THE FAIR TRADE LABEL - HOW TO CONQUER THE SUPERMARKETS

Jürgen Tölke, FLO

1. Introduction

Bertold Brecht was right when he said: "food comes first, morals second." People that are well-fed tend to attach greater importance to a morally correct way of trading. In the rich nations, the catalogue of ecologically and socially correct goods is growing steadily.

The issuing of a quality label proceeds from the assumption that there is no "homo economicus", i. e. someone who is only interested in buying goods at the lowest possible price. Rather, there are buying motives other than economic ones, such as environmental and social criteria. Therefore the quality label has to be issued by credible institutions that do more than making publicity with seductive images.

In this paper, first the aims of TransFair and Fair Trade Labelling Organization International (FLO) will be presented, then the problems relating to merchandizing bananas in the supermarkets will be described.

2. Aims, tasks and method of working of TransFair

The aims of the association can be derived from the purpose of the statutes:

promotion of the trade carried on by disadvantaged producers in Africa, Asia and Latin America

improvement of the living and working conditions by Fair Trade

educational work and information regarding the structures of global trade and working and living conditions overseas

The last-mentioned point especially relates to the educational work of TransFair. The association considers educational work to be as important as the expansion of Fair Ttrade. Educational work aims at raising in the public an awareness of the structures of global trade that cause the bad economic situation people in the so-called developing countries live in.

According to its aims, TransFair tries to target the following goals:

to encourage companies to become a licensee for Fair Trade goods

This leads to the question: What precisely is a "licensee"?

Any company that binds itself towards TransFair to comply with the criteria of Fair Trade can become a licensee.

Such company is entitled to print the TransFair label on the package of its fairly traded product. In exchange for it, the company pays licensee fees to TransFair.

The licensees use their contacts to the food retail trade in order to offer their fairly traded products there.

Once the fairly traded products have entered the shops of the retail trade, the next step is to

make it possible for the consumers to identify the fair trade goods offered by the retailers regardless of their brand or trade mark.

The products can be recognized through the Fair Trade label by which products such as coffee, tea, honey, chocolate and chocolate products are already marked as fairly traded goods.

In order to make sure that the Fair Trade label serves as signal for the consumers that shows them that the product in question has been traded in a fair way, it is necesary to

increase the popularity of the idea of fair trade,

and this is exactly what is achieved by TransFair's public relation and educational work, which - as has already been mentioned - plays a role as important as merchandizing. It is only by well-informed consumers that the aim of TransFair to be mentioned next can be realized, that is:

to promote the demand for and sale of fair trade goods benefitting disadvantaged producers in third world countries.

The control of fair trade is effected on two levels, first by cross-checking the statements of the importers against those of the licensees and by comparing the statements of the importers with those of the licensees.

This means precisely: The producer organizations inform TransFair about their sales contracts. These data are cross-checked against the statements of the importers and the licensees, who make a quarterly list of the quantities they purchased, stored and sold.

Secondly, control is effected by independent accountants.

At the end of every fiscal year, they check the statements of the importers and licensees.

The controls make sure that only those products are offered under the TransFair label that have actually been purchased under fair conditions from the producers.

Should there be any doubts concerning the statements in a contract of a partner, TransFair is entitled to check the books of the respective partner and to take the appropiate steps.

On the producer's side, control of the compliance with the criteria of fair banana trade is effected by Fair Trade Labelling Organizations International (FLO).

FLO, which stands for Fair Trade Labelling Organizations International, was founded in April 1997 under the umbrella association of all existing Fair Trade labelling initiatives. FLO is structered as an association under German law.

All in all, FLO has 15 founding members from the following countries: Austria (TRANSFAIR), Belgium (Max Havelaar), Canada (TRANSFAIR), Denmark (Max Havelaar), France (Max Havelaar), Germany (TRANSFAIR), Great Britain (Fair Trade Foundation), Ireland (FairTrade Foundation), Italy (TRANSFAIR), Japan (TRANSFAIR), Luxembourg (TRANSFAIR-Minka), Netherlands (Max Havelaar), Sweden (F"r. f"r R"ttvisem"rkingen), Switzerland (Max Havelaar), USA (TRANSFAIR).
FLO is in effect a coordination and service coby for its members. It provides a forum for decisions on which potential new products should be examined for labelling, acceptance of Fair Trade criteria and decisions regarding th coordination of producer registers, changes of criteria, their application and so forth.

The FLO Producer Registers are committees which are responsible for the registration of all producer sources approved as participants in Fair Trade. The register coordinators are reponsible for monitoring the flow of goods between producers and authorized importers, as well as the transfer (and use) of the Fair Trade premium payments.

FLO is also responsible for representing the inters of the Fair Trade labeling initiatives to international bodies such as the European Commission.

For bananas the fair trade conditions are:

Minimun price of 6 $/box
surcharge of 1,75 $/box
providing long term relations and contracts
production criteria splitted into labour and environment criterias

3. Fair Trade Bananas in the Supermarkets

The introduction of fairly traded coffee in Germany has not exactly been easy, and the marketing of fairly traded bananas in Germany will even be more difficult.

The way has been paved by the banana campaign and by Bananafair that have worked intensely in the sphere of public relations for years now. Without raising an awareness in the public and in the potential consumers, every effort to sell fairly traded products will be overshadowed by the risk of failure.

The banana trade is most important for the retail business. The sale of bananas makes up for approximately 1 % of the entire turnover in food and as much as 10 % of the entire sale of fruits and vegetables.

According to a study realized by the European Institue of Commerce and Trade, with bananas the yield achieved in a given area under cultivation is well above average. The yield per square meter amounts to 14,420 german marks in contrast to an average of only 3,119 german marks with fruits and vegetables in general. So with bananas, the yield per given cultivated area is four times as high as the average yield with fruits and vegetables.

Retail managers in charge of banana trade neither can nor want to suffer a loss of profit through the trade of bananas labelled as fair. Hence reliable logistics is crucial. Empty shelves are equivalent to high losses profit. Managers are most unlikely to place an order with somebody who is unable to supply or fails to supply. Therefore, from the retailers' point of view, the large banana companies have a competitive advantage due to their longstanding experience and their large number of suppliers.

In Germany, the experience gained by our associated organizations in Switzerland and in the Netherlands as well as in Denmark and Belgium can serve as a basis to start from. Max Havelaar bananas were introduced there in October 1996 and in March 1997 respectively. Their market shares amount to up to 10 %.

TransFair Germany intends to offer bananas under the Fair Trade label to German retail shops in April 1998. The talks held with representatives of major retail centres give rise to a certain optimism. Some final decisions regarding the placement of orders have already been made.

For the success of our common effort it is crucial to keep bringing before the public the untenable conditions in the banana cultivations, thus paving the way for fairly traded bananas to enter the shops of the retail business. As a matter of fact, 74 % of the population are interested in buying fairly traded bananas and 37 % would even pay a higher price for them.