SUSTAINABLE BANANAS - A PROSPECTIVE MARKET?

Results of the EC consumer survey

Bettina Burkert, Bananen - Kampagne

This presentation is based on the main findings of an opinion poll conducted in early 1997 in all 15 European Union Member States to investigate public attitudes to fair trade bananas. The survey was designed to provide some indications of the likely consumer demand for such a product, and to inform both the Commission and others interested in fair trade bananas of the view of EU citizens. This will enable any future activities or initiatives concerning fair trade bananas to be effectively focused and designed for maximum impact and effectiveness.

1. What is fair trade?

The fair trade concept has been developing in western nations throughout the past 30 years, in response to a growing recognition of the inequalities existing in trade relationships between developed and developing countries.

The objective of fair trade is to ensure that producers receive a price which reflects an adequate return to their input of skill, labour and resources, and a share of the total profit commensurate with their input. Fair trade recognises that production systems which meet specified social and environmental standards, and therefore provide better conditions for farmers and workers, are likely to have higher costs, for example in terms of wages, social costs and environmental protection. Fair trade provides a financial return to the producer which helps to cover the costs of these improved standards.

Fair trade labels are awarded to goods imported from developing countries which have been produced according to social and environmental criteria based on international instruments such as the ILO (International Labour Organisation) Conventions and the United Nations' Agenda 21 recommendations. The criteria cover for example, such things as employment conditions, controls to prevent pesticides from contaminating rivers and drinking water, and the protection of natural ecosystems. Appropriate criteria are established for each product by international organisations such as FLO (Fair Trade Labelling Organisation), who are also responsible for monitoring and control of producers and traders applying to use fair trade labels to ensure that the conditions are strictly respected.

The fair trade symbol is displayed on the packaging, certifying that the production and marketing processes respect fair trade standards. The label is additional to other labelling information requirements, such as quality classification and origin, which are governed by the normal statutory rules. By buying products carrying a fair trade label the customer can help improve the living and working conditions of producers in developing countries. This gives ordinary western consumers the power to make a difference to trading relationships by voting with their shopping lists. Major retailers are very sensitive to their customers' demands, and consumer power can influence them to stock certain products.

2. Consumers’ previous experiences of fair trade products

The survey showed that overall, 29% of the EU population knew of the existence of fair trade products, and 11% had previously bought at least one such product, as shown in Figure 1 (The 5% who did not know, have been included as "unaware" in Figure1). The overall awareness of the fair trade concept in each Member state is shown in Figure 2, whilst Figure 3 shows the percentage of the population in each Member State who had already purchased fair trade products.

There are clear differences in the levels of awareness and experience of fair trade products between Member States. In general terms, there is a greater awareness and experience of fair trade products in the northern and central Member States, whereas the concept is very little known in the Mediterranean Member States.

Only 13% of French, Greek or Portuguese citizens had ever heard of the concept of fair trade, and only 3-4% had ever purchased any fair trade goods. In contrast, the highest figures were recorded in the Netherlands where 86% of Dutch consumers were aware of fair trade goods, and 47% had actually bought them.

The percentage of consumers aware of the concept of fair trade who then actually go and buy fair trade products also varies between countries, as shown in Figure 4. This implies that it is not simply the level of awareness of the issue which determines consumers' propensity to purchase fair trade products, but also other attitudes, and that these too, vary considerably between Member States. Whereas one out of every two consumers in the Netherlands and Luxembourg who knew about fair trade bought fair trade products, less than one in five Spanish consumers and only one in four in Portugal or Greece who were aware of the concept had ever bought any fair trade products.

3. Consumers’ willingness to purchase fair trade bananas

1. ... at the same price as "standard" bananas
   EU consumers declared themselves to be very willing to buy fair trade bananas, with almost three-quarters (74%) of the population saying they would buy them if they were available at the same price and quality as the bananas they normally buy. The results are shown in Figure 5, and it can be seen that the highest proportion, 87%, was recorded in Sweden, and the lowest percentage in Austria (57%).
   Only 11% said they would not buy fair trade bananas, with the two main groups being those that do not buy bananas at all (3,3%) and consumers in Spain, who only buy home-produced bananas. The remaining 15% of the population (including 27% of Austrians) did not know whether they would be interested or not.)
2. ... at a price premium compared to "standard" bananas
   Over one third of the EU population said they would be prepared to pay a premium above the price of normal bananas for a fair trade product. When questioned about the level of premium they would be prepared to pay, 37% said they would pay 10% more, 11% of respondents 20% more, and 5% said they would still buy at a 30% premium above standard bananas.

4. Links between previous experiences of fair trade and willingness to buy fair trade bananas

When respondents' declared willingness to buy fair trade bananas was compared with the level of previous experience of purchasing fair trade products, a clear trend emerged. People who had already bought other fair trade products are more likely to buy fair trade bananas, and are more willing to pay more for them, as shown in Figure 6.

70% of the consumers who were completely unaware of the existence of fair trade products said they would buy fair trade bananas at the same price and quality as normal bananas. On the other hand, 93% of those who had already bought fair trade goods said they would buy fair trade bananas, and 70% of these consumers were prepared to pay a 10% price premium over standard bananas.

The correlation’s found between consumers' willingness to pay a premium for fair trade bananas and previous experience are even more striking. When replies are broken down further, taking into account the amount of previous fair trade purchases, it emerges that 76% of those with considerable experience of fair trade products are willing to pay 10% more, and 19% are prepared to pay a 30% premium, compared to only 30% and 3% respectively of those who were unaware of the concept of fair trade.

