Brussels Development Briefing Does Fair Trade contribute to sustainable development? 16 April 2008 How are retailers responding to fairtrade? Prepared by Natalie Berg, Grocery Research Manager Planet Retail Ltd | April 2008 part of emap communications

Agenda Fairtrade – facts & figures Retailer & manufacturer responses Future challenges Future opportunities

Fairtrade – facts & figures

Retailer & manufacturer responses

Future challenges

Future opportunities

Fairtrade – an overview Global market for fairtrade products is growing at 40% year-over-year 569 producer organisations in 57 countries mainly in the southern hemisphere* Main categories include bananas, cocoa, coffee, cotton, flowers, honey, juice, rice, sugar, tea, wine. * As of FYE 2007, source: FLO

Global market for fairtrade products is growing at 40% year-over-year

569 producer organisations in 57 countries mainly in the southern hemisphere*

Main categories include bananas, cocoa, coffee, cotton, flowers, honey, juice, rice, sugar, tea, wine.

Fairtrade sales by consumer market Source: FLO 42 1,609.0 1,132.4 Total 63 1.9 0.03 Spain 191 7.2 2.5 Australia/New Zealand 45 499.0 344.1 USA 48 409.5 276.8 UK 1 135.3 133.8 Switzerland 73 16.0 9.3 Sweden 28 8.6 6.7 Norway 12 41.0 36.5 Netherlands 23 2.8 2.3 Luxembourg 23 4.1 3.4 Japan 23 34.5 28.0 Italy 77 11.6 6.6 Ireland 55 110.0 70.9 Germany 47 160.0 109.1 France 73 22.5 13.0 Finland 54 21.5 14.0 Denmark 54 53.8 34.8 Canada 86 28.0 15.0 Belgium 63 41.7 25.6 Austria Increase (%) 2006 (EUR mn) 2005 (EUR mn) Country

Agenda Fairtrade – facts & figures Retailer & manufacturer responses Future challenges Future opportunities

Fairtrade – facts & figures

Retailer & manufacturer responses

Future challenges

Future opportunities

Retailers & fairtrade Retailers increasing their fairtrade offerings in response to consumer demand – private label and brands (150-200 SKUs on average). Fairtrade products are generally separated from the rest of the store’s offering. Mainly Western European grocers driving fairtrade growth, especially UK. Some are converting entire product categories to fairtrade and setting up development funds for fairtrade communities. Despite rapid growth, fairtrade still lags behind other ‘green’ categories such as organic.

Retailers increasing their fairtrade offerings in response to consumer demand – private label and brands (150-200 SKUs on average).

Fairtrade products are generally separated from the rest of the store’s offering.

Mainly Western European grocers driving fairtrade growth, especially UK.

Some are converting entire product categories to fairtrade and setting up development funds for fairtrade communities.

Despite rapid growth, fairtrade still lags behind other ‘green’ categories such as organic.

Top 10 European grocery retailers going green with private label Sainsbury Active Naturals So Organic, Organic You, Active Naturals, Whole Foods UK Entr’Aide Marque Repère Marque Repère France - - Bio Wertkost Germany - Bio/Prima Bio Germany Auchan Auchan Auchan Bio France - - Rewe Bio, Naturgut Germany Fairglobe - Bioness Germany - - Grünes Land Germany Fresh & Easy Tesco Naturally Tesco Organic, bnatural, Fresh & Easy Organic, Whole Foods UK Carrefour Solidaire Carrefour Eco Planète Carrefour Bio France Fairtrade PL Eco-friendly PL Organic/Natural PL Home Market

Fairtrade sales at Sainsbury’s boosted by category conversions Source: Sainsbury’s / Planet Retail estimates 164% 41.2 58.5 77.7 204.6 277.3 0 50 100 150 200 250 300 2004 2005 2006 2007 2008 Sales (EUR Mn)

Sainsbury’s converting entire categories to fairtrade First major UK grocer to offer fairtrade food in 1994. Fairtrade products offered under all PL tiers – value, standard, premium, organic. First British retailer to convert all bananas to fairtrade (in 2007). Sainsbury’s Red label tea, sugar and hot beverages (instore cafés) have also been converted to fairtrade. Additional FT categories include roses, clothing.

First major UK grocer to offer fairtrade food in 1994.

Fairtrade products offered under all PL tiers – value, standard, premium, organic.

First British retailer to convert all bananas to fairtrade (in 2007).

Sainsbury’s Red label tea, sugar and hot beverages (instore cafés) have also been converted to fairtrade.

