romans mainstreaming of fair trade

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The mainstreaming of fair trade

University of MaastrichtFaculty of Economics and Business Administration

Maastricht, 22 August 2010

Romans, LPMi6011511

MSc International BusinessStrategy & Innovation

Master thesisSupervisor: Ursula Glunk



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Abstract

Fair trade is often part of a company’s CSR policy, fair trade is growing in popularity and an

increasing number of organizations are formulating and deploying fair trade into their business. This

study provides insight into the mainstreaming of fair trade on the Dutch market and how the fair trade

landscape is changing, by focusing on the different types of organizations involved in fair trade and

how these organizations operate on the fair trade market. This thesis provides a perspective on the

mainstreaming of fair trade by analyzing the commitment of organizations towards fair trade and the

degree of inter-organizational alliances and networks in the market. Accordingly, this thesis assumes

that organizations involved in fair trade differ in their commitment towards fair trade, dependent on

their CSR strategy and fair trade activities. This thesis also assumes that success in the fair trade

market is dependent on the extent to which organizations engage in alliances and networks. Drawing

on five interviews with different fair trade players on the Dutch market, this study aims at analyzing

the engagement of organizations involved in fair trade to the fair trade principles. In addition, this

study provides insight on the inter-organizational relationships and the way these relationships havecreated success for companies involved in fair trade. The results show that significant differences

between organizations involved in fair trade exists and inter-organizational alliances on the fair trade

market stimulate the mainstreaming process and are vital in creating success.



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Acknowledgements

I would like to express my gratitude to Ursula Glunk for all the ongoing support and advice, which

greatly improved the quality of this research. I would also like to thank everyone who participated in

this research and made it possible to draw some important conclusions for this research. At last, I am

thankful for all the advice and support from my family and boyfriend, who motivated me during the

process of writing the thesis.



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Table of Contents

1. Introduction ................................................... .................................................. .................................... 1

1.1 Introduction to the research topic.................... .................................................. ............................ 1

1.2 Problem statement explained .......................................... .................................................. ............ 4 1.2.1 Problem statement ................................................... .................................................. ............ 4

1.2.2 Value chain perspective ..................................................... ................................................ .... 4

1.2.3 Sub questions........................................... .................................................. ............................ 6

1.2.4 Research focus ......................................... .................................................. ............................ 7

2. Literature review ................................................... .................................................. ............................ 9

2.1 The fair trade landscape .................................................. .................................................. ............ 9

2.1.1 Fair trade: The global fair trade system and its history ............................................. ............ 9

2.1.2 The national landscape ............................................ .................................................. .......... 13

2.2 Mainstreaming of fair trade..................................... .................................................. .................. 15

2.2.1 Pros and cons of mainstreaming fair trade......................................................... .................. 15

2.2.2. Challenges facing fair trade .............................................. ................................................ .. 17

2.3 Previous scientific research............................. .................................................. .......................... 18

2.4 Analysis of corporate participation in fair trade ....................................... .................................. 20

2.4.1 Development process............... .................................................. .......................................... 21

2.4.2 Advantages of interfirm alliances and networks........................................ .......................... 22

2.5 Conclusion .............................................. .................................................. .................................. 25

3. Methodology ................................................. .................................................. .................................. 26

3.1 Study design.......... .................................................. .................................................. .................. 26

3.2 Research landscape ................................................. .................................................. .................. 27

3.3 Interview selection .................................................. .................................................. .................. 28

3.4 Interviews with participating organizations .............................................. .................................. 32

3.6 The interview questions .................................................. .................................................. .......... 34



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4. Results ........................................... ................................................ .................................................... 35

4.1 Commitment of organizations towards fair trade...................................................... .................. 35

4.1.1 Albert Heijn ............................................. .................................................. .......................... 36

4.1.2 Plus Retail...... .................................................. .................................................. .................. 37

4.1.3 Verkade............................ .................................................. ................................................ .. 38

4.1.4 Fair Trade Original .................................................. .................................................. .......... 39

4.1.5 Max Havelaar Foundation ............................................... .................................................... 40

4.2 The importance of alliances and networks................................................ .................................. 44

4.2.1 Albert Heijn ............................................. .................................................. .......................... 44

4.2.2 Plus Retail...... .................................................. .................................................. .................. 45

4.2.3 Verkade............................ .................................................. ................................................ .. 47

4.2.4 Fair Trade Original .................................................. .................................................. .......... 47

4.2.5 Max Havelaar foundation ................................................ .................................................. .. 49

4.2.6 Overall results.................................................. .................................................. .................. 51

5. Discussion & Conclusion .............................................. .................................................. .................. 54

5.1 Discussion ............................................... .................................................. .................................. 54

5.1.1 Engagement with fair trade principles ....................................................... .......................... 54

5.1.2 Advantages of inter-organizational alliances and networks ................................................ 55

5.2 Conclusion .............................................. .................................................. .................................. 57

5.3 Theoretical and practical relevance and implications ....................................... .......................... 59

5.4 Limitations and suggestions for future research ....................................... .................................. 60 5.5 Recommendation for future research ................................................ .......................................... 61

5.6 Final remarks .................................................. .................................................. .......................... 62

6. References ............................................. .................................................. .......................................... 63

7. Appendices ............................................ .................................................. .......................................... 71



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1. Introduction

1.1 Introduction to the research topic

Corporate Social Responsibility (CSR) is a hot topic and an increasing number of companies areformulating and deploying CSR activities. More and more companies are aware of the positive effects

CSR has on the social reputation of a firm. That CSR is so popular can be derived from the fact thatthe majority of fortune 500 companies engage in CSR initiatives, but also devote considerableresources in reporting CSR activities to a wide array of corporate stakeholders. 79% of the top 250global companies in the Fortune 500 list, reports corporate responsibility (KPMG, 2008). Vodafonewas in 2008 according to Fortune, the most responsible company:

‘At Vodafone we do not treat corporate responsibility (CSR) as a gesture or add-on. It is part of ourcore business and will help us accomplish sustainable business success. Our approach to CSR is toengage with stakeholders to understand their expectations on the issues most important to them, andto respond with programs and targets, and to communicate regularly and transparently on our

progress’ (Vodafone, 2010).

CSR is an umbrella term to demonstrate a company’s social sensitivity, it includes all initiatives fromreduction in firm’s waste to solving illiteracy problems in less-developed countries (Porter & Kramer,2006). Defining CSR may be complex, since there are many definitions. The first definition was made

by (Bowen, 1953) who argued that ‘it refers to the obligations of businessmen to pursue those politics, to make those decisions, or to follow those lines of actions which are desirable in terms of theobjectives and the values of society’ (p. 6). Later Davis defined CSR as: ‘the firm’s considerations of,and response to, issues beyond the narrow economic, technical, and legal requirements of the firm toaccomplish social [and environmental] benefits along with the traditional economic gains which thefirm seeks’ (Davis, 1973, p. 312). Also policy makers have tried to define CSR, in 2001 the EuropeanCommission published the green paper defining CSR as ‘a concept whereby companies integratesocial and environmental concerns in their business operations on a voluntary basis’. (Commission of

the European Communities, 2006, p. 2). A widely-used definition of CSR, which will be applies inthis thesis is ‘CSR is a commitment to improve community well-being through discretionary business

practices and contributions of corporate resources’ (Kotler and Lee, 2004, p.3).

Many studies focus on CSR, the CSR literature has largely considered the management of CSRinitiatives from different perspectives. One stream has emanated from the management literature, herethe focus has been on normative questions of whether firms should engage in CSR and the effects ofCSR on the financial bottom line (Berger et al., 2007). Especially the link between CSR and CorporateFinancial Performance (CFP) has been intensively researched, but the results seem to be inconclusive.The stock performance of companies with high social performance does not excel from companieswith poor social performance (Brammer & Millington, 2008; Orlitzky et al., 2003; Margolis & Walsh,2003). The result is that after decades of research, it cannot be clearly concluded whether a one-euroinvestment in social initiatives returns (Barnett, 2007). Another stream of research is related tomarketing and has focused on how consumers’ respond to CSR at the individual level. Marketingresearchers have found that CSR initiatives can have a positive effect on consumers’ attitudes towardsa firm, its identity and its brand, their intentions to purchase, and their purchase behavior (Berger etal., 2007). Research is also related to the aspects of CSR implementation by an organization in termsof understanding the internal and external factors that influence CSR implementation in organizations(Aguilera et al., 2007; Maignan & Ralston, 2002; Basu & Palazzo, 2008) and the design of CSRstrategies (McWilliams et al., 2006; Lamberti & Lettieri, 2009; Stark & Hanke, 2009).



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There are many types of CSR activities a company can perform. This thesis will focus on one specificCSR category: Fair Trade. The currently general accepted and widely used definition of Fair Trade,described by the international Fair Trade Labeling Organization (FLO), is: “Fair Trade is a trading

partnership, based on dialogue, transparency and respect, that seeks greater equity in internationaltrade. It contributes to sustainable development by offering better trading conditions to, and securingthe rights of, marginalized producers and workers. Fair Trade Organizations, backed by consumers,

are engaged actively in supporting producers, awareness raising and in campaigning for changes in therules and practice of conventional international trade” (FLO, 2010a).