Whilst a degree of overstatement in the responses, particularly at two levels of awareness/experience, would be expected, the existence of these clear relationships shows that those who would be expected to be least interested have indeed been prepared to give negative answers, and this therefore lends support to the overall picture recorded in the survey responses.

5. Outlets and availibility of fair trade products

The most common outlets where consumers had previously purchased fair trade products were Third World Shops and supermarkets. It was noticeable that whereas those with most experience (assumed to be the most dedicated fair trade shoppers) cited the former most frequently, consumers with limited experience of fair trade purchases cited supermarkets. This suggests that there is a body of consumers who are positively disposed towards fair trade products, but not sufficiently dedicated to search them out in specialist shops, and that to reach this potential market, the produce must be available through supermarkets.

This is also supported by the findings from the Netherlands, where the highest percentages of fair trade purchases were recorded (49%), in tandem with high availability through supermarket chains (57% of consumers had bought fair trade products at a supermarket) suggesting that a considerably higher proportion of the population is prepared to buy fair trade goods if the products are easily available.

When those consumers who said they would buy fair trade bananas were asked where they would want to buy them, supermarkets were clearly the most popular choice, followed by greengrocers. Consumers in the Member States demonstrating high levels of previous experience and high levels of willingness to purchase fair trade bananas expressed a clear preference for supermarkets as retail outlets.
Shoppers who would prefer to buy from greengrocers are less prepared to pay a price premium than supermarket shoppers.

Consumers' expectation and/or preference for fair trade bananas to be available in supermarkets is considerably higher amongst those with some experience of buying fair trade products, than amongst those who are unaware of the concept. This may be because unawareness of the existence of fair trade products is combined with lack of understanding of potential outlets/commerce, and so these consumers might not think it possible to find such products in mainstream outlets. Thus the responses may underrepresent consumers' preference for supermarket purchase.

It seems clear from the survey that for consumers to be prepared to exercise the preferences they state, certain conditions must be fulfilled. Firstly, fair trade bananas must be widely and easily available from mainstream outlets, i.e. supermarkets. Secondly they must be of a similar quality to standard bananas.

Thirdly, in order for consumers to be able to exercise their declared preference for fair trade bananas, the product must be clearly identifiable and they must be able to buy with confidence. This requires labelling which clearly identifies fair trade bananas as distinct from the standard product, and which is endorsed and controlled by an independent, reputable and trustworthy organisation.

6. Socio-economic factors

When the survey results were analysed according to socio-economic variables, the respondents' level of education proved to have a significant effect on their experience of fair trade. The analysis of the responses by age of the interviewee at completion of full-time education is summarised in Table 1.

Awareness and experience also both increase across income groups, but the differences between groups are smaller than those recorded for educational level, suggesting that the principal determinant factor is educational attainment, and the relationship to income is largely induced because higher qualifications are related to higher incomes.

Awareness of the concept of fair trade is strongly correlated with educational attainment, and as educational level increases, so also does the proportion of consumers who act on awareness and actually purchase fair trade products, resulting in people with higher education being three times as likely to have brought fair trade products as those who left school at an early age. This group were also considerably more prepared to purchase fair trade bananas.

The third socio-economic variable showing a clear relationship with attitudes to fair trade is political orientation. Left-of-centre voters were only slightly aware of fair trade, but had significantly higher levels of previous fair trade purchase and were significantly more willing to buy fair trade bananas than "centre" voters. Equally, these "centre" voters were both more aware and more likely to have brought fair trade products than right-of-centre voters.

7. Estimates of potential consumer demand for fair trade bananas within the EU

If the most conservative approach is taken, and potential market share is estimated only from those who have previously actually bought fair trade products, and also say they would buy fair trade bananas, figures of 10% of consumers throughout the EU at price parity, or 7,5% at a price premium of 10% are obtained.

These percentages translate into volumes of 400,000 tonnes and 300,000 tonnes respectively (assuming an EU15 total supply of 4 million tonnes). This does not take into account the increased propensity of these consumers to buy bananas (the survey also showed that this group brought more bananas than the EU average).

The volumes above represent a base figure. Although there are likely to be some speculative replies amongst the 64% of the total population who have no prior fair trade purchases but said they would buy fair trade bananas, undoubtedly a certain percentage of the replies were genuine, and thus the potential market would in fact be higher than the conservative figures presented here.

In addition, it should be borne in mind that the group of consumers considered above are not distributed evenly throughout the EU. They are located principally in the Benelux countries, Scandinavia, the UK and Germany.

In the Mediterranean Member States, where awareness of fair trade as a concept is very low, it seems that considerable preparatory work in terms of awareness-raising, educational campaigns etc. would be required before launching fair trade bananas onto the market would be a viable commercial proposition.

8. Conclusion

The survey lends support to the idea that fair trade bananas could be commercially viable, even at a price premium, within the EU, particularly in some Member States.

Currently there is no way for the banana consumer to choose to support one production system over another. The introduction of fair trade labelled bananas onto the EU market would provide one method of recognising that better social and environmental production conditions do incur higher costs. A faire trade system would result in producers participating in the scheme receiving higher prices for their fruit than non-certified producers. Since the increased returns are generated from market revenues, as a result of consumer preference, there is no issue of WTO non-compatibility.