Fairtrade was going to save the world: now consumers fight to keep it going

Supermarkets now largely set their own ‘ethical’ production standards, and only a few big employers follow Fairtrade principles. So consumers must vote with their purses

When, in 2017, Sainsbury’s announced that it was planning to develop its own “fairly traded” mark, more than 100,000 people signed a petition condemning the move. Today, on the eve of Fairtrade Fortnight, the fact that most supermarkets have moved away from the standards developed by the Fairtrade Foundation is worrying.

While some grocery chains have sought the foundation’s stamp of approval, many have gone their own way. This means most consumers have little sense of which organisation is doing what to protect the wages and rights of developing world workers. Over the next two weeks, the foundation plans to focus its publicity efforts on cocoa farmers in west Africa and the way the Fairtrade mark can improve their lives.

Later this year, the base price of Fairtrade cocoa will increase by 20% from $2,000 a tonne to $2,400. The premium farmers put aside for community projects will also rise by 20%, from $200 to $240. This is great news for the farmers who are part of the scheme – and the higher price is easily within the pockets of chocolate lovers in the rich west.

It is a premium on today’s open market price, which stands at around $2,260 a tonne, and protects farmers from the drops in value that hit the industry in 2017, when it dipped below $2,000.

Yet the focus on cocoa reveals the limits of the Fairtrade system, which was once going to provide a popular alternative to most goods sold on the high street. There are standards for everything from cotton to gold and flowers, but such products are usually only available at specialist providers or the Co-op.

The foundation has tried to persuade some bulk buyers to buy marked goods only, and has had some success. For instance, Transport for London has made sure that the safety vests it provides to staff are made of Fairtrade cotton.

But more local authorities, government agencies and corporations need to follow this lead, ensuring that when they place orders in the thousands, it is always for a Fairtrade product.

Big businesses, with their large personnel departments, have the resources to explain to their workers why Fairtrade matters when they buy stuff, and what it means for those people at the other end of the production process.

But in other sectors, it is left to the Fairtrade Foundation to publicise its efforts and achievements – with the help of its most active members, such as Divine Chocolate.

That is a sad situation. After the great financial crash of 2008, a commodity boom that lasted from 2013 to 2017 turned into a slump that has robbed farmers and developing world governments of vital cash. Just as they were managing to stabilise their finances and set aside money to invest, the world price tumbled and wiped out their profit. Fairtrade practices protect farmers from this sort of setback and allow them to plan for the future.

Of course they have their critics. These are most mostly from the US – people who favour unfettered markets and seek to undermine the Fairtrade ideal, saying it is a form of protectionism that dampens innovation and ultimately ruins farms.

Theirs is an almost religious adherence to the free market that discounts the gains in stability and security that Fairtrade provides, and the scope of the community premium to promote universal education and the rights of women.

But without large employers making strides to adopt the standardised and transparent Fairtrade practices put forward by the foundation, it will be left to consumers to drive the project forward.

Sainsbury’s Asda merger is toast, but investors are still hungry

In a letter sent last May to Rachel Reeves, chair of the business, energy and industrial strategy select committee, Sainsbury’s boss Mike Coupe set out why the grocer needed to merge with rival Asda. Discounters Aldi and Lidl “now set the value benchmark” on food, he conceded. That meant Sainsbury’s and Asda needed to get together to compete better. “In this fast-moving environment, standing still is not an option,” he warned.

Well, after the competition watchdog’s preliminary verdict last week, it looks like Coupe will be standing very still indeed.

The Competition and Markets Authority said Coupe’s merger would mean higher prices, less choice, poorer quality, higher petrol prices and less competition at local and national levels. It could just block the deal, it said. Or it could allow it – so long as a (very large) number of stores were sold to a single buyer. It could also order them to sell off the Sainsbury’s or Asda brand names.

Coupe, almost spitting with anger, suggested he might take that verdict to a judicial review. But the consensus is his merger plan is toast. He needs another plan, fast.

When the merger deal was unveiled last spring, Sainsbury’s looked the stronger of the two grocers, but Asda has performed better than Sainsbury’s since then. Analysts reckon that if Walmart – Asda’s owner – wants shot of the chain, a private equity buyer could emerge. Supermarkets appeal to private equity houses because they generate lots of cash.

If Coupe can’t come up with a new big idea, shareholders might decide they need new leadership – which wouldn’t be ideal timing with long-serving chairman David Tyler stepping down in March.

Or maybe this will be the moment when we discover whether Amazon is serious about a bid for a UK grocery business?

Flawed business model gives Purple Bricks a case of the blues

Traditional estate agents are gleeful over the travails of Purple Bricks, the online agency whose share price plunged by 40% at one point last week, as revenue forecasts were slashed and its UK and US bosses departed.

Last Friday, industry news site Estate Agent Today added to its woes by publishing figures showing that of the 86,736 UK properties listed for sale between 7 and 21 February, just 4,085, or less than 5%, were with online agents.

Purple Bricks is dominant, accounting for 71.8% of new listing for the online sector, but why, despite its multimillion-pound advertising campaign, is it not more popular?

Maybe its business model is fundamentally flawed. To sell through Purple Bricks, sellers have to pay an upfront fee of £899. If the property doesn’t sell, they get nothing for their money. High street agents charge far more, but only if they make a sale.

In a fast-moving market, the Purple Bricks offer makes sense: the number of homes listed makes pricing a property easier. And £899 can seem a bargain compared with the big money a traditional agent will charge even on a property that sells within days.

But in a slow market – which is most of the south of England right now – sellers can misprice a property and never find a buyer. Even in a “normal” market, only 58% of homes listed at traditional agents find a buyer. Purple Bricks says its conversion rate is 75%, but that still means a quarter of its customers are shelling out £899 for nothing.

Tellingly, last week Purple Bricks said that in the US it was going to shift to fees payable only on completion. Pressure will build for the same here – but that could leave Purple Bricks with reduced initial cash flow and, on 75% sales conversion, knock revenue by a quarter.

It might be a very long time before big early investors in Purple Bricks, such as star fund manager Neil Woodford, see much of a return.

The GuardianTramp

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