The growth in sales of fair trade certified products has been remarkable since its introduction in 1988(Reed, 2009). Especially in countries as the Netherlands, Switzerland, Germany and the UK fair tradeis widely available and well-recognized. Between 2000 and 2007 supermarket sales of fair trade

products in Europe increased with 57% (EFTA, 2007). In it last report released in 2009, FLOestimated that retail value in 2008 exceeded 2,894 million Euros worldwide, a global increase of 22%compared to 2007 (FLO, 2009a). This growth, has come partly from increasing involvement ofcorporations in fair trade. Although fair trade is still considered a niche market, the remarkable growthin sales, shows potential for companies to engage in the Fair Trade principles. Consequently,

companies are trading under the increasingly popular banner of fair trade (Balmer et al., 2007). Fairtrade is present at companies as McDonalds, Nestlé, Ben & Jerry’s and is no longer only traded byspecial fair trade organizations.

The increasing involvement of corporations in fair trade has changed the practice of fair trade, thesechanges are defined as mainstreaming (Reed, 2009; Raynolds, 2000). Mainstreaming fair trade ischaracterized by the increasing participation of corporate actors in fair trade. These corporate actorssell fair trade products as part of their product range. Mainstreaming is also characterized by theoriginal fair trade organizations that sell their fair trade products in major retail stores (supermarkets)and not any more only through specialty shops. Before this corporate involvement, fair trade productswere only available in specialty stores. This corporate involvement has not only changed the practiceof selling fair trade products but has expanded the market for fair trade products. However, there are

concerns that corporations use fair trade certification to give legitimacy to their brand and do notcomply fully with the fair trade certification standards.

Although major fair trade corporations voice a common commitment to the fair trade ideal, it has beenembodied differently in their strategies. Corporations that enter into the fair trade market have a dual

purpose of on the one hand increasing sales and profits and on the other hand acting as a ideologicalfoundation based on the fair trade principles (Davies, 2009). This thesis will provide insight into thedifferences between market driven and mission driven organizations (Raynolds, 2009). The market-driven organizations are companies that have recently introduced part of their product range under thefair trade label, for example Ben & Jerry’s. These are mainstream brands offering fair trade productsas an extension to the existing brand portfolios (Davies, 2009). The mission driven organizations are

the original fair trade organizations that are primarily concerned with fair trade such as Max Havelaarand Fair Trade Original. Fair trade is integrated in their mission statement and their focus is on promoting and offering fair trade products. This thesis will refer to these organizations as AlternativeTrade Organizations (ATO’s). ATO’s are non-profit organizations devoted entirely towards fair trade

products. As stated above originally ATO’s used to sell their fair trade products in alternative shops.

This distinction between companies active in fair trade and ATO’s raises questions as: what are thedifferences in terms of operations and strategies between them. How are these organizations internallyorganized in terms of engagement with fair trade principles. Most companies are aware of the fact that



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fair trade commitment involves a change in their value chain. Consider Starbucks, the companystruggled with the question ‘how’ to integrate fair trade coffee while remaining focused on its strategyto offer high-quality coffee at a premium price as well as its mission to be socially responsible. In2006, only 6% of Starbucks coffee in the U.S. was fair-trade. Starbucks mimics aspects of fair trade

production which involves setting lower standards. This poses a dilemma for fair trade, on the onehand fair trade can remain ‘pure’ but limited to small group of consumers, or profit-seeking

corporations offer fair trade products, that can redefine the fair trade movement. This raises questionson how corporations and ATO’s manage their fair trade commitment.

Recent academic contributions to fair trade are expanding. The literature that concentrates on fair tradeis diverse ranging from economics, consumer studies, business studies and other fields (Jaffee, 2008).Part of these contributions focus on the consumer perceptions, level of consumer trust and the buying

behaviour towards fair trade products. However until recently, relatively li ttle work has focused on themainstreaming of fair trade. Recently, however a few studies have explored the impact ofmainstreaming of fair trade on the fair trade market (Davies et al., 2010; Argenti, 2004; Fridell, 2009;Bezencon & Blili, 2009; Reed, 2009; Davies, 2009).

There appears to be a gap in the empirical research on mainstreaming fair trade. The studies mainlyfocus on the fair trade coffee market in the U.K. or the U.S. There is a clear gap in literature studyinganother successful fair trade market, namely the Netherlands. Moreover, the existing studies arelimited in their research due to the limited number of fair trade actors researched. The studies usuallycompare two contradicting fair trade actors namely fair trade dedicated ATO’s and corporationsinvolved in fair trade. In addition, most studies focus on the coffee market. Coffee is the most popularfair trade product (Raynolds, 2009).



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1.2 Problem statement explained

1.2.1 Problem statement

The problem statement of this thesis relates to the general issue identified in fair trade namely themainstreaming of fair trade. The mainstreaming is characterized by increasing corporate involvementin fair trade. These companies are attracted by the fair trade concept and are attempting to takeadvantage of the fair trade concept (Renard, 2005). An important aspect that has to be researched is theincreasing role of corporations in the fair trade market and its relation to CSR; since fair trade labelingis a valid aspect of a company’s CSR strategies (Jaffee, 2008). The problem statement of this thesis is:

How is the mainstreaming of fair trade on the Dutch market and how do different players in thisfair trade market operate?

Before this research can proceed with an outline and explanation of the sub questions in order toanswer the problem statement, it is important to have an understanding of the different players.Therefore, first an overview is provided of the different players.

1.2.2 Value chain perspective

This thesis will explore the mainstreaming of fair trade, evident by the entry of companies and rapidmarket growth. As discussed before, a clear distinction can be made between the original alternativetrade organizations (ATO’s) and the companies who sell part of their product range according to thefair trade principles. Crowell & Reed (2009), provide a framework of the different actors involved infair trade, according to different value chain perspectives. By using a value chain perspective acomplete picture is created of the actors involved in the fair trade market. The different value chain

perspectives are:

1) Fair trade without corporate participation. The original value chain.

(Alternative Trade Organizations)2) Fair trade with corporate retail participation3) Corporation involvement in fair trade4) Fair trade with plantation production e.g. bananas5) Companies not involved in fair trade movement

The first two categories include organizations that promote fair trade, known as the Alternative TradeOrganizations (ATO’s). The first category ‘(1) fair trade without corporate participation’ are in factATO’s that promote fair trade products. Some of these ATO’s still sell fair trade products in the old-fashioned way namely, in their own alternative, specialty stores (such as world whops). These ATO’sdo not sell their products in mainstream stores.The second category ‘fair trade with corporate retail participation’, are ATO’s that offer their fair trade

products in large retail channels. These ATO’s do not solely sell their fair trade products in specialshops but make agreements with corporations that are willing to sell their fair trade products as part oftheir product offering. A well-known example on the Dutch market is Fair Trade Original (FTO),which sells its products through world shop but also through mainstream supermarket channels.The third category ‘Corporation involvement in fair trade’, are companies that have integrated fairtrade into their product assortment. These companies usually sell a small part of their product rangefair trade and are profit-driven. Fair trade is part of their CSR strategy and not necessarily of theirmission statement. Usually these corporations have only recently introduced fair trade into their



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business. Well-known examples are Starbucks, Café direct, Ben & Jerry’s. There are, however, majordifferences within this category. This category includes a broad range of companies that cansignificantly differ from each other. For instance, a Starbucks is difficult to compare with an AlbertHeijn (mainstream supermarket), who both sell fair trade products. Therefore in this thesis it isnecessary to compare companies operating within the same sector.The fourth category ‘fair trade with plantation production’, are corporations selling fair trade products

produced in plantations. Recently with the acceptance of plantation production in fair trade, corporate participation has emerged offering products as flowers and bananas.The fifth category ‘companies not involved in fair trade movement’, include all the companies that donot sell fair trade products. This category is added to provide a comparison between companies sellingfair trade products and those that do not sell fair trade products, but have the potential to sell fair trade

products.

Although all categories play a role in fair trade, only two of these five categories remain interesting forthis thesis. For this thesis it is especially interesting to examine the second and third category, becausethe mainstreaming of fair trade has especially impact on these categories. Mainstreaming ischaracterized by corporations entering the fair trade market, therefore any corporate participation to

fair trade is important in this thesis. This includes the second, third and even fourth category. While,the first category seems to not have responded to mainstreaming of fair trade and still sell their products through specialty stores. The second category is of interest for this research, because itincludes ATO’s that sell their fair trade products through corporate mainstream retail chains. Perhaps,these ATO’s have perceived the mainstreaming of fair trade as a chance to improve their position andexpand sales. The third category (corporate involvement in fair trade) is of interests for this research,

because it includes all corporations involved in fair trade; the main source of mainstreaming.Consequently many questions can be raised as why are companies involved in fair trade. How is theirengagement with fair trade principles etcetera. The fourth category includes all organizations that sellfair trade products that are produced on plantations. Nowadays, many supermarkets sell these

products, especially bananas have become a popular fair trade product. Thus, corporations areinvolved in both categories (corporate involvement and plantation). This is a logical as corporationswhich sell fair trade product sourced from plantations are immediately also classified as corporationsthat sell fair trade products (second category). The fifth category is an overall category of allcompanies which are not involved in fair trade. The focus in this thesis will be on the second and thirdcategory and to a lesser extent on the fourth category. In fact, all players that contribute to themainstreaming of the fair trade market are of interest for this thesis.

