economic crisis graphs
economic crisis graphs
Mainstreaming Fair Trade: the Role of Consumers
Mainstreaming Fair Trade: The Role of Consumers
By Kamil Kanji
This article is based on a university research project focused on understanding the growth of Fair Trade. The term Fair Trade can be difficult to define. It is generally presented as an ‘ethical’ alternative to conventional, or ‘free’ trade. It guarantees small scale producers a minimum price for their produce, which is often defined as a fair price, or living wage. It forges a long-term relationship between buyer and seller, thereby providing some stability against market fluctuations. The Fair Trade Labelling Organisation (FLO) also stipulates that Fair Trade sources have to meet minimum social and environmental criteria before being accepted for the Fair Trade certifying procedures.
Many Fair Trade products exist, such as handicrafts, flowers and paper, but the main products are coffee, bananas, tea and chocolate. In 2003, global sales of Fair Trade products surpassed $700 million. In 2005, there were 433 producer groups globally working with 5 million farmers and their families, up from 360 in 2002. Since 2001, export prices for coffee have dropped from $1.00 to $0.49c/lb, but Fair Trade coffee prices have remained at $1.26/lb, preventing many small scale farmers from bankruptcy. Nonetheless, Fair Trade has remained a niche market.
Consumers have the power to affect the growth of Fair Trade products. However, this is contingent on their awareness of the inequalities of mainstream trade and the practices of supermarkets, so that they choose, or not, whether to promote Fair Trade by paying a sort of ethical premium for Fair Trade products. To better understand the current levels of knowledge and awareness among consumers, an original consumer survey was designed and carried out at one ‘up market’ supermarket (Waitrose) and one ‘down market’ supermarket (ASDA) in Kingston, south west London. The survey focuses on food as an important sector of the Fair Trade market.
ASDA and Waitrose target different socio-economic groups. According to a survey by Which magazine Waitrose is the leading supermarket chain in the UK in food quality and range. ASDA is ‘Britain’s best value weekly shop with prices that are independently shown to be lower than main competitors’ and holds the title for Britain’s best value retailer. While ASDA and other UK supermarket chains compete primarily on price and try to attract customers through rewards, loyalty schemes and cards, Waitrose tries to build up brand loyalty by offering differentiated, high quality products. Thus, Waitrose can be characterised as ‘up market’ whereas ASDA can be characterised as ‘down market.’ Waitrose holds a Royal Warrant for services, a prestigious symbol. It also has activities to maintain a ‘green’ image. It was the first ever winner of the ‘Organic Supermarket of the Year’ title. Its products are also more exclusive than ASDA’s, and tend to be more expensive.
The objective of the survey was to obtain information about consumer awareness and attitudes towards Fair Trade and to compare Fair Trade potential between the two supermarkets (ASDA and Waitrose) in relation to consumer characteristics (age, gender, education) and product characteristics (price, availability, labelling). The findings were compared to other UK consumer research. For example, the MORI survey, May 2004, commissioned by the Fair Trade foundation, which found that recognition of the Fair Trade mark was highest among women, 42% compared to 35% of men, and in the 45-54 age group.
Consumers entering both supermarkets were presented with a structured questionnaire. Consumers who did not intend to purchase foodstuffs were not included in the sample. Many consumers only wanted a paper, cigarettes or other item not available as Fair Trade. The total number of consumers was 280 (140 at each supermarket). Interviews took place from February 23rd 2005 to March 1st 2005, every day of the week between 11am-12pm and 6-7pm, to ensure a better cross section of consumers. For example, sampling in the evening between 6pm and 7pm accomodated evening shoppers. The survey was also piloted resulting in several improvements.
It was hypothesised that: “Higher awareness and demand for Fair Trade products exists among consumers. However, unavailability and higher cost of these products are key limitations to growth of Fair Trade.”
The key findings of the survey are presented in the graphs below.
It was found that 56% of consumers at ASDA were aware of Fair Trade, compared to 64% at Waitrose. At ASDA, 32% of consumers were both aware of Fair Trade and considered purchasing Fair Trade products, compared to 45% at Waitrose. A chi squared test showed this difference was significant at the 5% level (v = 1). Thus, consumers at Waitrose were more likely to purchase Fair Trade products.
