My word, this is a surprise Ms. Lawrence!

Sales of fairly traded products have bucked the trend of decline in the UK retail market to grow by 12% in the last year. The value of Fairtrade products sold through shops reached £1.32bn in 2011, compared to £1.17bn in 2010, according to figures from the Fairtrade Foundation, as it launches its annual marketing fortnight on Monday.

Blimey, amazing, eh?

By definition everything Fair Trade is imported. We\’ve a currency that has declined in value. Imports thus rise in cost.

Just astonishing, isn\’t it?

And it\’s all as much as 0.2% of retail spending. Or is it 0.5%…..summat in there anyway.

10 thoughts on “My word, this is a surprise Ms. Lawrence!”

  1. Sorry Tim, this doesnt really wash. The BoE Effective Sterling exchange rate index was 80.3761 in 2010 and 79.8681 in 2011. Even assuming some of it is lagged from hedging in 2009 doesnt help that much – 80.5332 in 2009. We have to go back to 2008 for a really large shift.

    Instead, what we have here is almost certainly the equivalent of total sales vs. same store sales, as firms have increasingly chosen to go “free trade”, this is boosting the total sales, but we don’t know what sales of goods that were branded “free trade” in 2010 were in 2011.

    The FTF doesnt care of course, since their aim is to boost their brand.

  2. However some of the raw material is rising in price:

    Sugar rose 25%
    Coffee, tea and cocoa together rose 16.6% BUT Cocoa fell 4.8% (ICO figures)

    Non-ICO figures are IMF from index mundi.

  3. Ken (#2), that looks like most of their product base has increased. Even for chocolate, I’d have thought a 25% increase in sugar would usually wipe out a 5% fall in cocoa.

  4. Fairtrade is bollocks, as Adam Smith said.
    Or to use the original words:
    “I have never known much good done by those who affected to trade for the public good.”

  5. ISTM that the most likely reason for the increase is the increase in the scope of Fair Trade registrations, rather than a switch to Fair Trade from “Exploitative Trade” or whatever it is.

    I could be wrong, but I have heard that the price difference for a coffee house chain to go “Fair Trade” was about 1p a cup. Most of the pricwe of a cuppa goes on rent and wages for UK staff. Sounds like a good marketing idea. How much it benefits the producers, I don’t know. ISTM that we should seek to free up the market, which should reduce monopsonies etc., rather than seeking to “cope with” the markets imperfections on a long term basis.

  6. Ken (#4), yes, but aren’t retail prices largely set as a % mark-up on wholesale price?

    So raw materials cost might only be 10% of retail price, but that’s probably 30% of wholesale price. If a standard % mark-up is applied, it’s the 30% of wholesale price that affects the shelf price.

  7. Nautical Nick (#6), I thought the main roll-out was a few years ago (accompanied by hand-wringing from parts of the Left, who objected to big businesses getting FairTrade status), and had largely stopped before the period they’re looking at.

    blokeinfrance has it right though; it’s all bollocks anyway. Didn’t the ASI publish a paper a while agog showing that FairTrade was actually harmful (largely because of insisting on particular models of business operation which made producers uncompetitive and therefore reliant on the FairTrade business).

  8. Hang on. If the price of something rises, people buy less of it, and the question of whether total sales value rises or falls is down entirely to price elasticity.

    So even if the issue here is mainly that prices are rising, the fact that Fairtrade isn’t price elastic and people aren’t substituting back to non-Fairtrade products as prices rise and incomes stagnate is still interesting.

    Finally, people who think Fairtrade is bollocks are fuckwits who don’t understand economics or marketing. *Within the context of a competitive market*, producers who adopt Fairtrade are able to provide a brand that increases the perceived value of their goods to consumers.

    Hence, consumers gain more value (obviously, otherwise they’d buy the cheaper non-Fairtrade products) and so do producers (in the form of cash money). You can personally believe that Fairtrade products don’t benefit you and hence buy them, but actually criticising its existence when it’s simply a brand operating by freely made choices in a free market is bizarre.

  9. john b (#9). Actually assuming it is price rises (rather than an increase in the number of FT compliant producers) and that sales are increasing does not necessarily show that FT products are less price elastic – the key question is the cross-elasticity – after all the prices of non-FT goods will also rise and there is probably some switching between brands depending on the composition of raw material costs within different products.

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