To provide clarification on the different actors in this thesis, the following terms will be used:• Fair Trade Organization or Alternative Trade Organization (ATO) for organizations which are

entirely dedicated towards fair trade• Fair Trade Brander for companies that produces products carrying the fair trade certification• Fair Trade Sellers for companies that sell fair trade products (mostly supermarkets).• All the above: organizations active or involved in fair trade



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1.2.3 Sub questions

In order to provide an answer to the problem statement, this research is divided into several subquestions that jointly provide an answer to the problem statement. First of all, an understanding of theglobal fair trade system and its challenges is key for the validity of this research, without such anoverview is it difficult to understand the fair trade market. The next chapter of this thesis, literature

review, will give an overview of the current fair trade market and its evolution, providing insight intothe global regulatory and organizational environment. In addition, this chapter will provide anoverview of the Dutch fair trade market. The first sub question of this thesis is accordingly

1. How is the landscape of the fair trade market changing and what are the challenges oftransforming fair trade?

The next sub questions will provide more insight into the mainstreaming of the Dutch fair trademarket. In order to provide insight into this mainstreaming process, two sub questions will beanswered by means of field research.

The mainstreaming has resulted in a significant growth of the fair trade market in recent years, due to

the expansion of fair trade certified products in mainstream retail channels. Fair trade branders/sellersnow also include Mac Donalds and Nestlé. In 2007, the number of fair trade sellers reached 67,619(EFTA, 2007). Fair trade has dramatically gained popularity, however this mainstreaming has raisedsome concerns about the fair trade principles that may be diluted, therefore it is important to analyzethe current mainstreaming of fair trade. In order to examine the mainstreaming of the Dutch fair trademarket, it is important to analyze whether the fair trade branders and sellers still convey to the fairtrade principles. According to Low & Davenport (2005), the fair trade branders and sellers do notcommunicate the transformative message. The transformative message wants to replace the currentconventional free trade system by an international fair trading system. ATO’s that are totally involvedin fair trade still aim to achieve this goal. Therefore, it is important to examine the commitment ofdifferent organizations involved in fair trade to the fair trade principles.

2. What is the stage in the development process of organizations involved in fair trade in theirengagement with fair trade principles?

To answer this question, attention will be given to the stage the organizations involved in fair trade arein their engagement to fair trade principles. When it comes to engagement to fair trade principles,much depends on what an organization has accomplished today and where is wants to be in the future.There may be organizations in transition whose knowledge, attitudes, structures, and practicesrepresent different degrees of understanding of fair trade. Knowing at what stage an organization is,and what challenges it faces in advancing fair trade, can clear up an executive's confusion about wherethings stand, outline strategic choices about where to go, assist in setting objectives, and perhaps speedmovement forward (Mirvis & Googins, 2006). The framework of Mirvis & Googins will be used in

this thesis to show the stage of each fair trade brander/seller and ATO in their development in fairtrade.

In addition, it is important to examine the ways in which fair trade branders and sellers can reach amainstream market. Fair trade branders and sellers are often corporations that do not have a historywith fair trade and fair trade is often a new aspect within the company. In order for them tosuccessfully integrate fair trade into their business and to manage their fair trade business, inter-organizational alliances (partnerships) and networks can be important. Engaging in networks or inter-organizational alliances will positively contribute to the growth and profitability (Davies, 2009).



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According to Davies (2009) to investigate the mainstreaming of fair trade, it is crucial to understandthe importance of network and alliances. Networks and alliances are crucial for the success of fairtrade branders and sellers, because several benefits can be accrued from them. This thesis assumes thatinter-organizational alliances and networks within the fair trade market, will positively influencegrowth in fair trade sales. The benefits derived from networks and alliances are especially beneficialfor fair trade branders and sellers, that recently introduced fair trade products. Reason for this

assumption is that young and new firms on the fair trade market often do not possess the experience,resources, skills and know-how that is necessary to succeed on the fair trade market (Lavie, 2007).

3. To which extent do organizations involved in fair trade create inter-organizational alliances orengage in networks?

1.2.4 Research focus

The objective of this thesis is to provide a comparative analysis between the main players on the Dutchfair trade market. The selection of the players that will be analyzed depends on their importance and

presence in the Dutch fair trade market. The focus in this thesis is more on the Dutch fair trade branders and sellers and not on the large multinationals involved in fair trade such as Ben and Jerry’s,Starbucks, DKNY, on which a lot of research is already done. In addition, these global fair trade

branders/sellers act out of a global sustainability strategy which is not adapted to a specific market.Ben&Jerry’s sells its fair trade ice cream worldwide and is therefore difficult to adapt to the Dutch fairtrade market. The number of organizations involved in fair trade on the Dutch market is limited. Themost prominent fair trade brander is Verkade. The most prominent fair trade organizations are FairTrade Original and Max Havelaar. Fair trade sellers include several supermarket chains. Chapter threeof this thesis, will provide more insight into the different organizations involved in fair trade in the

Netherlands.

This research will focus on the fair trade commodity market in the Netherlands and does not specify a particular fair trade product such as coffee. Main reason to choose for the fair trade commodity marketand not for other fair trade markets such as handicrafts, is that the mainstreaming of fair trade beenconcentrated in the food sector. In other sectors such as the craft and apparel there is a negligible

profitability and these industries are fragmented with only one or two players of reasonable size(Randall, 2005). In addition, the whole fair trade commodity market will be studied, because no

particular product within the Dutch fair trade commodity sector such as coffee is large enough todevote a research on. At least, this accounts for the Dutch market, some other countries do have aspecific product category within fair trade commodities that is significant large enough to study. Oftenthese studies focus on the coffee market, because coffee is the most popular fair trade product. As aresult, this research will focus on the fair trade commodity market. The purpose is to compare differentorganizations active on the Dutch fair trade market.

The contributions of this paper are 1) to analyze the commitments of different organizations involvedin fair trade in the Netherlands to fair trade principles, 2) to investigate the differences between ATO’sand fair trade branders / sellers involved on the Dutch fair trade industry, 3) to examine the differencesof fair trade branders/ sellers and ATO’s in their stage of development towards fair trade, 4) toexamine the extent of cooperation and support within the fair trade network.



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This thesis will investigate the research questions in a stepwise approach. This thesis is divided intofive major chapters. In the second chapter an introduction to fair trade and further analysis of the fairtrade market is provided by means of a literature review. This chapter provides insight in recentresearch results and the important aspects that constitute the fair trade market. In addition, it will

provide an answer to research question one. The third chapter will provide an overview of the methodsused to answer the other research questions. The fourth chapter examines the results gathered from the

research. This thesis concludes with a discussion and interpreting of the major research results.Finally, the limitations and suggestions for future research will be presented.

In order to investigate the research questions, desk and field research will be conducted. In chapter twoof this thesis a literature review will be presented, this literature review will answer research questionone. The information for the literature review, will be derived from academic articles and otherinformation sources such as corporate management reports, CSR reports, annual reports, news articlesand websites. After the desk research, a field research will be conducted to answer the second andthird research question. More information on the research methods will be presented in chapter 3 ofthis thesis.



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2. Literature review

Over the last decades the fair trade movement has grown significantly. The introduction of fair tradecertification allows organizations to communicate their commitment to fair trade to consumers easily

by means of placing a certification label on products. In this way, fair trade branders and sellers can publicize their support to small producers and plantation workers in the developing countries to its

customers, by revealing the fair trade certification label that guarantees better trading conditions to producers. Fair trade can be part of a company’s CSR strategy. Within CSR, a company can support a broad range of good causes in different fields of social and environmental issues including fair trade.More and more companies realize the competitive advantage that can be gained by addressingenvironmental and social issues. As a result, companies increasingly introduce fair trade certified

products as part of their CSR policy. However, satisfying to the fair trade principles requires a changethe strategies and supply chains of fair trade branders/sellers. Fair trade branders/sellers which adoptthe strict fair trade criteria might be forced to alter business operations.

The discussion on mainstreaming fair trade might not be understood without knowledge on fair tradeglobal landscape and its reforms. This chapter will first reveal a detailed understanding of the

landscape of fair trade including the institutions involved and the mechanisms behind the fair trade(inter)national trading system and its history. The thesis will further examine the changes in the fairtrade market and landscape due to an increasing participation of companies in fair trade. The impact ofthis participation on the traditional fair trade movement will be further analyzed. Previous researchwill be examined to further explain the fair trade movement and to identify gaps in literature. The fairtrade market has been divided according to different types of organizations involved in fair trademarkets in line with value chain perspectives, provided in chapter one of this thesis. This identificationof different players active in the fair trade market is necessary to make a distinction between thedifferent organizations active on the fair trade market (fair trade sellers / branders and ATO’s).

