The sale of chocolate is big business. According to the National Confectioners Association, chocolate sales totaled $21.1 billion in the United States in 2014. (Franchise Help). Despite the significant size of the market, growers responsible for cultivating cocoa do not always share the benefits. The Fair Trade movement attempts to address this imbalance and improve the economic plight of cocoa growers. This ethical movement has resonated with consumers, and there is well-documented consumer demand to purchase Fair Trade items. Despite the ethical and economic rationale for selling Fair Trade chocolate, cocoa sold with the Fair Trade label accounts for a very low 0.5% share of the global cocoa market, according to International Cocoa Organization. Based on the ethical and economic benefits companies will attain from distributing Fair Trade products, a strong case can be made for retailers to offer a larger selection of Fair Trade chocolates.
Despite the significant global demand for cocoa products, producers struggle with economic deprivation & human rights abuses. As a result of oversupply and fluctuating commodity prices, many cocoa growers live below the global poverty line, and earn less than $2 a day (ILPI 14). In addition to the struggle to afford basic life necessities, many cocoa growers are unable to hire sufficient labor and are forced to rely instead on having family members farm, including children who might be pulled from school. Even worse, other children are trafficked as low-salary laborers or even slaves, and forced to work on some cocoa plantations. There are an estimated 880,00 child laborers in Ghana, and 1,150,00 children working in Côte d’Ivoire (ILPI 31). Many of these children work in hazardous conditions, including operating heavy machinery, applying pesticides to foods, and using dangerous tools to harvest cacao pods.
In order to improve economic and human rights conditions, Fair Trade organizations have developed systems that organize cocoa growers to sell their goods as part of collectives which increases their bargaining power and reduces layers of middlemen. Cocoa growers receive a guaranteed minimum price for their goods which allows them to earn a living wage. This helps ensure that cocoa growers have a safety net when cacao falls below a sustainable level as a commodity. This is valuable to the cocoa growers because cocoa prices can be volatile and can move in a wide range, thereby creating uncertainty in the price that the cocoa growers will receive for their crop.
The Fair Trade organization consults producers, traders and other stakeholders and to determine a fair price for cocoa. The cooperatives also receive an additional “Fair Trade premium” where members have discretion to spend the funds in order for the benefit the cocoa growers and their communities. The Fair Trade premium for standard quality cocoa is $150 / ton. (International Cocoa Organization) and the Minimum Price including the Fair Trade Premium is $1,750 / ton. In return for these economic benefits, cocoa growers agree to comply with the organization’s labor standards which prohibit child labor and protect against other human rights abuses. Additional standards include environmental protections.
Producers of goods that purchase from Fair Trade providers display logos on their products which inform consumers the food was produced under Fair Trade standards. Consumers who purchase these items can be confident that they are supporting the Fair Trade system.
While there is a strong ethical case to be made for the sale of Fair Trade items, the question remains as to whether consumers are interested in purchasing them. Numerous academic studies have been conducted to investigate the amount of consumer interest in Fair Trade goods.
The first question a retailer should consider is whether or not consumers are interested in buying Fair Trade products and the amount they would be willing to pay. A survey posed to American consumers the questions of whether they value Fair Trade products and how much more they would be willing to pay for Fair Trade coffee. The results of this survey indicated that Americans are interested in Fair Trade products and would to be willing to pay $0.22 /lb. more for Fair Trade coffee than for the non-Fair trade equivalent. (Carlson 5)
Researchers at the Stanford Business School set up an experiment to determine whether coffee carrying a Fair Trade label sold better, equally, or worse than identical coffee not labeled. The results showed that the Fair Trade label had a substantial positive effect both on the quantity sold as well as the price it was able to command. Researchers found that sales rose by almost 10% when a coffee carried a Fair Trade label as compared to the same coffee carrying a generic placebo label. A second study found that demand for Fair Trade coffee was inelastic; sales of the Fair Trade labeled coffee remained fairly steady when its price was raised by 8%. In contrast, coffee without the Fair Trade labels experienced a 30% decline in sales after a similar price increase (Hainmueller et al 2).
In another study, titled “Are Consumers Willing to Pay More for Fair Trade Certified Coffee?” the author looked at items that went through Fair Trade certification and compared the price consumers were willing to pay for the same item before and after the item received its Fair Trade certification. The conclusion was that “consistent with prior work… (the study) finds that Certification has a large positive effect on the price of coffee”, although this paper determined that the premium consumers were willing to pay for Fair Trade certification was smaller than previous studies. (Carlson 16)
Fair Trade labeling produces a measurable response in the brain. Researchers from the University of Bonn conducted a two part study to discern the neural effects of Fair Trade labels. In the first part of the study, subjects were shown pictures of 80 different products, 40 with the Fair Trade emblem, and 40 identical items without the emblem. They were then prompted to choose how much they were willing to pay for each item. Not only were customers willing to pay more for each Fair Trade object, but fMRI scans revealed that while ‘buying’ these objects, the activity of the reward section of the subjects brains increased when the subjects were buying Fair Trade labelled items. For the second part of the study, a conventional chocolate bar was broken up into pieces for every participant and then equally distributed on two small plates. While the chocolate on the two plates were identical, scientists told subjects that one plate contained conventional chocolate, while the other was Fair Trade certified chocolate. When eating what they believed to be Fair Trade chocolate, fMRI scans showed “increased experienced taste pleasantness and intensity for the [Fair trade] label” (Enax et al 11)
At least some of the demand for Fair Trade chocolate can be attributed to positive, albeit unsubstantiated, perceptions that Fair Trade chocolate is healthier than non-Fair Trade chocolate. The ‘Halo Effect’, is a well known psychological phenomenon in which a singular good trait of a person or object leads people to apply additional good traits to the person or item. Companies can often be seen taking advantage of the halo effect by promoting organic, non-GMO, and locally grown products. Likewise, Fair Trade goods also tend to be perceived as having superior characteristics when compared to non-Fair Trade goods. In one study, subjects were given a description of a brand of chocolate. The control group was given no information about the chocolate, while the other group was it was told it was a Fair Trade product produced by a manufacturer that pays cocoa growers “50 percent more than the standard market price for cocoa, to ensure that the growers receive a fair wage for their efforts.” When the participants were later asked whether they believed the chocolate they had been presented with contained more, equal, or fewer calories compared to other brands, those who had been told that the chocolate was Fair Trade perceived it as lower-calorie than other brands. (Jacobs 1).
