promotional event for Fairtrade Fortnight, which runs from Feb 25 to March 10.

Sainsbury’s, Waitrose, Morrison and the Co-Op have switched to Fairtrade tea, sugar, coffee or bananas, while major brands like Maltesers, Kit Kat and Ben & Jerry’s, following the lead of Cadbury’s Dairy Milk, now carry the iconic green, blue and black label in Britain.

The Fairtrade Foundation’s latest campaign focuses on smallholders, family farmers who grow food for sale as well as for their own consumption and are exposed to volatile market prices and rising production costs.

“Half of the world’s hungry people are themselves farmers... And then in the UK we throw away a third of our food - it’s a shocking piece of evidence that in the 21st century we have such a broken food system,” Gidney said.

Yet Fairtrade products are still a “drop in the ocean”, he said. Ninety percent of cocoa globally is grown by smallholders, yet only 1 percent of it is sold under the Fairtrade label.

Meanwhile, prices on financial markets for coffee and sugar are hovering around 2-1/2 year lows on abundant supplies.

Gidney urged companies to source more products from smallholders and to help them capture more value further down the supply chain. He cited the example of Marks & Spencer, which recently launched a Fairtrade tea that is not only sourced, but also processed and packaged in Kenya.

Producers at the Iriaini Tea Factory now fetch an extra $2-3 per kg of tea sold - 60 percent more value than they would get from selling it in bulk - and can now sell their tea in the domestic and wider African market.

“The best way of ensuring that farmers are protected from the impact of price volatility is for them to be setting their own terms of trade more,” Gidney said.

Editing by Keiron Henderson

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