2.1 The fair trade landscape

2.1.1 Fair trade: The global fair trade system and its history

The purpose of fair trade is based on the ‘trade not aid’ strategy (Raynolds, 2000). Fair tradecontributes to sustainable development by offering better trading conditions and banishing unequalinternational trade in which small producers and plantation workers are exploited. Normal traderelations are characterized by low prices and market volatility, this free trade system tends to exploitfarmers and workers to ensure low commodity prices. As a result, the rural population is driven into

poverty, often unable to recover the costs of production. However, farmers empowered by fair tradeearn significantly higher incomes and can afford health care and educational opportunities tothemselves and their families. In general, fair trade guarantees a fair price, better working conditions

and promotes responsible business (TransFair, 2008). Today, over five million farmers, workers, theirfamilies and communities are benefiting from fair trade (fair trade foundation, 2008). In return,consumers pay a higher price for fair trade products than for comparable, non fair trade certified

products. In this way, consumers contribute to social values and to a more equitable way of trade(Castaldo et al, 2009).

Fair trade is based on several alternative norms including: fairness, partnership and sustainabledevelopment (Raynolds, 2009). In 2001, the international fair trade movement adopted the followingdefinition of fair trade. “fair trade is a trading partnership, based on dialogue, transparency and respect,



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that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, disadvantaged producers and workers –especially in the South. Fair trade organizations (backed by consumers) are engaged actively insupporting producers, awareness raising and in campaigning for changes in the rules and practice ofconventional international trade” (EFTA, 2007 p. 23). This definition shows three main actors in fairtrade namely - producers that are mainly located in less developed countries - organizations that

promote, monitor and coordinate fair trade - consumers who have the power to put pressure on market players to improve prices and conditions for producers (Bezencon & Blili, 2009).

A product carrying a fair trade certified label, guarantees the product complies with certain fair traderegulations. Today, there are many labels in society including organic labels, EU eco-labels, ForestStewardship Council (FSC) labels etcetera. Labeling or certification schemes provide consumers withinformation on supplier’s environmental or social responsible practices and empower consumers touse these labels as a criterion in their purchasing decisions. Furthermore, labels can increase thereputation of a firm (Christmann & Taylor, 2002).

History

Fair trade was originally introduced as a radical concept aiming to challenge the free trade system andmaking fair trade the general rule. In other words, all trade should be fair. Nowadays fair trade aims at

penetrating the market and creating a certain lifestyle for consumers. Organizations involved in fairtrade attempt to sell as much fair trade products as possible and thereby expanding the fair trademarket and extending the impact on producers in developing countries.This movement initially started in 1988 by the launching of the Max Havelaar label in the Netherlands,accompanied by Max Havelaar foundation. Since 1988, the certification system enables themainstreaming of fair trade; the certification label allows retailers to show their commitment with fairtrade to consumers by placing a label on their products. As a result, consumers can easily recognizefair trade products by its label. The certification guarantees certain labour and environmental standardsfor producers, the exact certification criteria will be examined later in this chapter.

Before the introduction of the fair trade certification label in 1988, the fair trade movement emerged by an increasing frustration of the public with the international trading policy with its inequalities andagricultural subsidies (Hira & Ferrie, 2006). Producers are exploited and frequently do not earnenough for living, this accounts especially for producers in developing countries. Driven by the aim toreduce poverty and injustice for small producers in developing counties, organizations emergedcharacterized as alternative trade organizations (ATO’s). These ATO’s mainly purchased handicraftsat higher prices and sold them to consumers in special World Shops. The 1970s and 1980s arecharacterized by the increasing emergence of fair trade movements (Reed, 2009) and the increasingemergence of World Shops (ATO’s) selling fair trade products and promoting the fair trade movement(a World Shop is a not for profit fair trade shop). A network of ATO’s (including World Shops)emerged in the 1980s known as the International Fair Trade Association (IFAT), later renamed as theWorld Fair Trade Organization (WFTO) (Raynolds, 2009). WFTO is the global representative body ofconsisting of over 350 ATO’s committed 100% to Fair Trade, operating in 70 countries (WFTO,2010a).ATO’s sell their products in special World Shops. But in the 1980s, the sales of fair trade productsexclusively sold in specific stores proved to be inconvenient for the western customer; only the fullyconvinced customer was willing to make effort to go to a World Shop and pay a higher price for the

product. Offering fair trade products in major retail channels proved to be more convenient forcustomers and even less dedicated customers were willing to purchase fair trade products.



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The Max Havelaar certification enables sales of fair trade products in major retail channels, the label is printed on packages of products that satisfy to the fair trade conditions. Since the introduction ofcertification in 1988, it is possible for any brand to offer fair trade certified products (Renard, 2003).The mainstreaming of fair trade not only provided new opportunities for corporations, ATO’srecognized the opportunity for selling their fair trade products in supermarket chains, expandingconsumption and promoting fair trade products. These supermarkets chains started to sell fair trade

products from ATO’s and became fair trade sellers.

Since the labeling initiative in 1988, the fair trade movement has increased rapidly and changed thetraditional fair trade system, fair trade branders and sellers emerged. Certification allows access intomajor retail channels, stimulating sales of fair trade products and increasing the reach of fair trade.Certification ensures that consumers are buying an ethically responsible product (Reed, 2009) and

provide better living conditions to more producers in developing countries.

Institutions involved in fair trade

In 1990, eleven European fair trade importers established the European Fair Trade Association(EFTA). Its main purpose is to facilitate the exchange of information and networking. In 1994, the

Network of European Worldshops (NEWS) was created. NEWS is an association of fifteen nationalWorld Shop associations in thirteen countries representing over 2500 World Shops in Europe.

The introduction of certification in the Netherlands was considered a success and soon spread to otherEuropean countries as Switzerland, Belgium and the U.K. These countries are now all considered afair trade success. From the start of Max Havelaar certification, other fair trade labels emergedincluding Transfair, see appendix A for the different labels. In 1997, seventeen fair trade certifiers

joined forces and established the Fair Trade Labeling Organization International (FLO). FLO is theglobal standard setting and certification organization for certified fair trade. FLO’s mission is ‘toconnect disadvantaged producers and consumers, promote fairer trading conditions and empower

producers to combat poverty, strengthen their position and take more control over their lives’ (FLO,2010b). FLO cooperates with producer organizations, national labeling initiatives and other economic

players to achieve its mission. Today, FLO covers 19 labeling initiatives in 23 countries includingMax Havelaar certification label (Max Havelaar, 2008a). In 1998, NEWS, EFTA and WFTOestablished an alliance with FLO known under the acronym FINE. This alliance brings severalimportant actors in the fair trade market together to jointly harmonize fair trade standards and

principles. Jointly, they develop campaigns and harmonize information and communication systems.In 2004, FLO separated into two organizations FLO remained and Fair Trade Labeling OrganizationCertification (FLO-Cert) emerged in 2007. The main goal of FLO-Cert is to provide arm’s-lengthcertification. It is an independent control organization that controls over 500 plantation and producerorganizations annually to ensure that they meet the fair trade standards set by FLO-I (Crowell & Reed,2009). The mission of FLO-Cert is ‘To contribute to the Social and Economic Development ofFarmers and Workers in the Global South through a credible and competent Certification System’(FLO-Cert, 2010).

FLO standards

A product is certified as fair trade if the product meets the following standards; the buyers must – purchase directly from a FLO certified organization – pay a price that covers the costs of sustainable production – guarantee the FLO minimum price – partially pay in advance if producers ask for it – uselong-term contracts. Other conditions for granting certification are - small scale producers can

participate in democratic producer organizations – plantation workers receive decent salaries and the



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right to participate in unions - child labour is prohibited (FLO, 2010c). The costs of monitoring are paid by importers and not by producers (Raynolds, 2000). The certification label guarantees that products have been purchased directly from small producers or plantation workers at a fair price. Thisfair price ensures that producers/workers at least receive a guaranteed fixed minimum price (Renard,2005). Buyers must partially pay in advance if producer/worker requires it, to avoid that

producers/workers run into debt. Besides, buyers must use long-term contracts to allow for long-term

planning.

FLO sets a minimum price, that must be paid for certified products to cover the costs of production.This minimum price differs per product category (Davies et al, 2010). For example the fair trademinimum price for cocoa is 1600 US dollar per tonne and for organic cocoa 1800 US dollar per tonne.Arabica coffee is 1.25 US dollar per pound and organic 1.45 US dollar. Robusta coffee is 1.05 USdollar per pound and organic 1.25 US dollar (FLO, 2010d). When the world market prices are higherthan these minimum prices, FLO requires a higher-than-market price for producers/workers by

providing a social premium (Davies et al, 2010). The amount of social premium depends per product,for example, for Robusta and Arabica coffee it is 0.10 US dollar per pound. For cocoa it is 150 USdollar per tonne (FLO, 2010d). This pricing system provides producers with a long-term guaranteed

price and enables them to plan for the future and invest in their farms and communities (Davies et al,2010). Appendix B, provides an overview of the evolution of conventional product prices compared tofair trade prices for cocoa, Arabica and Robusta coffee.

