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
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,"
"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
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
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.