Additional FT categories include roses, clothing.

Other examples of category conversion Co-op (UK) Sells over 180 fairtrade products. Sales of FT products in excess of EUR55 mn in 2006. Converted all hot beverages to fairtrade. To celebrate Fairtrade Fortnight, the Co-op reduced the price of all the fairtrade products by 20% which had proven an extremely effective way of increasing sales. Marks & Spencer (UK) Converted all jams and conserves to fairtrade sugar. In 2007, M&S purchased around a third of the world’s fairtrade cotton and sold over 3.2 million garments made from fairtrade cotton. Fairtrade food sales up 20% this year.

Co-op (UK)

Sells over 180 fairtrade products.

Sales of FT products in excess of EUR55 mn in 2006.

Converted all hot beverages to fairtrade.

To celebrate Fairtrade Fortnight, the Co-op reduced the price of all the fairtrade products by 20% which had proven an extremely effective way of increasing sales.

Marks & Spencer (UK)

Converted all jams and conserves to fairtrade sugar.

In 2007, M&S purchased around a third of the world’s fairtrade cotton and sold over 3.2 million garments made from fairtrade cotton.

Fairtrade food sales up 20% this year.

Carrefour a key driver of the fairtrade market in France Offers 324 fairtrade products as of FYE 2006 (almost double the number of products over the prior 2 years): Hypers: 232 Supers: 52 C-store: 34 C&C: 6 Discount: 0 Mainly brands but also offer FT products under the Carrefour Agir brand. 31% increase in number of fairtrade products offered between 2005 – 2006.

Offers 324 fairtrade products as of FYE 2006 (almost double the number of products over the prior 2 years):

Hypers: 232

Supers: 52

C-store: 34

C&C: 6

Discount: 0

Mainly brands but also offer FT products under the Carrefour Agir brand.

31% increase in number of fairtrade products offered between 2005 – 2006.

Fairtrade even makes its way onto discount shelves Germany – discount/organic paradox. Lidl was the first major German retailer to launch a private label range for fairtrade products under the Fairglobe brand. Launched in 2006 along with an organic and healthy-eating range. Viewed by critics as a smokescreen.

Germany – discount/organic paradox.

Lidl was the first major German retailer to launch a private label range for fairtrade products under the Fairglobe brand.

Launched in 2006 along with an organic and healthy-eating range.

Viewed by critics as a smokescreen.

Whole Foods Market goes its own way Whole Trade Guarantee launched in 2007. In partnership with TransFair USA, FLO and Rainforest Alliance. Evaluates quality, price, labour practices and environmental sustainability of import foods. Initially chocolate, coffee, tea, rice, bananas. Within next 10 years, half of Whole Foods’ imported goods from developing markets will bear this label.

Whole Trade Guarantee launched in 2007.

In partnership with TransFair USA, FLO and Rainforest Alliance.

Evaluates quality, price, labour practices and environmental sustainability of import foods.

Initially chocolate, coffee, tea, rice, bananas.

Within next 10 years, half of Whole Foods’ imported goods from developing markets will bear this label.

One of the first UK grocers to introduce organic PL food including fruit & vegetables, dairy products, bakery products and eggs. Currently the country's largest organic products retailer. 140 fairtrade products on offer, of which 45 are private label. Fairtrade products promoted to over 1 mn shoppers through Clubcard mailings. Clubcard points are incentive for customers to purchase organics, fairtrade & eco-friendly products. Rewarding shoppers for buying fairtrade - Tesco

One of the first UK grocers to introduce organic PL food including fruit & vegetables, dairy products, bakery products and eggs.

Currently the country's largest organic products retailer.

140 fairtrade products on offer, of which 45 are private label.

Fairtrade products promoted to over 1 mn shoppers through Clubcard mailings.

Clubcard points are incentive for customers to purchase organics, fairtrade & eco-friendly products.

Fairtrade - not just for supermarkets

Manufacturers also making the switch Tate & Lyle to convert 100% of its retail branded sugar to fairtrade by 2009. Largest ever switch to fairtrade by a UK company! Kraft, Nestle, Sara Lee and Procter & Gamble all offer fairtrade coffee. Acquisitions in the confectionery sector also reflect the growth of fairtrade products: Nestle - Day Chocolate Company Cadbury – Green & Black

Tate & Lyle to convert 100% of its retail branded sugar to fairtrade by 2009.

Largest ever switch to fairtrade by a UK company!

