18th December 2009

Is Fairtrade selling itself too cheap?

Last week saw years of patient courtship pay off for the Fairtrade Foundation, as it secured Fairtrade status for the nation’s favourite “chocolate biscuit bar”, Kit Kat. The cocoa will come from co-operatives in Côte d’Ivoire, and the sugar from farmers in Belize.

Fairtrade Kit Kat image

Appropriately enough, the news broke on the same day as cocoa prices reached one of their recent peaks: $3,378 per tonne on the New York futures market, the highest level since 1985. Prices are said to have been boosted by speculation about dwindling supplies from Côte d’Ivoire.

The news has been greeted with a good deal of unease among campaigners and activists. Though Kit Kat was originally launched in 1935 by Rowntree and is something of a British institution, Rowntree was of course taken over by Nestlé in 1988, just as Cadbury is looking likely to be swallowed up before too long. And Nestlé has the dubious distinction of being one of the world’s most notoriously unethical companies.

One response to criticism of the decision to certify Kit Kat is that the Fairtrade system certifies transactions, not companies. It is Kit Kat's supply chain that has gone Fairtrade, the rest of Nestlé’s business continues as before.

This is a strength because it allows Fairtrade to scale up by leaps and bounds, moving ever larger volumes of transactions through the system. It means that there is a practical prospect of improving some of the trade carried out by multinationals.

But it is also a weakness because Fairtrade seems to lack the moral authority with which to offer a critical perspective on corporate practice and international trade.

Yet that is an over simplification. Fairtrade has built up considerable political power and moral status as it has grown over the past fifteen years. In 2008, 70 per cent of the British population recognised the Fairtrade Mark and 25 per cent regularly bought several Fairtrade products. A vibrant network of local Fairtrade Towns campaigns has driven the movement forwards, receiving a boost when many Make Poverty History groups reformed as Fairtrade Towns groups after that popular campaign was disbanded.

Fairtrade has political and moral resonance that exceeds its status as a certification system. And whether we like it or not, when a company uses the Mark on their products it does bestow a potent ethical halo, and in its turn the company’s reputation impacts upon the image and credibility of the Mark.

So it is incumbent on us to ask whether the benefits of inviting a notorious multinational to use the Fairtrade Mark outweigh the costs.

On the negative side, the most powerful criticism of Nestlé is the company’s aggressive marketing of artificial baby milk across the developing world. This is in breach of international standards and has resulted in a decades-long consumer boycott. The World Health Organisation estimates that 1.5 million infants die each year because of inappropriate bottle-feeding, and Nestlé controls 40 per cent of this market.

Then there are a range of other misdeeds: its profiting from coffee farmers hit by price slumps, its failure to act on child labour and slavery in the cocoa industry, its public dismissals of Fairtrade over the years, union busting in countries such as Colombia and Thailand, an unpleasant attempt to extract $6m of debt payments from the Ethiopian government, illegal extraction of groundwater in Brazil… the list is extensive.

On the positive side, Nestlé is the largest food company in the world and it has converted its flagship confectionery product in the UK to Fairtrade. While there isn’t a great deal of chocolate in a Kit Kat, the sheer volumes shifted mean that 4,300 tonnes of Fairtrade cocoa will be purchased from Côte d’Ivoire in 2010, initially benefiting the deserving 6,000 farmers of the Kavokiva cocoa co-operative.

We eat a billion Kit Kats a year in the UK, so it will result in a massive increase in the visibility of the Fairtrade Mark. This could have corresponding educational benefits. There are a lot of people who don’t have a problem with eating Nestlé products: perhaps the Fairtrade Mark on these bars will start some of them thinking more about the people behind the products. Even the ethical dissonance generated by a prominent Fairtrade product line being sold by a notoriously unethical company could have significant educational benefits – it has already and will no doubt continue to generate debate.

For me the deciding factor is probably setting the Kit Kat commitment against the scale of the company. Nestlé is huge: in 2008 it made £10.67 billion net profit and used 370,000 tonnes of cocoa. That’s nearly a third of the entire of Cote d’Ivoire’s cocoa output of 1.34m tonnes a year. The company is vast and the scale of the change it could make is staggering.

Compared to the Dairy Milk deal, which does represent a significant proportion of Cadbury’s business, the 4,300 tonnes of Fairtrade cocoa represented by the Kit Kat deal looks quite half hearted. When you consider that the company is spending £43 million on a 15-month marketing campaign to revitalise the Nescafé brand, it looks very small indeed. It is also very cheap PR, given it will help to boost the company’s ongoing offensive to whitewash its tarnished image.

Like many commentators, I think Fairtrade should be “mainstreaming”, that’s what it was set up to do. This is the uncomfortable progress of engaging in the practical business of making international trade better.

But awarding another Fairtrade Mark to Nestlé doesn’t look so good when you weigh up the costs and benefits. Could Nestlé not have been charged a higher price?

Comments (2)

Just Visiting (not verified)
10:27, 17th January 2012

Interesting post - I've always been interested in fairtrade. I think they should be a little more expensive, but not too much, as Kit Kats have been an all-time favourite and a lot of people buy them as a bunch.

Not sure whether they should up the price - a lot of people want to buy fairtrade, but they demand lower prices like non-fairtrade goods.
I remember when Cadbury had their chocolates fairtrade and many people didn't buy it for couple of months, until the prices went down.

Scott (not verified)
09:16, 19th December 2009

HI Tom,

You make some interesting points, but I struggle to see how "mainstreaming" fairtrade is an engagement in the practical business of making international trade 'better'...(fairer??)

Would you be willing to explain in more detail how you make this link?

Am I missing something here?

Cheers
Scott

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