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Mainstreaming Fair Trade: a Discussion Through the Lipton Tea Case

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Mainstreaming Fair Trade: a Discussion Through the Lipton Tea Case Mainstreaming Fair Trade: A Discussion through the Lipton Tea Case Sylvaine Poret •• Social and environmental externalities of production, such as pollution or overexploitation of natural re- sources, and other market failures, like competitive disadvantages of some small producers, are issues well- known by many citizens living in the northern hemisphere. And the latter want to integrate these concerns in their daily acts. Indeed, a demand for sustainable products and services has appeared in developed countries for several decades. Thus, on the one hand, some consumers living in developed countries want to buy certain types of products which have sustainable attributes either embodied in the good or in the processes and methods used to produce and trade it. On the other hand, there are some producers, notably in developing countries, who would like the opportunity to produce and market in developed countries products with this kind of attributes. These different desires can create an incentive for more sustainable methods of production and trade. Fair trade is a good illustration of this view, since fair trade products link ethically minded consumers in the northern hemisphere with small producers in the southern hemisphere. Manufacturers and retailers are the link between producers and consumers. Therefore, they can supply products with sustainable attributes. This induces two related analyses in terms of strategic choices for suppliers in the framework of the theory of industrial organization. First, in order to gain market power or to avoid head-on competition, firms already well established in the market can choose among other compe- titive strategies product vertical or horizontal differentiation. The supplied product distinguishes itself from others by its quality or some specific characteristics or attributes. This might also allow the manufacturer to sell his product at a higher price or to create a niche market. Sustainable products are thus attracting interest for business. Second, sustainable goods have attributes that consumers cannot evaluate even in use. For example, consumers cannot inspect particular produce items and determine whether they were grown organically or whether they are the result of biotechnology. This type of product is called credence good. When a firm wants to promote a credence good, it has to offer a warranty. Certification systems involve specified standards, verification procedures, certification, and very often labels. Labels are visible means to signal to consumers on the products that they have met a standard required. This global context has created the proliferation of voluntary sustainability standards and labels, developed by business and suppliers in northern countries. More generally, four major agro-food related movements have emerged in the fields of sustainable development: organic agriculture, integrated agriculture, fair trade, and ethical trade. In a market research study conducted by Nielsen (2007) in July 2007 in Great Britain, 33% of survey respondents answered that they actively tried to buy fair trade products, whereas 21% acti- vely tried to buy ethically produced or grown products, 57% tried to buy local products and 17% tried to 190 • Sylvaine Poret buy organic products. Murdoch et al. (2000) note that fair trade and organic certifications represent the most important of third-party systems and generate new fields of power in agro-food chains. Fair trade has experienced rapid growth over the past twenty years, both in terms of the quantity and range of products sold. This is due to the fact that fair trade goes mainstream through its certified channel in mainstream manufacturers and retailers (Raynolds, 2009). For instance, Starbucks, Sara Lee, Nestlé, and McDonald’s have in recent years all began selling fair trade certified coffee, the flagship product of this ap- proach. This fair trade development with a mainstreaming-as-product certification provokes a debate within the fair trade movement, due to an opposite point of view between some militants of fair trade organizations and the leading fair trade certifier, FLO (Fairtrade Labelling Organizations). The fair trade concept is usually defined as an alternative approach to the traditional trade (Renard, 2003; Moore, 2004). It defines itself as “a trading partnership, based on dialogue, transparency and respect, which seeks greater equity in international trade. It contributes to sustainable development by offering better tra- ding conditions to, and securing the rights of, marginalized producers and workers - especially in the South. Fair trade organizations (backed by consumers) are engaged actively in supporting producers, awareness rai- sing and in campaigning for changes in the rules and practice of conventional international trade” (source: FINE website, 2003). Fair trade has been integrated in the sustainable development movement since 1990 and, according to Lecomte (2003): this has allowed a large diffusion of the problem of unfair trade relations in the public opinion. Generally, the purpose of fair trade approach is triple: ( i) to help producers from the South to improve their living conditions, (ii) to increase consumers’ awareness of unfair trade conditions for small farmers, and (iii) to transform international trade relations. This last aim can be viewed as the will to change the mainstream market relations. In May 2007, Unilever, the world’s largest tea company, announced plans to source its entire tea supply sustainably. It is clearly a mainstreaming strategy where all tea would be sustainable. To our knowledge, Unilever is the first multinational company whose objective is to convert a leading brand, Lipton, with its entire product line, in all over the world, to sustainability. After having examined different possible forms of routes, alliances and existing certification schemes, in particular Fairtrade (FLO) and UTZ certified, Unile- ver approached the international NGO Rainforest Alliance whose aim is to conserve biodiversity and ensure sustainable livelihoods by transforming land-use practices, business practices and consumer behavior. The first certified tea was available in August 2007 to restaurants and the catering trade in Europe. The aim of this chapter is to describe and comment how Unilever has implemented a CSR mainstream stra- tegy with one of its leading brand, Lipton, in association with a NGO, the Rainforest Alliance. Given the product, tea, its production sites, and the issues raised by its production and trade, the natural certification about which one is thinking for the Lipton tea is fair trade. That is why we will present the Lipton-Rainfo- rest Alliance case in the light of the fair trade concept, all the more so the question of mainstream companies and fair trade practises is relevant and weighty.1 The chapter proceeds as follows. We start our analysis by introducing the fair trade concept and outlining one of the main debates taking place about its challenges, mainstreaming fair trade. This is followed by a presentation of the tea market and the partners committed in the studied case, Unilever with Lipton tea and the Rainforest Alliance. Then, we describe the alliance between the international company and the NGO 1. Lower case letter, fair trade, refers to the global movement and Fairtrade (one word, Capital F) refers to the standards associated with Fairtrade Labelling Organizations International (FLO-I) certification. Mainstreaming Fair Trade : A Discussion through the Lipton Tea Case • 191 in terms of strategic decisions, operational decisions and communication. Finally, we conclude by some remarks and opened questions. The Fair Trade Due to its birth and evolution, two different systems coexist in the fair trade movement: the integrated or organization channel and the certified or product channel (Hira and Ferries, 2006; Poret, 2007). There are some tensions between the actors of these two lines. The Two Main Channels Fair trade, initially named alternative trade, started in the late 1960s in Europe as a grassroots movement. The aim was to alleviate poverty in the South by building direct, sustainable relationships with disadvan- taged producers and providing fair access to markets in the North, using a strategy of “trade, not aid”. Several Non-Governmental Organizations (NGO) created a parallel retail network with specialty stores managed as cooperatives and staffed by volunteers.2 Thus, the historic system is fair trading networks, which sell food products and handcraft through specific distribution channels. This original channel is based on direct importing and retailing. Many fair trade organizations have been brought together under the World Fair Trade Organization (WFTO, formerly the International Fair Trade Association) with about 330 members from 70 countries. In 2004, at the World Social Forum in Mumbai, India, the FTO Mark was launched. It is an organization label that identifies and gives global recognition to fair trade organizations. The latter are “mission-driven” organisations whose core activity is fair trade. This means that standards are being met regarding working conditions, wages, child labour and the environment. These standards are verified by self-assessment, mutual reviews and external verification. This integrated channel system has- li mited expansion, with sales currently valued at about US$ 193 million per year (Raynolds and Long, 2007). In 1988, a Mexican cooperative of coffee producers, who requested help in marketing their products
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