Kraft, Nestle, Sara Lee and Procter & Gamble all offer fairtrade coffee.

Acquisitions in the confectionery sector also reflect the growth of fairtrade products:

Nestle - Day Chocolate Company

Cadbury – Green & Black

Agenda Fairtrade – facts & figures Retailer & manufacturer responses Future challenges Future opportunities

Fairtrade – facts & figures

Retailer & manufacturer responses

Future challenges

Future opportunities

Fairtrade products – challenges General economic downturn. Rising commodity prices. Educating consumers: Sense that individual actions will not make a difference. Conveying health benefits. Confusion around which is better: fairtrade or local? Organic or fairtrade?

General economic downturn.

Rising commodity prices.

Educating consumers:

Sense that individual actions will not make a difference.

Conveying health benefits.

Confusion around which is better: fairtrade or local? Organic or fairtrade?

How does fairtrade compare to other ‘green’ products? Organic Fairtrade Local Eco-friendly Perceived consumer benefit HEALTH ENVIRONMENTAL SOCIAL X X X X X X X X X X

In 1970, there were 340 farmers’ markets in the US. Today, there are more than 4,500. In 1997, there was one farmer’s market in the UK. Today, there are over 500. A clear majority of consumers would prefer to buy a local non-organic option rather than an imported organic one. – Soil Association The food miles debate has led to increased demand for local foods "I don't think retailers will make a conscious decision at a point in time to stop listing products (with a high carbon footprint). What will happen is consumers will make a choice that they don't want to buy it and ultimately it will disappear off the shelves.” –Wal-Mart UK CEO, Andy Bond

In 1970, there were 340 farmers’ markets in the US.

Today, there are more than 4,500.

In 1997, there was one farmer’s market in the UK.

Today, there are over 500.

A clear majority of consumers would prefer to buy a local non-organic option rather than an imported organic one. – Soil Association

A threat to air freighted foods?

Managing air freight labels in fairtrade categories versus Casino, France M&S, UK

Carbon labelling In the UK, Tesco is developing a “universally accepted and commonly understood” measure of the carbon footprint of all products sold at Tesco. Others testing a similar scheme with the Carbon Trust – M&S, Boots, Walkers (right), Innocent, Cadbury, Coca-Cola, Kimberly-Clark. Coop in Switzerland – Climatop (right). Product’s complete lifecycle will be measured (eg, energy used in manufacturing, distribution, etc). More informed decisions for the consumer. But how much information is too much?

In the UK, Tesco is developing a “universally accepted and commonly understood” measure of the carbon footprint of all products sold at Tesco.

Others testing a similar scheme with the Carbon Trust – M&S, Boots, Walkers (right), Innocent, Cadbury, Coca-Cola, Kimberly-Clark.

Coop in Switzerland – Climatop (right).

Product’s complete lifecycle will be measured (eg, energy used in manufacturing, distribution, etc).

More informed decisions for the consumer.

But how much information is too much?

Agenda Fairtrade – facts & figures Retailer & manufacturer responses Future challenges Future opportunities

Fairtrade – facts & figures

Retailer & manufacturer responses

Future challenges

Future opportunities

Opportunities Increased distribution by the grocers make fairtrade products more available to the everyday consumer, which ultimately leads to greater demand. Much more publicity around events such as Fairtrade Fortnight will create opportunities. Opportunity for further growth in Western Europe in the immediate term, but CEE in the longer term as the modern grocery sector develops. Private label opportunities as retailers flex their green muscles.

Increased distribution by the grocers make fairtrade products more available to the everyday consumer, which ultimately leads to greater demand.

Much more publicity around events such as Fairtrade Fortnight will create opportunities.

Opportunity for further growth in Western Europe in the immediate term, but CEE in the longer term as the modern grocery sector develops.

Private label opportunities as retailers flex their green muscles.

Contact details Natalie Berg Grocery Research Manager Planet Retail Ltd T: +44 (0)207 728 5000 F: +44 (0)207 728 4999 [email_address] United Kingdom: Greater London House, Hampstead Road, London NW1 7EJ, United Kingdom T: +44 (0)207 728 5000 F: +44 (0)207 728 4999 Germany: Dreieichstrasse 59, D-60594 Frankfurt am Main, Germany T: +49 (0) 69 96 21 75-0 F: +49 (0) 69 96 21 75-40 Japan : Minami-Magome 5-42-3-508, Ohta-ku, Tokyo 143-0025, Japan T: +81 (0) 3 3775 4158 F: +81 (0) 3 3775 4162

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