The main reasons for purchasing Fair Trade products were fairer price for the producer (33%) and better taste and quality (20%). For the majority of consumers, both these reasons were important (48%). This implies that consumers who consider purchasing Fair Trade products are generally willing to pay a higher premium for Fair Trade products. Interestingly, more than two thirds (68%) make a link between Fair Trade products and better taste/quality and a fifth (20%) said they considered purchasing Fair Trade products solely for better taste/quality.
Fruit was the favoured Fair Trade product (58%), followed by coffee (51%). The favourite fruit was bananas; also the UK’s most popular fruit. Coffee and fruit were by far the most popular Fair Trade products, also indicated by UK sales figure. Tea (12%) and chocolate (12%) were less popular. Relatively few consumers were interested in vegetables (5%), juice (4%) and honey (1%).
Unvailability is a main limitation to the growth of Fair Trade, as suggested by nearly half (45%) of consumers who did not consider purchasing such products. Fair Trade products are limited to a handful of foodstuffs in supermarkets. They are not available in meat, cheese, bread and ready meals, and a range of other foodstuffs.
Reasons for not purchasing Fair Trade products by supermarket
% ASDA Waitrose Total
Unavailability 21% 68% 45%
Higher Cost 40% 2% 21%
Against Principle 18% 17% 18%
Unclear labeling 13% 2% 8%
Other 5% 13% 9%
At Waitrose, a higher proportion of consumers did not intend to purchase Fair Trade products simply because of their unavailability, 68%, compared to only 21% at ASDA. The range of Fair Trade products at each supermarket was similar, but more Fair Trade fruit was available at Waitrose. Perhaps linked to higher awareness, consumers at Waitrose were more likely to realise the limitation of availability. At ASDA, consumers were more deterred by higher cost: 40% of the group identified higher cost as a reason for not considering Fair Trade products, compared to just 2% at Waitrose. Overall, unavailability is the main limitation to the growth of Fair Trade (45%) and higher cost a secondary limitation (21%).
The findings give weight to the assumption that Waitrose caters for higher socio-economic groups, who may be more aware of Fair Trade and who can better afford such products. Waitrose consumers have a higher disposable income which allows then to spend more money on food. Therefore, the potential of Fair Trade to grow is higher at Waitrose. If there were more Fair Trade products available, 40% of consumers at ASDA would still not consider purchasing them because of higher cost, but at Waitrose, only 2% would still not consider purchasing them due to higher cost.
Nearly a fifth (18%) of consumers were against the principle of Fair Trade and thus did not consider purchasing Fair Trade products, perhaps because they wer in favour of mainstream ‘conventional’ trade, or completely ‘free’ trade. Advocates of free trade argue that it is unfair to establish a fair price because fewer producers can capture higher prices, whereas low prices ensure that more producers benefit from being paid the lower wage (although demand for Fair Trade products could grow so that more producers would benefit from higher wages). It can also be argued that trade could become fairer by being freer i.e. no government “interference” for efficient and socially optimal allocation of resources. Essentially, developed countries could remove domestic subsidies which protect their producers and force small scale producers in developing countries to compete on an unequal playing field. If World Bank estimates are true, freer mutual trade would benefit developing countries by $31bn a year. However, it has not been in the political or economical interests of Western governments to make trade completely free (or fair).
Around 8% who did not consider purchasing Fair Trade products mentioned that information/labelling was unclear. Fair Trade products are labelled with the Fair Trade logo, which gives consumers a tool or brand which they can recognise, along with the slogan ‘guarantees a better deal for third world producers.’ Thus, it is likely that this group of consumers were referring to unclear supermarket labelling rather than Fair Trade product labels. At ASDA, 13% of the group identified unclear labelling as a reason they did not consider purchasing Fair Trade products, compared to only 2% at Waitrose. At ASDA, it was clear that ‘conventional’ products were prioritised over Fair Trade products. There were many advertisements focusing on the low prices of various conventional products, such as bananas for 59 pence. It could be that the bombardment of consumers by such messages not only appeals to their pockets, but also makes them less willing to find out about alternative production methods (i.e. Fair Trade products).
In 2002, MORI asked people how they first became aware of the Fair Trade logo: 43% indicated that it was while shopping; 20% said features in newspapers or magazines; and 14% cited word of mouth from family and friends. Therefore, because labelling is clearer at Waitrose, it is more likely that consumers at Waitrose are aware of Fair Trade.
