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Statement on Fair Trade




Bill Keeling, Managing Director of Prestat, writes on the issue of Fair Trade which was raised on the BBC Watchdog programme on October 10, 2012

“Fair Trade has done a wonderful job raising awareness of the need to improve cocoa farmers’ welfare and income. I worry, however, that consumers are not informed that the Fair Trade chocolate bar they are purchasing may not be made with any cocoa beans from Fair Trade farmers. I am also concerned that consumers may think they are making a significant extra payment to farmers when purchasing a Fair Trade chocolate bar compared to a non-Fair Trade chocolate bar.

Fair TradeFor instance, a consumer may decide to buy a £2.00 Fair Trade bar and not to buy its equivalent £1.50 non-Fair Trade bar. How much of that additional 50p spend goes to the farmer? All the 50p? No. Half? Still too much. With Fair Trade status the cocoa farmer receives an extra £120 per tonne for his crop, equivalent to a 10% premium, but this additional sum is only worth about half of one pence in a typical bar of dark chocolate.

That’s right. The consumer may be paying 50p more for bar of chocolate that: may not have any actual cocoa from Fair Trade farms in it; and where the additional amount going to Fair Trade farmers may be as little as half of one pence.

I don’t doubt the good intentions of Fair Trade and I do think the premium paid to Fair Trade farmers is actually reasonable. The person getting the raw deal out of this is the end-consumer who is not informed of the beans’ lack of provenance and are unaware that such a tiny percentage of the purchase price is reflected in the farmers’ premium.

It should be acknowledged that the biggest chocolate companies have achieved Fair Trade status for their products without raising prices. They are, however in a privileged position. They buy their beans as normal (without any requirement that these come from Fair Trade farms). The big chocolate companies then give a payment to the Fair Trade organisation relating to the specific tonnage of beans they wish to use for Fair Trade products. The beans are then granted Fair Trade status even though they don’t come from Fair Trade farms.

This is good news for the farmers who have organised themselves into a Fair Trade co-operative, although quite tough on the non-Fair Trade farmers whose labour may have produced the beans that are actually being used. Big chocolate companies reap the benefit of Fair Trade status and their contribution should be applauded (so long, of course, that this contribution is genuinely additional spend and not just a reallocation within their existing marketing or investment budgets).

At Prestat, we do not process from the bean, so are not in the privileged position of big chocolate companies. If we are to make a Fair Trade product, we have to buy chocolate which is already designated Fair Trade. Does this cost us 10% more than its equivalent non-Fair Trade chocolate? After all, that’s the percentage premium being paid to the farmers for their crop. No, it costs us 35% more – and for a chocolate that may be made with the exact same beans as non-Fair Trade chocolate.

Fair Trade representatives argue that the primary reason for permitting Fair Trade status for chocolate regardless of the cocoa beans’ lack of provenance is the supply-chain cost of segregating Fair Trade and non-Fair Trade beans. Yet the premium Prestat is required to pay for Fair Trade-designated chocolate is not only extremely high, it is significantly above the premium received by the Fair Trade farmer. Why is this happening? Why does a £120 per tonne premium received by the cocoa farmer turn into a premium of up to £5,000 per tonne paid by the consumer for their Fair Trade chocolate? Someone is reaping large additional rewards far in excess of what is being received by the farmer.

I find this situation unsatisfactory and actually very awkward. I delight in the farmers getting a fair price for their crop. I applaud the investment that big chocolate companies are making toward traceability and sustainability. Prestat also makes a direct contribution to these key goals. But there’s too much in the current Fair Trade structure and application of the Fair Trade logo that doesn’t make sense or which lacks transparency. It calls for an open debate.”

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