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June 9, 2007

Fair Trade Realities - A Manifesto for the UK Wine Trade

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We've been looking at creating a Fairtrade Stormhoek wine, but been struggling with what we see as a disconnect between the market and the ideal. Fair Trade is very much the hot ticket these days, all of big UK retailers are in pursuit and it seems to be a moral imperative that retailers stock more of the stuff.

For those who don’t know, Fair Trade is a certification assuring that workers or growers of certain products and commodities are treated and paid fairly. The idea is a good one especially for small growers of commodities such as coffee and cocoa where world commodity prices fluctuate wildly with the bottom of the market being below the actual growing costs. The Fairtrade certification sets floors to these prices which assures that these growers can earn a living.

For wine, tea and other ‘estate’ products, Fairtrade guarantees that the owner of the property is paying fair wages and providing good working conditions.

In any case, Fairtrade is about passing more money to the laborers and ensuring that they are treated in accordance with set standards.

And as we explore the possibilities, we see that exercise of 'trading fairly' is one where all of the parties in the value chain must share the responsibility.

It is obvious that "Fairtrade" does equal higher cost and any objective observer will ask: Where is this extra money supposed to come from?

Retailers must deal with the vagaries of consumer demand and while the large grocers are interested in supporting good causes and showing that they care about the community, stakeholders and suppliers, they will balk at selling something for more money that the equivalent non “Fairtrade” wine.

So, if there is no more money in the retail price, and we assume that the grocers work on standard profit margin, the UK government takes their customary 16.06 pounds per dozen in duty, plus 17.5% VAT and the EU takes the approximately E1.20 per dozen, then where is extra to pay workers coming from? Where in the value chain is the “Fair” coming from. It is not in the producers’ budgets as already it was recently reported that 80% of all wineries do not make money- and we can attest to the fact that it is very difficult to make money in the business- not to mention that the UK/EU government takes more of the value of an average bottle of wine than the winery receives.

So, if we are all not going to be intellectually dishonest, then everyone who is involved in the business must agree to “Fairly” contribute to the value chain.

With this in mind, we would like to propose a Fairtrade Manifesto:

1) The Consumer must become a ‘stakeholder’ by being willing to pay a reasonable supplement to the normal cost of the wine. Even if this is 10p a bottle, it provides tangiable meaning to what will otherwise inevitably become a meaningless term.

2) Fairtrade, unlike the term ‘organic’ must not be used to as emotional blackmail to guilt the consumer into spending more than the wine is reasonably worth.

3) The retailer and importer must contribute to the Fair Value Chain by being willing to contribute some portion of the ‘normal margin’ to the benefit of the workers. This is essentially paying a bit more and reducing margin, even if it is a few percent.

4) Wineries must pass the extra proceeds from above to the workers in accordance with the terms of Fairtrade regulations and better those terms, if the proceeds exist from the value chain.

5) Finally, the biggest beneficiary from wine sales in the UK is the Government, and there should be a set aside or some similar contribution or rollback of duty in order to help sustain the FT system.

Without a “contract” between all the parties in the value chain, the temptation will be for some in the chain not to participate in delivering the real meaning of the endeavour. One of the implications of "Fairtrade" is that others, who are not part of Fairtrade, trade "Less Fairly". "Fairtrade", by definition, means more cost and if everyone along the way is expecting to make the same amount, and the consumer is unwilling to pay a bit more, then the system will not work and it will be another cynical endeavour, with duplicity reigning.

Let's not all just take advantage of the nice halo that Fairtrade can offer, but truly own the fundamentals of what Fairtrade stands for by everyone who benefits from the sale of the product, contributing to the betterment of others who need the help.

We think that there is more to the Fairtrade discussion and we'll be posting some more on the subject.

Posted by Jason at June 9, 2007 11:43 PM

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Comments

Jason

You say For wine, tea and other ‘estate’ products, Fairtrade [certification] guarantees that the owner of the property is paying fair wages and providing good working conditions

You then suggest that to achieve certification you would have to raise the price of your wine by 10p

Thus the impression I get from your post is therefore that Stormhoek currently does NOT pay fair wages and provide good working conditions.

I cannot believe this is true of Stormhoek, or what you meant. Could I ask for clarification?

Posted by: Peter May at June 10, 2007 3:39 PM

Hi Peter,

Sorry for the misimpression, and thanks for pointing it out. This post was not at all about Stormhoek, but the idea of everyone in the 'value chain', from producer to retailer contributing to the betterment of the worker. The 10p increase in retail price suggestion is not about what is needed to make things 'fair', but about the fact that people do not value what they do not pay for, and the 10p is about communicating to consumers that there is a real and tangible cost associated with the spirit of fair trade.

On our farm we pay the higher end of the local farm wage scale, provide housing and some educational assistance. But, like all certification processes, if we were to certify as Fair Trade, there is a real cost of compliance, and this has nothing to do with the potential benefits to workers... Just one of the FT certifying bodies, based in Germany, has an annual budget of at least 4 million Euros, and these are fees paid by producers wishing to certify.

It seems to me that if people want the assurance of a "certified" Fairtrade product, then there is a cost to it and all of the parties involved with that product need to share the burden.


Posted by: Jason at June 10, 2007 6:23 PM

Sounds like the Fair Trade certification process is a cash-consuming bureaucratic hassle. Sounds like an alternative would be letting people know exactly how you treat your people; sod the trendy logo. If enough companies get fed up, perhaps FT as a brand will fail (and I hope it does, for many reasons). A friend of mine owns a coffee roastery and café (http://www.ristrettoroasters.com) and gets asked all the time if his coffee is Fair Trade. He has to explain to customers that the farmers he buys from are too small to qualify for FT...which I hope invalidates the FT bureaucracy in the eyes of many.