The moral arguments for Fair Trade products resonate with consumers. Numerous studies conclude because of the ethical considerations, consumers are interested in buying Fair Trade products. Selling Fair Trade chocolate makes sound economic sense and there is a demand for Fair Trade products. Are Fair Trade products readily available for purchase by American consumers? In order assess the availability of Fair Trade chocolate products I conducted a survey of five retailers: Whole Foods, Trader Joe’s, CVS and Rite Aid drugstores and Key Food supermarkets to determine the extent of their Fair Trade chocolate selection. Whole Foods and Trader Joe’s were chosen because they are two out of the three retailers listed on the Fair Trade America’s website. CVS and Rite Aid were chosen as representative of chain drug stores. Key Food was chosen as representative of a neighborhood supermarket. The survey was conducted the week of May 6, 2018. In order to correct for variations in offerings and out of stocks at different locations, two locations for each retailer were surveyed.
Whole Foods is a supermarket chain with 470 stores, primarily in North America (Securities and Exchange Commission). Whole Foods has a strong history and association with social responsibility. As part of the Core Values listed on the website, Whole Foods highlights “We practice win-win partnerships with our suppliers”, a notion highly aligned with Fair Trade philosophy. Each of the Whole Foods surveyed had an extensive selection of Fair Trade chocolates which comprised nearly all of the chocolate items for sale. The stores surveyed had approximately 100 different Fair Trade chocolate products for sale, from 16 companies.
|Brand||95 East Houston St. store||4 Union Square store|
|365 house brand||4||–|
|Green & Black||9||7|
|Madecasse (Direct Trade)||7||7|
|Taza (Direct Trade)||5||5|
|Whole Foods – private label||4||8|
Trader Joe’s is a supermarket chain with 474 stores nationwide (Trader Joe’s). The company does not highlight social responsibility, but rather “innovative, hard-to-find, great-tasting foods… that cut our costs and save you money.” While the company does not position themselves as placing a high value on socially responsible products, they do maintain lists Vegan, Gluten Free, and Kosher products. Based on the “Halo Effect” described above, this might lead some customers to make the association with selling Fair Trade items as well. The Trader Joe’s stores surveyed had a very limited selection of Fair Trade Chocolates.
|Brand||14th St. store||31st Street store|
|TJ Fair Trade Organic||1|
CVS / Rite Aid
CVS is a pharmacy/convenience store chain with 8,060 stores and Rite Aid is a chain similar to CVS with 2,550 stores (Securities and Exchange Commision) CVS and Rite Aid cater to a much broader demographic than either Whole Foods or Trader Joe’s. Of the stores surveyed, the number of Fair Trade chocolate products were far below those sold at Whole Foods, and sold a similar number of Fair Trade chocolate items to Trader Joe’s.
|Brand||500 Grand Street store||253 1st Ave. store|
|Brand||408 Grand St. store||81 First Ave. store|
Key Food is a cooperative of independently owned supermarkets located in the Northeast. Of the two stores surveyed, one sold no Fair Trade items while the other sold considerably more than CVS, Rite Aid or Trader Joe’s.
|Brand||43 Columbia St. – store||52 Ave. A – store|
|Green & Black||–||5|
Despite the sound ethical and economic reasons for retailers to sell Fair Trade chocolate, cocoa sold with the Fair Trade label still captures a very low share of the cocoa market. Research indicates that consumers are interested in purchasing Fair Trade products and are willing to pay a premium. Whole Foods has tapped into this demand and demonstrates that it is possible for a retailer to offer an extensive selection of Fair Trade chocolate items. They however seem to be more the exception rather than the rule. If other retailers tapped into the demand and offered a more extensive selection of Fair Trade chocolate, it is likely that more Fair Trade chocolate would be purchased and more cocoa suppliers would share the benefits of Fair Trade.
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Jacobs, Tom. “’Fair Trade’ Chocolate Perceived as Healthier.” Pacific Standard, Pacific Standard, 5 Jan. 2012, psmag.com/economics/fair-trade-chocolate-perceived-as-healthier-38894.
“Jens Hainmueller: Will People Pay More for Fair Trade Products?” Youtube, Stanford Graduate School of Business, 18 Feb. 2015, www.youtube.com/watch?v=fMiy1Y55DLA.
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