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July 11, 2003 -- CropChoice news -- Times of London, 06/29/03:
Some of Britain's biggest supermarkets have been accused
of exploiting customers' goodwill by overcharging for
Fairtrade products.
The items will always be more expensive than their
ordinary equivalents because the Fairtrade scheme, which
has boomed in Britain in recent years, is designed to
ensure that the farmers who produce them are paid more.
But an analysis of the pricing structure shows that
only a part of the considerable premiums being charged
by supermarkets is being fed back to producers. The
bulk of the price hike is being pocketed by the stores
in profits.
John McCabe, a retail pricing expert with the consultants
Connector Global who has studied the Fairtrade market,
said: "The supermarkets know that people do not
go for the cheapest product when buying Fairtrade because
they think the extra money is helping someone in the
developing world.
"What they will be surprised to learn is that
the lion's share of the extra money appears in many
cases to be going to the supermarkets."
The price of Fairtrade products can be double that
of the ordinary equivalents, leaving room for generous
profits.
For example, under the scheme, supermarkets pay 24p
extra to farmers for every kilogram of bananas on which
they place a Fairtrade logo. But last week stores including
Sainsbury's, Tesco and Asda were charging a mark-up
on Fairtrade bananas of between 59p and 89p. This means
that Sainsbury's - the most expensive - is making up
to 65p extra on top of its normal profit.
"Much of the premium over and above the fixed
price they must pay the farmers appears to be going
straight into their profits," said McCabe.
"It is a good scheme and it is helping the farmers
but it is helping certain supermarkets a whole lot more."
Waitrose appears to be the only major supermarket not
to make extra profits from Fairtrade items. Its prices
are higher for such products but only to reflect the
extra money paid to farmers.
Sainsbury's, in contrast, charges Pounds 2.49 for 8oz
of Fairtrade coffee - 60p more than its regular premium
coffee. Of the extra charged, only about 21p is thought
to be paid to farmers.
Sainsbury's and other stores are understood to be making
similar gains on Fairtrade tea, chocolate and exotic
fruits.
The Fairtrade scheme began as a small-scale operation,
selling branded items in independent health food shops
and through local churches. It now "licenses"
supermarkets to use its name providing they agree to
pay fixed premiums to the farmers. It does not, however,
have control over the final price of the product - a
loophole the supermarkets are exploiting.
Sainsbury's already sells 1m Fairtrade bananas a week,
while Tesco, which only joined the scheme earlier this
year, sells more than 500,000.
Bananas are the bestselling "food line" in
Britain and have recently been the subject of a fierce
price war between supermarkets. Wal-Mart, the American
company that owns the Asda chain, has been criticised
by the prime minister of St Vincent and the Grenadines
for driving down wholesale banana prices and bankrupting
farmers.
Yesterday, the supermarkets declined to comment on
their profit margins but pointed out that the scheme
was still benefiting Third World farmers.
A spokesman for Tesco, which made more than Pounds
1billion profit last year, said: "We are one of
the biggest supporters of Fairtrade and the scheme has
led to big improvements in education and health facilities
in the Windward Islands."
The supermarket chain will announce an 11p cut in the
price per kilogram of Fairtrade bananas from today.
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