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FAIR TRADE MARKETS: WHAT ARE CONSUMERS AND PRODUCERS BUYING? KIMBERLY ELLIOTT CENTER FOR GLOBAL DEVELOPMENT NOVEMBER 3, 2012.

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Presentation on theme: "FAIR TRADE MARKETS: WHAT ARE CONSUMERS AND PRODUCERS BUYING? KIMBERLY ELLIOTT CENTER FOR GLOBAL DEVELOPMENT NOVEMBER 3, 2012."— Presentation transcript:

1 FAIR TRADE MARKETS: WHAT ARE CONSUMERS AND PRODUCERS BUYING? KIMBERLY ELLIOTT CENTER FOR GLOBAL DEVELOPMENT NOVEMBER 3, 2012

2 Goods certified as meeting standards and carrying a label: Focus on smallholders in democratic coops But also standards for hired labor on plantations Traders, producers must both be certified Minimum price + social premium Encourage long-term contracts, with option for pre-payment WHAT IS FAIR TRADE?

3 WHAT CAN BE CERTIFIED?

4 WHAT ARE CONSUMERS BUYING?

5 By volume By value

6 WHO IS BUYING? 2011 global sales = $7 billion 2004 global sales = $1 billion 2011 global sales of coffee, cocoa, bananas, sugar = $85 billion

7 MARKETS SMALL BUT GROWING RAPIDLY

8 GROWTH BY PRODUCT, (MT) 6-fold growth 10-fold growth

9 WHERE ARE CONSUMERS BUYING? 80% coffee, bananas 84% flowers & plants, tea, cocoa, coffee 64% tea, coffee

10 DO CONSUMERS PAY MORE? They should, given extra costs for: minimum price above market price, social premium, certification costs With homogenous products: yes. Quality-differentiated items specialty coffee, gourmet chocolateprobably yes. But hard to say how much

11 QUALITY OR PRICE DISCRIMINATION? Starbucks Italian Roast for $11.95/lb; same as non-FT French Roast, but same quality? FT-certified Café Estima blend for $13.95/lb vs. Starbucks House blend, $11.95cost recovery, quality, or price discrimination? Or, Ruta Maya, $8.95--certified organic, also shade-grown in Chiapas, but not FT certified >> lower quality, cost, or profit? Quality + Trust = Willingness to pay?

12 WHAT ARE PRODUCERS BUYING?

13 Conventional Markets Fair Trade Markets Producers Intermediary Producer cooperative Processor Exporter Importer* Roaster* Retailer* * May be the same. Must be certif ied by FLO- Cert Whoever applies label must be licensed by national initiative Exporter Credible certification easier with compressed supply chains

14

15 DIRECT INCOME EFFECTS UNCLEAR Price floor = insurance, But not necessarily higher profits: Higher costs to cover product collection, transportation, processing Higher costs related to meeting, certifying compliance with standards Higher costs to improve quality Income effects depend on share sold on FT terms, often less than 100% (Coffee avg. ~ 50%) And with prices well above the floor?

16 Connecting producers to buyers, market info Capacity-building for improved production methods, product quality Encouragement of long-term contracts, access to finance Social premium often plowed back into PO to improve productivity, competitiveness But also sometimes used for community projects WHERE ARE THE PRODUCER BENEFITS? *Continued demand for certification suggests producers see benefits*

17 How many more consumers? How much more will they buy? Mainstream retailers provide access to markets, but will they promote? Most of what they sell is unfair? WHAT ABOUT SCALING UP?

18 Grow, pick, ship Produce, process rubber, leather, fabric (for laces, insole) >>> each in a different place? Cut, shape, dye, etc. each intermediate input >>> each in a different place? Assemble and ship >>> in another place? WHAT ABOUT SCOPE?

19 WHAT ABOUT SPREADING THE BENEFITS? Fair Trade USA question: what about unorganized producers, coffee, other plantation workers? vs.

20 SUMMARY Consumer demand continues to grow, but still a niche market and market potential unclear Producer demand for certification also continues, indicating benefits in market access, relationships Expansion limited by retailer ambivalence, demands of credible certification


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