Growing market

Demand for fair trade products is increasing in many developed countries. In 2008, the estimated retailvalue worldwide is €2.9 billion, which is a 22% increase compared to 2007 (FLO, 2009b), seeappendix P for the global fair trade sales. Still fair trade products represent only a minor share of thetotal world market, as a result fair trade is a niche market. There are now 746 fair trade certified

producer organizations in 58 producing countries, representing over one million farmers and workers(FLO, 2010e). Between 2004 and 2007 global fair trade sales have almost tripled. The most important

countries in 2007 are the U.S. and the U.K. contributing for more than 60% of global fair trade sales.The most successful fair trade country is Switzerland in terms of sales per capita (see appendix C).Appendix C (1-4) provides an overview of the most significant worldwide fair trade countries, interms of net retail value (C. 1), fair trade consumption per capita (C. 2), number of licensees (C. 3),number of supermarkets (C. 4). Europe remains the most important fair trade continent, countries asU.K., Germany, Switzerland, Norway, Austria, France, Italy, and the Netherlands are importantmarkets. Most fair trade products sold are agricultural products. Other fair trade products such ashandicrafts do not receive fair trade certification; FLO has not set standards for these products.Therefore, typical fair trade certified products are rice, fruits, coffee, cocoa, honey, bananas, herbsetcetera and a few non-food products as cotton and flowers. However, composed products such aschocolate and ice cream are increasingly certified, leading to more consumer choice in fair trade

products (Krier, 2007). Coffee, sugar, flowers and bananas are the most important fair trade products.Due to the fact that handicraft products cannot be FLO certified, no mainstreaming has occurred in thefair trade handicraft sector. Fair trade handicrafts are offered in World Shops.

In the Netherlands fair trade retail sales increased from ± € 61 million in 2008 to ± € 86 million in2009, a remarkable increase of 41%, see appendix D for more information and worldwide results.Even in a mature market as the Netherlands fair trade products are becoming more popular (FLO,2009a).



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The increase of fair trade sales in the Netherlands is mainly caused by mainstreaming of fair trade. Themainstreaming of fair trade products has facilitated the rapid expansion of the fair trade market. In2009, the availability of fair trade products in an average supermarket increased from 9 to an averageof 15 products per supermarket; an increase of 70%. Five supermarket channels offer more than 15 fair

trade products per store. The rise in the number of fair trade products sold in supermarkets is partlyexplained by Verkade chocolate company who buys its cocoa under fair trade standards(Milieudefensie, 2009). Since Verkade chocolate started to sell fair trade certified products the sale offair trade products in the Netherlands has increased significantly (Max Havelaar, 2008c).

2.1.2 The national landscape

The Netherlands is the pioneering country of fair trade certification. As a result, the Dutch market ischaracterized by a dense network of World Shops and is home to one of the most important labelingorganization: Max Havelaar.

Next to Max Havelaar, another major ATO on the Dutch market is Fair Trade Original (FTO). FTO isthe largest fair trade importer on the Dutch market. Its products are available at World Shops and in atfair trade sellers (supermarkets). Since 2006, FTO products are sold by fair trade sellers such as Jumboand Albert Heijn. In support of the introduction of its products in supermarkets, the organizationchanged its image drastically. FTO changed its name from Fair Trade Organisatie (Fair TradeOrganization) to Fair Trade Original. The organization introduced new product packaging and a newlabel. The reason for such a drastic restyle was stagnating sales and growing competition in the fairtrade sector. As a result of this change, the organization’s commodity related sales have increaseddrastically. Today, a large part of its sales is generated through supermarket channels. One fair tradeseller that has contributed significantly to the increase in fair trade commodity sales is Jumbo. Jumboagreed to sell over 40 products of FTO in its bigger stores in 2007. Currently the organization workson four projects aiming to expand the market for fair trade products and to involve more producers inthe fair trade movement (Fair Trade Original, 2008).

The second largest importer is De Evenaar, this organization sells its products through World Shopsand concentrates on handicrafts only (Evenaar, 2010). Both importers (FTO and De Evernaar) are partof the Dutch Association of World Shops (DAWS), it covers almost 400 World Shops in the

Netherlands. In 2007, DAWS and Fair Trade Original established a joint venture called FairSupport.The two organizations together with some importers that are also part of FairSupport provide supportto each other and share knowledge. The people working in World Shops are largely volunteers, around12 500 volunteers work in World Shops and 21 employees (fairsupport, 2010). Fifteen other importershave joined forces and established Centrum Mondiaal. All these importers are specialized in

handicrafts and sell their products in World Shops. DAWS is a member of the overall World FairTrade Organization (WFTO). WFTO has over 350 members which are fair trade organizations (totallycommitted to fair trade). This overall body supports 110 million artisans, farmers, growers, producers,and supporters. The mission of WFTO is ‘to enable small producers to improve their livelihoods andcommunities through sustainable fair trade. WFTO does this by delivering market access through

policy, advocacy, campaigning, marketing and monitoring’ (WFTO, 2010a). WFTO developed itsown standards and own certification label, see appendix A for the certification label and appendix Efor the ten standards.



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A well-known importer and distributor of fair trade products is AgroFair Europe. Agrofair wasestablished in 1996 in the Netherlands. Although it is not a fair trade organization, AgroFair Europe is

best-known for its fair trade certified Oké bananas. Agrofair is therefore a fair trade brander, in the Netherlands the Oké bananas are available at fair trade sellers. Today, Agrofair imports and distributesfair trade certified tropical fruits in Europe and the U.S. Agrofair is totally committed to fair trade, itcommunicates the transformative message of "Fairtrade must not be the exception, it should become

the most normal thing in the world; the way we all do business" (Agrofair, 2010). Agrofaircommunicates the same transformative message as fair trade organizations (ATO’s) do. AgroFairEurope is a parent company that concentrates on tropical fruits. The holding company is situated in the

Netherlands. AgroFair uses Max Havelaar fair trade label and pays a fee to Max Havelaar for using thelabel (Agrofair, 2010).

The best known fair trade organization is probably the Max Havelaar foundation. The foundation wasin 1988 established by Solidaridad. The movement started in 1986 with a recall from Mexican coffeefarmers to Solidaridad; ‘thanks for your aid, but we prefer to have a fair price for our coffee beans’(Solidaridad, 2010a). Two years later the Max Havelaar certificate was introduced by Solidaridad,accompanied with the Max Havelaar foundation. Since 1988, the number of fair trade products have

increased and many other countries have copied the Max Havelaar foundation. Today, Max Havelaaris a member of the umbrella organization FLO, the blue-green fair trade label is everywhere the same,see appendix A. Max Havelaar foundation is in fact the national labeling and certificationorganization. Max Havelaar does not produce, purchase or sell fair trade products, instead thefoundation guarantees a product is produced under the fair trade standards set by FLO (Solidaridad,2010a). Max Havelaar enables organizations that purchase fair trade certified ingredients to carry thefair trade certification on their products, in turn the licensees must sign a license agreement and pay afee. Max Havelaar aims at improving the position of farmers and workers in developing countries, thefoundation works with businesses, consumers and civil society organizations to expand the fair trademovement. The organization was in 1988 introduced together with the fair trade label and certificationcriteria. Max Havelaar has since its introduction, played a pioneering role in fair trade, directing fairtrade out of the conventional World Shops into the commercial market. Thus, Max Havelaar is anindependent certification organization, which is not involved in the purchase or sale of products (MaxHavelaar, 2010a). The organization has expanded the market of fair trade significantly and thismovement is still growing. During 2009, Max Havelaar label grew with 43%; the number of Dutchcompanies selling fair trade certified products increased from 80 to 107 (Max Havelaar, 2010b).

Solidaridad is active in promoting sustainable economic development. Today, the organization isinvolved in several models such as UTZ certified, EKO label. The organization introduced MaxHavelaar and was the driving force behind fair trade development. Today, the organization hasexpanded its range of sustainable labeling schemes. The main aim of the organization is to makecompanies and consumers aware of the sustainable options (Solidaridad, 2010b) The organization alsoworks with producers in developing countries to help them increase their knowledge and stimulate

improvements across all the elements in the value chain including quality, trade, purchasing,marketing (Solidaridad, 2010c). Today, Solidaridad still conducts regular contacts with Max Havelaarfoundation, it supports producers and supports farmers in obtaining fair trade certification(Solidaridad, 2010a).

Fair trade sales are increasing in the Netherlands. According to a research conducted by the NCDO(national commission for sustainable development) in cooperation with Fair Trade Original and MaxHavelaar foundation; the number of fair trade consumers has increased with 40% during 2009. Around2,9 million households have purchased one or more fair trade products during this year. The main



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reason for this growth, is the fair trade brander: Verkade company. Verkade changed in 2008 itsconventional chocolate bars into fair trade certified chocolate bars. In addition, Fair Trade Originalattracted 25% more consumers in 2009 compared to 2008. A reason for this growth is the growingavailability of Fair Trade Original products at fair trade sellers. These figures present the increasing

popularity and acceptance of fair trade certified products. Fair trade sellers are increasingly interestedin expanding or introducing fair trade products into their assortment. This results in greater consumer

awareness for purchasing fair trade products. (NCDO, 2009).