The proportion of women who were aware of Fair Trade was 69%, significantly higher than men (46%) (chi-squared: 5%, v=1). As there were a higher proportion of women in the sample, it is probable that women spend more time shopping for food than men, and develop more knowledge about availability of products and, thus, are generally more aware of Fair Trade than men. The findings are also supported by the 2004 MORI survey, which showed that recognition of the Fairtrade mark was higher among women (42% compared with 35% of men). In the total sample, 40% of women were aware of Fair Trade and considered purchasing Fair Trade products, compared to 31% of men. Therefore, Fair Trade potential is higher among women. Interestingly though, 57% of women who were aware of Fair Trade considered purchasing Fair Trade products, whereas 67% of men who were aware of Fair Trade considered purchasing Fair Trade products. This implies that men who are aware of Fair Trade are more likely to consider purchasing Fair Trade products. Perhaps women are more aware of the limitations of Fair Trade products, such as unavailability and higher cost.
The 41-55 age group was most aware of Fair Trade (83%), and most likely to be both aware of Fair Trade and considering purchasing Fair Trade products (63%). The findings can be related to the MORI survey, which identified that recognition of the fairtrade mark was highest for people in the age group 45-54. Consumers between the ages of 26-40 followed in terms of awareness and purchasing power. Over half, 56%, of 16-25 year olds were aware about Fair Trade products, but only 19% considered purchasing them, a relatively small proportion compared to other age groups.
Relationship between age (years) and reasons for not purchasing Fair Trade products
16-25 26-40 41-55 56+
Unaware/not considering purchasing Fair Trade products 34% 27% 9% 31%
Against principle of Fair Trade 21% 11% 7% 36%
Higher Cost 30% 18% 29% 11%
Unavailability 35% 54% 86% 32%
Unclear labeling 5% 10% 11% 13%
Other 13% 11% 7% 9%
Around 30% of 16-25 year olds did not consider purchasing Fair Trade products due to the expense involved. It is likely that younger people generally have less money to spend on food, linked to lower disposable incomes. This is probably particularly true of the many students who live and study in Kingston. Consumers in the 56+ age group were most likely to be against the principle of Fair Trade and found labelling and information about Fair Trade unclear. Perhaps the older generation are less willing to change their patterns of consumption and less sure about Fair Trade, as an alternative to conventional trade which provides conventional products. Only 9% of 41-55 years olds did not consider purchasing Fair Trade products, and 86% put this down to unavailability. This implies that more aware consumers are more likely to see unavailability as the main limitation to the growth of Fair Trade.
The proportion of consumers who were educated to degree level and aware of Fair Trade was 89%, compared to 36% of consumers not educated to degree level. Consumers educated to degree level were also more than twice as likely to consider purchasing Fair Trade products (59% compared to 24%). While 46% of consumers who were not educated to degree level were unaware/uninterested in Fair Trade products, only 10% of consumers educated to degree level were unaware of fair Trade and did not consider purchasing Fair Trade products. Thus, a strong relationship exists between education and Fair Trade purchases. In order for Fair Trade to grow into the mainstream, consumers must make an informed decision to purchase Fair Trade products, which means they must understand and support Fair Trade principles. Perhaps, consumers educated to degree level have a wider awareness of such issues. A higher proportion of consumers at Waitrose were educated to degree level, 54% compared to 35% at ASDA.
Reverting back to the main hypothesis, the Kingston survey finds that high awareness and demand for Fair Trade products exists among consumers, which implies a high level of support for the principles of Fair Trade. However, unavailability and higher cost of these products are key limitations to growth of Fair Trade. Consumer characteristics, including gender, age, and education, affect consumer awareness of Fair Trade. Women tend to be more aware of Fair Trade, as do consumers between 41-55 years and those educated to Degree level. At ASDA, higher cost seems to be the main limitation to growth. Fair Trade potential is higher at ‘up market’ supermarkets such as Waitrose. At Waitrose (and overall) higher cost was a secondary limitation to unavailability. The MORI survey, May 2004, identified that 63% of people who recognise the Fair Trade Mark subsequently buy Fair Trade products and similarly, the Kingston survey shows 64% of consumers who know about Fair Trade products consider purchasing them. This highlights the potential of Fair Trade and the importance of consumer awareness.
