Magazine article The Spectator

Fairtrade Fat Cats

Magazine article The Spectator

Fairtrade Fat Cats

Article excerpt

Fairtrade is the new cricket. It's official. Fairtrade has been declared a 'Superbrand' with sales growth up a whopping 51 per cent to £140 million. The funky little green and blue Fairtrade logo is the latest must-have retail status symbol.

Once a quirky niche market dominated by charity-operated companies, Fairtrade is now big -- and the big boys are clambering aboard. The wizened faces of coffee and banana farmers gaze, a little bemused, from a thousand corporate websites. In the words of Starbucks, Fairtrade shows 'you can do good and do well at the same time'.

All very warm and fuzzy. But have you ever wondered how much of the almost £1 extra you might pay for a bag of Fairtrade bananas gets back to the farmer? The answer is 4p. How about a 99p bar of Fairtrade chocolate? Just under 2p extra gets back to the grower. Most of the rest gets sucked up by a sticky web of middlemen -- the Fairtrade Fat Cats -- some of whom have grown very rich on Fairtrade products.

One Fairtrade banana company makes more by selling EU banana licences than the farmers get in Fairtrade premiums. Then, of course, there are the supermarkets that sell Fairtrade as premium lines, with margins to match. As if that's not enough, the Fairtrade market is awash with puffed-up claims which threaten to discredit the whole movement.

Fairtrade was founded in the Netherlands in 1989 and guarantees to pay above-market prices to Third World farmers. The question is: why does such a minuscule sliver of the extra you pay in the shops end up with the people the movement is designed to help?

Bananas are a good place to start.

Waitrose is the supermarket of choice of the middle classes. It likes to talk about its 'commitment to ethical trading' and ran an emotive TV advertising campaign featuring the small growers behind their Windward Island bananas. So you might think that Waitrose at least would make an effort to keep margins down on Fairtrade products.

You'd be wrong. Buy a kilo of ordinary Caribbean bananas at Waitrose and you'll pay 99p. Pick a bag of prepacked Fairtrade Caribbean bananas and you'll be shelling out £1.79 a kilo.

Waitrose isn't entirely alone. Most of the supermarkets charge a chunky premium for Fairtrade bananas. But if the Co-op can charge £1.25 a kilo, Waitrose at £1.79 ('Good food, honestly priced') must be making a killing -- as must Sainsbury's, which charges £1.70.

Of course, Fairtrade bananas cost the supermarkets more and come ready-bagged -- together, this adds about 15p a kilo, making a wholesale cost of 95p a kilo. This still leaves Waitrose and Sainsbury's with about four times the profit margin on Fairtrade bananas. Or to put it another way, they make 65p extra margin on a kilo of prebagged Fairtrade bananas for which the farmer gets just 5p more. Waitrose at least seems to be aware of the problem: it has just agreed to sell loose Fairtrade bananas at a lower price -- with the profits they've been making, they can afford to.

But it's not just the supermarkets that are doing very nicely. Fairtrade bananas from the Windwards Islands are all imported by Wibdeco, which is owned by the islands' governments. The cost of buying, bagging, boxing and shipping a kilo of Fairtrade bananas to the UK is about 55p. But Wibdeco UK makes a healthy turn by selling the bananas on to the ripening companies for almost 70p a kilo, or ripening the fruit themselves and selling it to the supermarkets for 95p a kilo.

On top of that, Wibdeco UK makes a small fortune out of selling EU banana licences. Originally given to the company to import Windwards' bananas tariff-free, falling production has left them with a windfall of up to 40,000 tonnes of annual licences, some of which are in a joint venture with the Irish family-controlled Fyffes company. Much of this surplus licence is sold to other importers, making Wibdeco UK, by most estimates, several cool millions in clear profit during 2004. …

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