The role of fair trade sellers especially in supermarkets is increasing, the market share of fair trade product sales in supermarkets is 85%. Indicating that supermarkets account for 85% of all sales on fairtrade commodity products. Chocolate is the most purchased fair trade product followed by fruits andcoffee during 2009. (NCDO, 2009).

The research of the NCDO also explores customer reasons for purchasing fair trade. The researchreveals that customers main reason for purchasing fair trade products is the fair price producers and

plantation workers receive in developing countries. Next to economic support, taste can be a decisivefactor for purchasing fair trade products. Around 88% of the customers of fair trade products ratequality of fair trade products as better or no difference in comparison to non fair trade products.Consumers that do not purchase fair trade products argue that the high price and the limitedavailability of fair trade products are the main reasons for not buying fair trade products (NCDO,2009).

2.2 Mainstreaming of fair trade

Companies are taking more and more responsibility for sustainable issues in their business.Consumers, in turn, are increasingly demanding sustainable products that carry a clear traceable label.Companies assume consumers will appreciate the sustainable activities of the business and this willincrease sales and customer loyalty. As a result, companies are investing in CSR activities. Fair traderepresents an opportunity for firms to expand their CSR policy and to tap into new niche markets.Corporate participation in fair trade is increasing, as a result fair trade receives more consumerapproval and enhances its image (Reed, 2009). However, previous research has often criticizedcorporate participation in fair trade by fair trade branders/sellers, research suggest that corporate

participation diminishes or weakens fair trade principles. This subsection outlines the advantages anddisadvantages of mainstreaming and its future challenges.

2.2.1 Pros and cons of mainstreaming fair trade

One of the goals for the introduction of the first labeling initiative, Max Havelaar, was to sell fair trade

products through fair trade branders/sellers in order to expand sales and be more accessible toconsumers. Nowadays, mainstreaming of fair trade is often criticized (Raynolds et al, 2004; Raynolds,2009; Argenti, 2004; Fridell, 2009; Moore et al, 2006; Murray et al, 2006). Corporations have the

power to foster growth of fair trade products. Corporations have the resources, investments, capacityand global reach to foster the fair trade movement. The profit motive accelerates corporations’ movetowards sustainable practices including fair trade. Today, corporations can enhance their competitive

position by creating societal value. (Hart, 2007). However, corporations are slow in incorporating fair



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trade products within their product range (Reed, 2009). A corporation strategic response to fair tradeis limited. Despite the fact that consumers interest in fair trade products is increasing (Nicholls, 2002).

Consumers have high expectations of companies social and environmental responsibilities. Consumers buying behaviour is partly dependent on the sustainable activities of companies. A firm committed tofair trade (fair trade brander/seller) might benefit from aspects such as heightened employee morale

and thus productivity, positive reputation, improvement of image, customer loyalty, less pressure frominterests groups and an overall better corporate performance (Dowell et al, 2000). Corporations slowlyexplore the competitive advantage, sales of fair trade certified products provide. Especially during the

past few years, corporations become more aware of the benefits of being an environmental en socialresponsible company, this leads to more corporations selling fair trade products which accelerates the

pace of fair trade movement. As a result, the number of fair trade branders/sellers is growing.

Mainstreaming of fair trade does not only have positive effects, many critics argue the mainstreamingof fair trade include both pros and cons (Davies et al, 2010). Fair trade branders can have a negativeeffect on the fair trade brand. A major issue is the engagement of corporations in CSR activities (incl.fair trade) with a bad reputation (Reed, 2009). One well-known example is Nestlé, the company has

been boycotted because of its aggressive marketing of baby milk powder in developing countries.However recently Nestlé has become a fair trade brander, the company introduced fair trade KitKatand Partners Blend coffee in the U.K. market (babymilkaction, 2007). These Nestlé practices have

been referred to as cleanwashing or fairwashing. Fairwashing occurs when a fair trade brander/sellerenjoys the benefits from its position it takes as a socially responsible company while only putting theminimal effort in meeting the standards (Davies et al, 2010). Nestlé is claimed to not fulfill the fairtrade values as only a few percent of cocoa they use in their KitKat chocolate bar is fair trade(babymikaction, 2007). Nestlé is accused for deriving positive benefits from its association with fairtrade while putting minimal effort in commitment to the fair trade principles (Davies et al, 2010).

Probably the most popular example of fairwashing by a company is the fair trade brander and seller:Starbucks. Starbucks was forced to become involved in fair trade by a NGO. This NGO threatened

Starbucks with negative publicity if the company did not introduce fair trade. As a result, Starbucksagreed to sell fair trade certified coffee. However, only a few percent of all its coffee sold appeared to

be fair trade certified coffee. Starbucks enjoyed an enhanced brand image and competitive position by promoting itself as a socially responsible company selling fair trade coffee, while in reality only asmall part of its coffee was fair trade. A reason for Starbucks minimal effort in fair trade coffee might

be that the company struggled to integrate fair trade certified coffee while still maintaining highquality coffee. Starbucks had to switch suppliers, it was difficult to find fair trade suppliers that coulddeliver the same amount of quality coffee beans (Argenti, 2004). Starbucks is the largest purchaser offair trade coffee in the world. Today Starbucks sells its espresso, cappuccino and café latte in itsEuropean outlets 100% fair trade coffee (Max Havelaar, 2010c).

Another threat of the mainstreaming of fair trade is that no uniform fair trade label exists; there is alack of a uniform, global fair trade certified label. Although FLO certification is the most commonlyused and best-known fair trade label, there are many other labeling organizations such as WFTOcertification and TransFair USA certification. In addition, fair trade branders can define their own fairtrade certified label and thus develop lower fair trade standards. As a result, there is a chance ofconfusion of consumers on the exact definition of fair trade. See appendix A for the certificationlabels.



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In short, fair trade has been divided into two camps which are interconnected. On the one hand thereare the mission-driven ATO’s and on the other hand there are the market-driven fair trade branders /sellers. The fair trade branders sell their products at mainstream retail channels (fair trade sellers).Initially, ATO’s only sold their fair trade products through specific stores, nowadays ATO’s sell their

products also through fair trade sellers. However, ATOs’ mission and vision has remained the same,they are totally committed to fair trade, while fair trade branders/sellers tend to be less committed to

the fair trade values, best-known examples are Nestlé and Starbucks. Nowadays, a new trend in fairtrade emerging: fair trade sellers (supermarkets) offer own-brand fair trade certified products. Thistrend represents the latest movement in the mainstreaming of fair trade. It is not surprising that ATO’sand fair trade branders/sellers do differ in their commitment, since ATO’s are non-profit organizationsestablished to sell solely fair trade products. As a result, ATO’s only focus on fair trade and oftenATO’s contribute even more to the producers and workers than FLO requires (Raynolds, 2009). Thefull dedication of ATO’s towards fair trade is translated into their mission statement. An example of anATO’s mission statement is

Equal Exchange builds long-term trade partnerships that are economically just and environmentally sound, to foster mutually beneficial relationships between farmers and consumers and to demonstrate,

through our success, the contribution of worker co-operatives and Fair Trade to a more equitable,democratic and sustainable world. (Equal Exchange, 2010).

2.2.2. Challenges facing fair trade

As explained above, there are certain concerns for corporate participation in fair trade. One of themain concerns, is the use of the label by corporations. Fair trade branders can devalue fair trade in the

point of view of consumers. Consumers tend to link fair trade products to ATO’s because fair trade products used to be offered solely by ATO’s, only recently fair trade branders exists and sell fair trade products. As a result, consumers assume that fair trade products are solely offered by ATO’s that areentirely committed to fair trade without pursuing profit. However with the increasing involvement ofcompanies in the fair trade movement, customers have concerns on the commitment of these fair trade

branders to fair trade. These concerns are partially confirmed by the fairwashing trend. Thefairwashing trend is characterized by companies which use other labels to indicate fair trade products,these other label do not comply to the FLO fair trade standards (standards dilution) or the fair trade

brander only offers a small proportion of its assortment fair trade (usually only a few percent), while promoting its company as completely fair trade dedicated, creating a positive image and deceivingconsumers (parallel production).

Another concern relates to the better conditions fair trade branders can offer to consumers, such as better price and quality in comparison to ATO’s. Because fair trade branders tend to do only theminimum required to conform with fair trade standards and do not pay an extra premium or invest in

development projects. Often fair trade branders pursue accessible pricing, they are able to achieve this by taking away inefficiencies in the supply chain and by only meeting the FLO standards required.ATO’s do often not have the power and capacity to take away inefficiencies and want to help the fairtrade producers more by providing extras. As a result, fair trade branders/sellers can offer betterconditions to consumers. In addition, fair trade branders sell popular A-brands, that are preferred bymany consumers. Consequently, consumers might favor fair trade products from fair trade brandersover the fair trade products from ATO’s (Crowell & Reed, 2009). This poses a challenge for ATO’s inattracting consumers. The increased use of the fair trade certificate by fair trade branders may be a



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competitive threat to ATO’s. Consumers might prefer products from fair trade branders over ATOsfair trade products. In response, ATO’s must clarify to consumers the added value they give to

producers in comparison to fair trade branders. ATO’s should try to communicate their unique positionand their dedicated involvement to fair trade. In this way ATO’s can differentiate themselves from fairtrade branders.