One of the interesting findings of the survey was that consumers make a link between Fair Trade products and better taste and quality. There is evidence of the ‘turn to quality’ in the food business, where consumers are making informed purchases based on how they want food to be produced and supplied to them. The trend has been termed ‘green consumption’ where consumers seek foods that are produced outside the agro-industrial system responsible for food scares and widespread environmental degradation. In the UK in particular, this ‘turn to quality’ has been constructed around consumer concerns over health and food safety, which can be linked to a foot and mouth epidemic, public anxiety over GM products and the BSE crisis. Consumers may also seek to boycott food from particular multinationals or countries, or to consume only locally produced or organic food or animal welfare friendly meat, or become involved in ‘community supported’ agriculture and these consumers are a driving force behind Fair Trade. Fair Trade products, along with organic products and a range of natural foods, are perceived to be of better quality and taste, which is increasing Fair Trade sales. The survey may have reflected some confusion among ‘green’ consumers between organic and Fair Trade markets. Nevertheless, it can be argued that Fair Trade may be capitalising on the success of the organic market, and that the products overlap.
Fair Trade is rapidly growing as a market, with powerful consumer support (as indicated by this survey and many others). In some countries, such as Switzerland, Fair Trade coffee has penetrated the mainstream. The success of coffee could be repeated for other products, including staple foods such as rice and potatoes. But Fair Trade is difficult to institutionalise, constrained by continuing policy distortions in importing countries. These range from protectionist barriers on agricultural products (and a range of other products), along with often unnecessarily bureaucratic regulations, which discriminate against small scale producers in developing countries.
Some consumer studies in Europe have also shown that, in general, only a maximum of 20% of people would be willing to pay more for Fair Trade goods. A huge majority of people would rather pay a lower price despite the negative social and environmental consequences of doing so. Fair Trade is often dismissed because of these limitations. It is also argued that Fair Trade is limited because it centres on competing with conventional trade, and not enough on tackling the root causes of poverty and unequal power relations in trade. TransFair USA describes the benefits of Fair Trade as follows: ‘In a global village, we prosper as our less fortunate neighbours prosper. Nations become neighbours, and we accept that some nations (‘neighbours’) are naturally more fortunate than others. The causes underlying global inequality, such as imperialism, neo-imperialism, trade advantages, and the debt crisis, disappear in this quaint metaphor. The notion that natural resources are limited, and that the first world neighbours gobble up a disproportionate share of the global commons, is also implicitly accepted.’
There are many limitations to Fair Trade, and it cannot be seen as an answer to root causes of poverty and inequality. At present Fair Trade is a niche market. It only guarantees protection against unequal and competitive international markets to a minority of small-scale producers in Fair Trade partnerships. However, I would argue that Fair Trade is part of a growing social movement, and one positive element of globalisation and, if growth continues, Fair Trade will penetrate the mainstream market.
This article focuses on the role of consumers in mainstreaming Fair Trade. Consumers are creating demand for more Fair Trade products, but for Fair Trade to become mainstream, economic, political and social factors need to work in tandem to make governments get behind Fair Trade. Fair Trade is at present an individual subsidy, but it should signal pressure for public subsidies (for the environmental and social cost of food production), so consumers are less deterred by cost. Developed countries could allow developing countries to subsidise their producers; open up their markets to exports from the developing world; and dismantle their own protection. Oxfam calculates that if developing countries increased their share of world exports by just 5% this would generate US$350 billion – seven times as much as they receive in aid.
A key challenge for the Fair Trade movement is in educating consumers in developed countries. In fact, about half of the extra price charged for Fair Trade products currently represents the cost of publicity and education work in the consumer market. The Fair Trade banana is a case in point: it costs up to 40% more than the “normal” banana. In other words, the consumer is paying a premium to inform other consumers. If Fair Trade principles and environment and development issues were debated in schools, colleges and universities, even as part of a national curriculum, there would be great potential of Fair Trade to grow and challenge conventional free trade, linked to much higher awareness of the public from a young age.
Politically aware consumers can make ethical purchases but also resist unfair trade practices through citizen campaigns, pressuring governments and companies to improve the social and environmental performance of trade. Non Government Organisations, collaborating with groups of aware consumers can do more to place pressure on transnational companies to participate directly in Fair Trade. For example, Starbucks was essentially compelled to start carrying Fair Trade labelled coffee by activists who picketed stockholder meetings and threatened mass demonstrations. Governments can be progressive at the national level, working with NGOs to develop Fair Trade. In Switzerland Fair Trade has been relatively successful because NGOs have helped to educate the public, raise awareness about Fair Trade, and distribute products, with financial and technical support from the progressive Swiss government. Linked to consumer awareness and demand for Fair Trade products, companies have realised the profitability of Fair Trade.
