STORES Magazine - April 2009 - (Page 74) POSTSCRIPT endcap Outlook for Conscientious Shopping BY ISABEL CAVILL Isabel Cavill is a retail analyst for Planet Retail. British supermarket chains. For example, the Co-op has converted its entire hot drinks category to Fairtrade, while Sainsbury’s was the first retailer in the country to convert the banana category to Fairtrade (and has since converted coconuts, as well). As a result, Fairtrade is the only choice in some categories — usually exotic products or those that cannot be sourced locally — in a growing number of outlets. Findings from specialized research company Organic Monitor indicate that global Fairtrade product sales exceeded $3.5 billion in 2008 and will increase in 2009. Even in the U.K., Fairtrade sales are reportedly holding up despite the deepening recession: retail sales of Fairtrade products, led by bananas and coffee, rose to a record high of $1.041 billion in 2008 as large retail chains and hotel, restaurant and catering (HoReCa) companies got behind the certification label to underscore their commitment to ethical trading. On a regional basis, Europe (65 percent) and North America (34 percent) account for nearly the entire Fairtrade market. The U.K. is the world’s largest market for these products, with Sainsbury’s the No. 1 seller, followed by Waitrose and the Co-operative Group. In Germany, discounter Lidl is the top retailer of Fairtrade products. There are a few key reasons for the relative strength of the Fairtrade category, particularly in countries like the U.K., where consumers are relatively hard hit by the recession. The higher price of these products is accepted by shoppers because of the widespread belief that labor and living standards in developing countries will be improved as a result of these purchases. Therefore these products offer a tangible value-added benefit that may not be as clearly communicated in the organic sector. Indeed, the benevolent element of Fairtrade items appeals to U.K. consumers in a market where the charity culture is fairly strong. Furthermore, the association with altruistic activities allows retailers to show their charitable credentials through marketing messages and promotional activities, which are enhanced during Fairtrade Fortnight. Another key driver of growth is the fact that Fairtrade products have taken over entire categories in some 74 STORES / APRIL 2009 More private label Furthermore, as new categories are introduced by mainstream retailers, the opportunities for more processed foods using these new Fairtrade products will proliferate, which should, in turn, fuel further private-label development in the sector. The ethical sector will not escape the downward pressure on prices, however, and this has implications for the very basis of the Fairtrade supply agreements that guarantee minimum prices to producers. By contrast, the organic sector is likely to see growth slow down on a global level, with sales starting to decline in the U.K. One of the underlying reasons behind this trend is that the benefits of paying a premium for organics is not as clear to consumers as those offered by Fairtrade, which tend to educate consumers about the welfare of the producer through callouts and labeling on the shelves. In addition, supermarket sales of these products are particularly exposed to the trend of consumers trading down. And no mainstream retailers have converted entire categories to organics, making them further prone to discretionary spending. However, the availability of cheaper organic private labels in mainstream grocers and discount stores should offset the difficulties facing the organic sector. Achieving equilibrium There is a bright side to all of this: After years of undersupply, organic supply and demand should now reach equilibrium as a result of falling sales. Prices of organics are likely to be reduced and stay lower over the next couple of years, according to Organic Monitor. This ultimately will be to the detriment of high-end players and brands. While 2009 should be a good year for Fairtrade products, the most important factor in making sure that organics continue to be bought by consumers is the promotion of their nutritional benefits, animal welfare credentials and the sustainability of organic farming – a message that can be lost given the increasing number of products available on supermarket shelves with an ethical or additional health benefit. WWW.STORES.ORG http://WWW.STORES.ORG
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