Another main challenge is how to bring fair trade into the mainstream market. Currently, there is alimited number of fair trade branders/seller, although this number is growing and fair trade hasreached the mainstream market, fair trade is still special. This can be increased through demonstratingthe success of the fair trade model. Fair trade branders/sellers provide evidence for companies notinvolved in fair trade, that fair trade is beneficial for the business. In addition, ATO’s can promote fairtrade to these companies. More evidence must be provided to companies not active in fair trade thatinvolvement with fair trade provides firms with several benefits and that these benefits exceed theextra costs associated with fair trade. Firms can identify themselves as a socially responsible firm and

profit from the associated benefits.

ATO’s and fair trade branders/sellers face different challenges; ATO’s must try to preserve theirunique character and demonstrate that they are completely dedicated towards fair trade in order toensure not to lose consumers to fair trade branders. While, fair trade branders/sellers face thechallenge of appealing to the less ethically sensitive consumers. In general, fair trade branders/sellersmust show that fair trade certified products are successful and that the subsequent certification labeland CSR policy makes a difference to the company. By demonstrating the success of fair tradecertified products, other companies might be attracted to become involved in fair trade.

2.3 Previous scientific research

Recent academic contributions to fair trade are expanding. The literature that concentrates on fair tradeis diverse ranging from macro-economics, consumer studies, business studies and other fields (Jaffee,2008). Part of these contributions focus on consumer perceptions including the level of consumer trustand buying behaviour towards fair trade products. However until recently, relatively little work hasfocused on the mainstreaming of fair trade. Recently, however a few studies have explored the impactof mainstreaming of fair trade on the fair trade market (Davies et al., 2010; Argenti, 2004; Fridell,2009; Bezencon & Blili, 2009; Reed, 2009; Davies, 2007; Moore et al, 2008). For instance Fridell(2009) explores the mainstreaming of fair trade through a comparative assessment of two distinctivefair trade corporations in the U.S. market. Fridell compares two fair trade branders: a 100% dedicatedcoffee brander to the coffee giant Starbucks in its vision towards fair trade. Other studies also haveexplored involvement of fair trade branders/sellers in fair trade through comparative analysis betweentwo or more organizations that differ in their fair trade mission. Most of these studies focus on fairtrade branders involved in the fair trade coffee market, since coffee has formed the core of Fair Trade

initiatives worldwide and is the most widely consumed fair trade product (Raynolds, 2009). Thesestudies focus mainly on the U.K. and U.S. market with an exception of Switzerland. The U.K. andSwitzerland are considered to be success stories in fair trade while the U.S. fair trade market isgrowing. Other popular fair trade markets are The Netherlands, Belgium and Germany where such astudy has not yet been conducted. This is one of the reasons why this thesis will focus on a relativelynew market in fair trade research namely the Netherlands. The reasons for selecting this country is thatthe Dutch market is one of the world’s most successful fair trade market and fair trade was introduced



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in the Netherlands in 1988. In addition, almost no research had focused on the mainstreaming of fairtrade on the Dutch market.

The academic literature mentioned so far relies on case studies that compare and analyze companies inmainstreaming fair trade (fair trade branders/sellers). However, another bunch of academic literaturefocuses on the mainstreaming of fair trade from a global fair trade network perspective. These studies

situate fair trade within larger processes of change in the global agro-food system and therefore provide an analysis on the entire fair trade commodity chain. For instance, Raynolds et al (2007),argues that the challenges facing the fair trade market include the growing complexity of fair tradelabeling, the centralization of regulating bodies, the increasing participation of large corporate tradersand retailers, and struggles over market mainstreaming among various players, especially betweenthose emphasizing growth of supply and those who prioritize maintaining fair trade’s identity as atransformative social movement (Jaffee, 2008). This academic literature on mainstreaming fair tradehas examined the key challenges and issues facing the fair trade market and provides an insight intothe changing regulatory and organizational environment (Raynolds, 2002, 2009; Renard, 2003, 2005;Reed, 2009; Hira & Ferrie, 2006).

There appears to be a gap in research on mainstreaming fair trade. The studies mainly focus on the fairtrade coffee market in the U.K. or the U.S. or criticize the global fair trade value chain, there is a cleargap in literature studying another successful fair trade market namely the Netherlands. Moreover thesestudies are limited in their research due to the limited number of fair trade actors researched. Thestudies usually compare two contradicting fair trade actors namely an ATO and a fair trade branderand focus on the coffee market (Fridell, 2009; Argenti, 2004). As stated above, this thesis will focuson the Dutch fair trade market which has pioneered fair trade mainstreaming and still is one of thesuccessful fair trade markets in the world.

Despite the many contributions to the literature on fair trade, it should be noted that almost no researchexists on how corporations manage engagement with fair trade principles. This study will addresssome major questions related to the mainstreaming of fair trade. The mainstreaming of fair trade is not

without consequences. It requires organizational change both for ATO’s and fair trade branders/sellers. This study will try to explore the process of mainstreaming. Based on prior researchon fair trade, it should be noted that there does not exists an overall model. Although some modelshave been developed that are useful for this thesis. The first model originates from Low and Davenport(2005) in which a model for engagement with fair trade principles is proposed. In this model,organizations are categorized according to their commitment to fair trade principles. This model isuseful because it will provide a clear overview in what stage different organizations on the Dutchmarket are situated. Analyzing at what stage a company is situated and the challenges the companyfaces in advancing fair trade, can provide an understanding to the company on aspects such as, whereits stand, strategic directions in the future towards desirable conditions, support in setting objectivesand accelerate the fair trade movement (Mirvis & Googlins, 2006). A similar model will be used in

this thesis, this models differs only little from Low and Davenport. Only the model used in this thesiscan be used for all CSR activities, it originates from Mirvis & Googlins (2006). This model is preferred because it is more comprehensive. Next to this model Davies (2009) has revealed that thecreation of alliances and networks are essential in creating success on the fair trade market. This thesiswill provide a better perspective on the organizational relationships as a main factor contributing tosuccess in mainstreaming fair trade.

It should be noted, that research on how actors on the fair trade market manage mainstreaming of fairtrade, from an organizational perspective, is rather limited. Most studies are based on case studies and



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reveal similar results, which tend to explore the competing visions of fair trade. These competingvisions arise from the presence of distinct fair trade different players: ATO’s and fair trade

branders/sellers. Most case studies reveal different directions of different players that broaden ornarrow their fair trade activities (Fridell, 2009). This distinction between ATO’s and fair trade

branders/sellers is central when investigating mainstreaming of fair trade. Studies focus on thedifference between these distinct players and their impact on stakeholders. This study partly explores

the differences between these organizations involved in fair trade and their commitment with fairtrade. This thesis will use the model of Mirvis & Googlins (2006) to identify commitment with fairtrade principles on the Dutch market. No research exists yet with a focus on the Dutch market. Inaddition, this thesis will investigate a new aspect that significantly contributes to success inmainstreaming fair trade, namely: inter-organizational alliances and networks. Research on inter-organizational alliances and networks in the fair trade market is limited, only one study focusesentirely on inter-organizational alliances and networks in the U.K. market (Davies, 2009). Thisresearch provides evidence that alliances and networks influence success of organizations on the fairtrade market. Furthermore, these inter-organizational alliances provide information on how fair trade

branders/seller manage fair trade from an organizational perspective.

2.4 Analysis of corporate participation in fair trade

As explained above, previous research has significantly focused on differences between ATO’s andfair trade branders/sellers. Significant differences between these actors exists. ATO’s traditionallytraded fair trade products, fair trade started as a special cooperation between producers and committedimporters (ATO organizations). The growing fair trade market, consumer approval, and enhancedimage of fair trade, represents an opportunity for corporations to expand their CSR policy and to tapinto the new fair trade niche markets. Several corporations have already grabbed this opportunities,companies such as Ben & Jerry’s, Bodyshop are fair trade branders/sellers that position themselves inthe marketplace as a socially responsible company in which fair trade is at the core of their CSR policy

(Balmer et al, 2007). The growing number of fair trade branders/sellers has increased the availabilityof fair trade products and fair trade sales. Fair trade branders/sellers presumably use fair tradecertification as a tool to increase market share by entering into a niche market. In comparison to fairtrade branders/sellers, ATO’s are fully dedicated towards fair trade principles and fair trade is the mainarea of business resulting in integration of fair trade values throughout the organization; in the missionstatement, strategies and operations. Whereas fair trade branders/sellers often view fair trade as animportant part of their CSR strategy instead of incorporating it throughout their entire organization. Asa result, fair trade branders/sellers tend to be not as committed compared to ATO’s towards fair tradevalues. This poses a challenge for fair trade branders/sellers to promote their commitment to fair tradein the long-term by extending their contribution to improve the economic position of producers.