The time has come for businesses and supermarkets to realise the profitability of Fair Trade, and follow in the success and footsteps of other ‘social enterprises’ such as the Body Shop and Ben & Jerry’s. Governments must regulate the corporate sector so that Fair Trade is not exploited for a niche market. Ironically, the time has come for ethical corporations to take advantage in the food market, this time with a fair outcome.
The findings of this study highlight the importance of better understanding consumer preferences, and raising awareness further, if Fair Trade is to continue to grow into the mainstream. Consumers have and will play a key role in the growth of Fair Trade. Fair Trade is a market and a social movement that seeks to resist unfair trade practices. It operates both ‘within and against the market.’ For this reason, education and public awareness of trade issues and the principles of Fair Trade will be paramount to the growth of Fair Trade.
About the Author
What caused the economic crisis?
I’m asking this question for my personal knowledge and My “Economics” Research In College.
please try giving me information that is very subjective and economic and straight forward, and a few examples would be ok.
i need to know:
The cause of the crisis.
The sequence of events which led to the crisis.
The effect of those events (the problem in itself).
And the solutions to this problem.
all i need is 4 paragraphs for this research so the information could be brief and very simple, yet explaining the problem in economic terms and…stuff
im a freshman, so keep the complicated graphs and expressions aside as much as you can.
thanks for the much appreciated help guys and ladies 
mind that all the information provided is from an economist view.
mind as well that this research deals with the economic problem in USA and not anywhere else.
Make yourself a bag of popcorn and strap yourself in. This is a little complicated, and it’s pretty hard to simplify it.
First of all, the internet bubble, like all bubbles, burst around 1999-2000. Investors still had quite a bit of money on hand to invest, and noticed that housing prices were steadily rising. Remember that a fundamental rule of economy is to buy low and sell high. Housing prices were low and rising, so they would increase in value over time. So they invested in the housing market. Mortgage lenders (basically, people that gave people loans for houses) gave mortgages to prospective homebuyers at low interest rates, and sold the mortgages to big banks. This turned out to be quite profitable for all involved, but the mortgage lenders were running out of prospective homeowners to sell mortgages to. As a result, mortgage lenders began to loosen restrictions on mortgages, and gave mortgages to those that they would normally turn down. It got to the point that anyone who wanted a mortgage could pretty much get one- they did not have to, for example, show how much money they made. Sure, some of these loans wouldn’t be paid back and the homeowners would enter foreclosure, but on the whole, these loans were profitable. Fannie Mae and Freddie Mac, who bought some of these mortgages, were kind of stuck in the middle of this. They are quasi-governmental organizations, so they are controlled and regulated in part by the Federal government. They were pressured by Congress to provide mortgages so that those who could not normally afford a house could now.
Keep in mind that home values were still rising, so these homeowners figured that they could sell their house at a higher value than they bought it, and pay off the mortgage with that money. The mortgage lenders were selling these risky loans to banks, remember, so they bundled up bad loans with good loans to make the loans as a whole appear to be very reliable. As a result, the banks were buying risky loans without knowing it.
Then, the housing bubble burst, because that’s what bubbles do. Bills started to come in, and the mortgage lenders and banks needed their money, so they rose interest rates on the loans. The homeowners couldn’t afford the higher interest rates, and defaulted on their loans (failed to pay them off). As a result, a sort of hot potato game started. Home values dropped, and the risky homebuyers found it difficult to sell their home (because it had become so easy to get a mortgage, so many now owned houses and there was no longer a large market for houses). At the same time, the banks that bought the bundled up mortgages now had mortgages that could not be paid off, and no one wanted to buy them. The banks invested huge amounts in mortgages that would not be paid off. They ran out of money, and subsequently went bankrupt. They received ‘bailout’ money from the federal government so that they could continue buying mortgages and prospective homeowners could get mortgages.
That rather long-winded story covers the first three questions of yours. Now, for solutions, no one is entirely sure. Many say that the market will correct itself in time- mortgage lenders will continue to buy mortgages (although with many more restrictions), banks- with their bailout money- will buy these mortgages, and interest rates on the mortgages will drop as a result. This, in my estimation, shouldn’t take more than 5-8 years. In short, the market will correct itself as it always does. That is just one possibility, though it is probably the most likely one.
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