The Fairtrade Foundation

How it works

The marketing system for Fairtrade and non-Fairtrade coffee is identical in the consuming countries, using mostly the same importing, packing, distributing and retailing firms. Some independent brands operate a virtual company, paying importers, packers and distributors and advertising agencies to handle their brand, for cost reasons. In the producing country Fairtrade is marketed only by Fairtrade cooperatives, while other coffee is marketed by Fairtrade cooperatives (as uncertified coffee), by other cooperatives and by ordinary traders.

This mode of operation has led to criticism of the foundation. It is argued that, because retailers and cafes in the rich countries can sell Fairtrade coffee at any price they like, nearly all the extra price paid by consumers, 82% to 99%, is kept in the rich countries as increased profit. There is evidence that dishonest importers do not pay the full Fairtrade price, so an even smaller proportion reaches the Third World.

Cooperative traders and exporters can sell coffee as Fairtrade certified if they meet the political standards of FLO and they pay them a certification and inspection fee. Other administration costs and production costs are incurred to meet these standards. The exporter (not the farmer) is paid a minimum price for Fairtrade certified coffee when the world market is oversupplied, and a Fairtrade premium of 15c per lb at other times. The cooperatives can, on average, sell only a third of their output as Fairtrade, because of lack of demand, and sell the rest at world prices. As the additional costs are incurred on all production, not just that sold as Fairtrade, cooperatives sometimes lose money on their Fairtrade membership. After the additional costs have been subtracted from the Fairtrade price, the rest goes on ‘Social Projects’ such as clinics, women’s groups and baseball pitches.

Critics therefore argue that farmers do not get any of the higher price under Fairtrade. Nor is there any evidence that they get higher prices as a result of better marketing: the cooperatives sometimes pay farmers a higher price than farmers do, sometimes less, but there is no evidence on which is more common. Farmers do, however, incur extra costs in producing Fairtrade, so they certainly do lose money from Fairtrade membership in some cases. There is little or no research on the extra costs incurred, or the effect of Fairtrade membership on the income of farmers.

However, other economists have argued that the existence of a Fair Trade marketing route benefits producers by raising producer prices generally, and there is evidence of such an effect at least among coffee producers; according to Podhorsky, the critics of the Fairtrade Foundation err by assuming that fair trade producers receive the world price for coffee, when that is in general not so.

To become certified Fairtrade producers, the primary cooperative and its member farmers must operate to certain Fairtrade standards, set by the organization. FLO-CERT, the for-profit side, handles producer certification, inspecting and certifying producer organisations in more than 50 countries in Africa, Asia, and Latin America. In the Fair trade debate there are many complaints of failure to enforce these standards, with Fairtrade cooperatives, importers and packers profiting by evading them.

Organisational links

The Foundation was established in 1992 by CAFOD, Christian Aid, New Consumer, Oxfam, Traidcraft and the World Development Movement. These organisations were later joined by the Women's Institute, Britain's largest women's organisation, and other organisations including Banana Link, Methodist Relief and Development Fund, Nicaragua Solidarity Campaign, People & Planet, SCIAF, Shared Interest Foundation, Soroptimist International, Tearfund and the United Reformed Church.

Promotion

The Fairtrade Foundation organises and coordinates promotional campaigns and events every year, such as the Fairtrade fortnight (typically in February/March), the British counterpart of Max Havelaar France's Quinzaine du Commerce Équitable. The Foundation also coordinates the Fairtrade Town campaign, which designates areas and towns committed to the promotion of Fairtrade certified goods.

The Fairtrade Foundation commissions professional photographers to take images of farmers and workers that belong to Fairtrade certified producer groups. Some of the photographers the Foundation and FLO has worked with are Simon Rawles, Peter Caton, Eduardo Martino, Richard Human, Didier Gentilhomme and Anette Kay.

Market penetration

Since The Co-operative Food became the first supermarket to sell a Fairtrade product (Cafedirect coffee) in 1992, both the range and total sales of Fairtrade certified products in UK supermarkets has grown extensively. In 2013, there were over 4000 Fairtrade products available in the UK with estimated sales of over £1.7bn. Products carrying the Fairtrade label can be found at vendors like Asda, Budgens, Booths, The Co-operative Food, Londis, Marks & Spencer, Morrisons Sainsbury's, Spar, Tesco, Waitrose as well as in hundreds of coffee shops, small retailers and online merchants.

In 2014, Fairtrade certified sales in the United Kingdom amounted to an estimated retail value of £1.68 billion, up from £273 million in 2006. Volumes of Fairtrade banana sales grew by 3% in 2014, generating an estimated £7.9 million of Fairtrade premium. One in three bananas bought in the United Kingdom carries the Fairtrade label. Fairtrade sales of coffee, which remains Fairtrade's best known product, rose 9% generating an estimated £5 million of Fairtrade premium in 2014.

It was estimated in 2014 that approximately 77% of British adults could identify the Fairtrade Certification Mark, up from 25% in 2003, 39% in 2004, 50% in 2005 and 57% in 2007. In 2008, an estimated two in three UK households regularly bought at least one Fairtrade-labelled product.

The Fairtrade Foundation is a registered charity (no. 1043886). It is also a company limited by guarantee, registered in England and Wales (no. 2733136).