Fact is, a 'fair price' is whatever the market says it is. If the farmers are providing produce for which the demand is not commensurate with what they need to live well, they should be encouraged to find a better paying way of making a living. Innovate or die, indeed. I think it is terribly inhumane to subsidize a certain crop (say, coffee) that is already flooding the world market; encouraging coffee growers to innovate would be much more 'fair' and kind. But then I guess people wouldn't get to feel smug about the labels on their coffee...

Posted by: Jackie Danicki at June 20, 2007 1:26 AM

Given SA's history whatever you do you're bound to take criticism. I prefer to take the 'glass half full' approach and congratulate Stormhoek for grasping a thorny nettle and taking a positive position. Go for it - show the world that even small producers can and do make a positive difference in tough environments. Knowing that and trusting you to deliver would get me to buy your wine.

Posted by: Dennis Howlett at June 20, 2007 1:37 AM

not meaning to be rude but it has all gone a bit quiet round here. Two weeeks between posts? Come on guys we neeed our fix!

Posted by: Jonny B Good at June 22, 2007 12:47 AM

Folks, apologies for not moderating comments very efficiently. Over 1000 spam comments in the last few days, makes it hard to find the real ones.

Thanks Dennis and Jackie, Fair Trade is a thorny issue and one that we feel commercial pressure to embrace, but I can't help but agree with Jackie that it is best to let the commercial opportunities drive employment into more rewarding endeavours. I know it seems odd, but I cannot help but think about all of the folks in France, Italy and Spain that are not making a living from their grapes. "Fairtrade" makes no effort to help these folks because they live in the West.

The botom line is that the wine economic model does not really work well overall and I can't help but feel that the entire industry will look much different in ten or twenty years time.

Posted by: Jason at June 23, 2007 11:09 PM

Oh Johnny B, You are so right... We need to get back to the business of blogging.. but our problem is that the phone keeps on ringing... ;-)

Posted by: Jason at June 23, 2007 11:13 PM

I am forever bemused that consumers think they should pay the same for
fairtrade as for goods produced under sweat shop labour etc. If people
get the kudos from buying fair trade they should expect to pay a
premium.


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Posted by: Mike Butcher at June 23, 2007 11:17 PM

Mike,
The numbers DO speak for themselves.... Hey, what's wrong with doing good at someone else's expense anyway :-) ?

Posted by: jason at June 23, 2007 11:19 PM

I agree with Mike Butcher. I am a great Fair Trade fan and it is the only way forward in our world of vast inequality. For those that can afford a little more (recognising that some people just can't afford that luxury) it's a choice that makes a real difference to the producers. Retailers should indeed share a part of the cost, it's disgraceful that they'll put it on their shelves but not be responsible enough to buy into the principle themselves.

It's one thing to all get together and make good noises at a concert like Live8, it's another thing to live that for real and spend just a small amount more. I suspect those people that are anti it are the same people that hoard their cash, never give to charity and ignore the real hardship that fellow human beings have to endure for our benefit.

Full marks for the manifesto, I'm behind you all the way.

Posted by: RobK at June 29, 2007 6:24 PM

Surely you're missing the point that as far as the customer is concerned the FT mark is the guarantee that your product - wine or whatever - is genuinely fairly traded.

There are plenty of people prepared to make all sorts of claims about their product. When I see the FT mark I know that those claims have been checked out.

A lot of the time I am in fact paying a premium over other products, to a large extent because FT suppliers are at the stage where they still have limited economies of scale.

Hopefully the increased sales generated by the confidence that the FT mark (and all the free marketing that our campaigning activities as FT volunteer supporters provides you with) should eventually compensate you for the burden imposed by compliance with the certification process.

Posted by: Owen at July 15, 2007 1:31 PM

I've had a decreasing amount of confidence in the FairTrade logo. It seems more to be a sop to liberal thinking whilst providing nice middle class jobs in affluent countries to monitor and promote it. I think I'd have more faith in Brands that were just upfont about what they paid suppliers and how they treated people through the value chain. I used to feel that way about Green and Blacks, perhaps you could start a trend.

Posted by: Golly at July 18, 2007 9:39 PM

Hi there,
Stumbled upon your site today and interested by this entry.
I'm a firm believer in Fairtrade, so let me tell you my wine buying policy. I will not buy wine from third world countries that does not have the Fairtrade Mark. However, I am quite happy to buy wine from countries in the west because there are labour laws that prevent worker exploitation.
And yes, this does affect my buying habits. I recently contacted Laithwaites because they had a special "introductory offer" - but the case included some Chilean and South African wine that was not Fairtrade certified and there wouldn't swap them for French / Italian / Australian / NZ / American wine. So they've blown their chance.
I will not buy Stormhoek unless you get Fairtrade certification, irrespective of how much you tell me you pay a fair price - my guarantee is the Fairtrade Mark.
So I guess the question is, how many people like me can you afford to ignore?

Posted by: Stu at July 25, 2007 10:35 AM

Hey Jason how are you? its been a while since we caught up. we (me and thomas otter) have an alternative idea for a Stormhoek eco story and strategy. I have begun to discuss it with Hugh, but i did not know that you were beginning this conversation. If you'd like to talk about the idea just email me. In the meantime I am proceeding with my evil plan, in the hope I can really pique Hugh's participation

Posted by: James Governor at July 27, 2007 10:38 AM

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