This subsection of the thesis focuses on analyzing mainstreaming of fair trade. The level of analysisremains at the organizational level. This thesis proposes that successful fair trade participation dependson: 1. organizations commitment towards fair trade. Differences in commitment towards fair tradeexists between fair trade branders/sellers and ATO’s. To explain these differences, a model is

presented describing the level of commitment to fair trade by ranking each organization according to aset of indicators. Understanding the level of commitment of all organization involved on the fair trademarket, is key for these organizations to spot new opportunities and possibilities for the future and toachieve long-term fair trade goals 2. the alliances and networks organizations established on the fairtrade market. In particular, for fair trade branders/sellers, who are relatively new to the market and do



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not have the same commitment and experience as ATO’s have, that operate in the market for severaldecades. For fair trade branders/sellers engagement in alliances and networks is an effective method togain experience and knowledge in fair trade. Partnering with important fair trade organizations can

provide fair trade branders/sellers with the necessary support for successful implementation andmanagement of fair trade products and strategies. Below each approach to mainstreaming fair trade isexamined in detail.

2.4.1 Development process

The mainstreaming of fair trade has replaced the original transformative fair trade message of‘Fairtrade must not be the exception, it should become the most normal thing in the world; the way weall do business’ (Agrofair, 2010) now the general message is ‘shopping for a better world’ (Low andDavenport, 2005). Because of these differences in fair trade messages it is important to evaluate theengagement of the different fair trade players to fair trade values. There is a broad range oforganizations in transition, moving forward in fair trade, with different levels of understanding andcomplexity about fair trade. It is relevant to know at which stage an organization is in its commitmentto fair trade. Mirvis and Googings (2006) presents a scale to know at which stage a company is in itscorporate citizenship. This framework can be easily extended to fair trade because fair trade is acategory of CSR.

The model consist of five stages: elementary – engaged – innovative – integrated – transforming.The first stage elementary (disbeliever) : the organization is not involved in fair trade. The reasons fornot engaging in fair trade can be numerous, for instance the organization is uninterested in fair trade, isnot aware of the benefits, has an indifferent management, is resistant to changing suppliers and other

stakeholders etcetera (Mirvins and Googings, 2006). An example is Douwe Egberts, which is the biggest coffee retailer on the Dutch market who refuses to sell part of product range fair trade. Despiteof pressures by NGO’s the company has no plans to sell a special fair trade certified range of products.

Engaged (defensive fair trade organization) : the stage in which an organization shows interest in fairtrade and sells fair trade certified products. However, these organizations are reactive in their approachto fair trade (Mirvis and Googings, 2006). Example is McDonald’s which has included fair tradecoffee on the Swiss market. McDonalds has little engagement with fair trade principles. The mainreason for McDonalds engagement in fair trade is its local purchasing policy and quality standards.Coffee is an exception to their local purchasing policy. The products purchased outside the country aresubject to IP-Suisse regulations, which is a Swiss organization which labels products according toenvironmental and quality standards, which has strict requirements. Involvement with IP-suisse is as aresponse to the increasing pressures of NGO’s in an effort to appear as a social and environmentalresponsible company. McDonalds involvement in fair trade is thus more an indirect consequence intheir attempt to satisfy pressure groups and to overcome negative publicity and MacDonalds does not

pursue a true ideology concerning fair trade (Bezencon & Blili, 2009).

Innovative (pro-active fair trade organization) : this stage is characterized by organizations who widentheir agenda by becoming more committed to fair trade principles. Organizations usually create aspecial fair trade (CSR) department and develop special agendas. Organizational learning is key to this



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stage (Mirvis and Googings, 2006). For example the Swiss company La Semeuse a coffee roasting anddistribution company involved in the high-quality coffee segment. The company sells a small part oftheir coffee fair trade. The owner of the company introduced the fair trade into the company, it was theindividual ideology to sell fair trade products. Another example is the Swiss supermarket Coop whosells fair trade products. Fair trade is part of their strategy but it did not require a drastic change intheir business process because the fair trade products in their products range are purchased from other

organizations (Bezencon & Blili, 2009).

Integrated (value driven organization) : organizations in this stage have integrated fair trade throughouttheir entire business. As a result, fair trade becomes truly embedded within the organization, it is partof the identity, image and consequently the actions of its members (Mirvis and Googings, 2006). Forexample, the Swiss company Switchers is active in the apparel industry in which fair trade is part oftheir corporate culture. This involves more than being pro-active because the fair trade principles areincorporated in all activities of the business (Bezencon & Blili, 2009).

Transformative (fair trade organization) : in this stage organizations are totally dedicated to fair trade,it is central in their mission statement, identity and strategy. The organization is completely devotedtowards fair trade, these organizations are typical ATO’s and are characterized by their uniqueobjective towards fair trade (Mirvins and Googings, 2006). For example the U.K. organizationCafédirect is a fair trade coffee retailer that was formed through an alliance between four ATO’s. Theorganization is now the fifth largest coffee brand covering 7% of the market in 2008. Their productsare mainly available at mainstream fair trade sellers. Cafédirect does more than only meeting the FLOcriteria for certification, it pays producers at least 10% over the fair trade price set by FLO (Davies etal., 2010).

2.4.2 Advantages of inter-oganizational alliances and networks

Fair trade branders are profit seeking organizations and aim to increase sales by targeting mainstreamconsumers and competing for shelf space at fair trade sellers (Davies & Crane, 2003). However,

becoming involved in the fair trade movement and integrating fair trade certified products into the product assortment, is an unknown process to most corporations. According to Davies (2009), forcorporations to become involved in the fair trade movement, alliances and networks are vital in orderto profitable introduce fair trade into the business. This section of the thesis focuses mainly on thesuccess of fair trade branders/sellers by engaging in networks and support structures.

An increasing bunch of literature concentrates on the benefits of alliances and network as sources ofinformation and know-how, necessary to remain competitive. Partnerships provide access to valuableresources and know-how, firms cannot produce internally (Powell et al., 1996), these complementaryassets are a key motivator for engaging in alliances. Relationships with partners increases openness of

communication and information sharing between partners and consequently organizational learning(Krishnan et al., 2006). Alliances provide access to resources and know-how (Stuart, 2000). Alliancesand networks thus provide a basis for competitive advantage, it is important for organizational successand survival, particularly for young and small firms who are unknown to the new industry or market.Through alliances small or young firms gain knowledge and support.

The fair trade market has grown significantly, there is an increasing interest in commercialization andmarketing of fair trade (Davies & Crane, 2003). Recently, more and more corporations decide to sellfair trade certified products. As a result, this thesis assumes that establishing alliances and networks is



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necessary for successful participation in the fair trade market, it is particularly interesting to analyzethe alliances and network of fair trade branders/sellers. By analyzing the alliances and networks muchknowledge can be gained on how organizations manage and develop the transition towards fair trade.Fair trade branders/sellers have typically a dual purpose of, on the one hand, increasing sales and

profit and on the other hand managing their fair trade ideology. This means maintaining close andlong-term relationships with producers from the developing countries and promoting the fair trade

ideology. Fair trade branders/sellers become involved in fair trade networks by engaging in alliances. Networks improve sales by allowing fair trade branders/sellers to be integrated into an overallnetwork. The networks and alliances are a primary source of valid (tacit) knowledge. The advantagesof networks and alliances for the mainstreaming of fair trade have only receive little consideration inthe fair trade literature. Raynolds (2009) and Renard (2003) described global networks to examine thefair trade commodity value chain. However Davies (2009) examines the fair trade networks andalliances formed in the U.K. market. This is the only study, till now, that analyzes a successful fairtrade market in terms of networks and alliances and explicitly discusses the competitive benefits ofengaging in alliances. Davies also shapes an overview of the network structure in the UK market andhow this network is established and managed. Apart from Davies no study exists yet that analyses fairtrade networks and alliances.

This thesis tries to uncover when organizations involved in fair trade ally and which partners theychoose to ally with and why. In theory, fair trade organizations own a certified fair trade brand and actas a hub through which multiple organizations interact in the production of the products. Thesenetworks have proven to be a successful way of leveraging fair trade movement and grow. Throughnetworks and alliances an organization can grow but remain small at the same time. For instance FairTrade Original has only 49 employees, it means that organizations can appear larger than they actuallyare through use of alliances (Davies, 2009). Also fair trade associations such as EFTA bring severalfair trade market players together and directs information sharing amongst its members.

The network is created as soon as a company has multiple alliances at the same time, it finds itself in anetwork with other partners. Developing a network of different fair trade market players is particularlyvaluable for start-up firms. A recent phenomenon is that ATO’s start to work together with fair trade

branders/sellers to support their fair trade activities and stimulate growth in fair trade sales. Thisincludes the collaboration between fair trade sellers (supermarkets) and ATO’s to sell fair trade

products and between fair trade branders and ATOs. This thesis concentrates on examining to whichextent such collaborations exists on the Dutch market. An important aspect of this is the partnerselection process. The general literature on alliances makes the assumption that organizations are verycareful with partner selection as an organization does not want to enter into an alliance with every

potential partner. Partner selection is influenced by partner properties such as know-how and if the partner is already embedded into an extended network of very well-established partners. In otherwords organizations ally with partners from which they can learn because that partner itself has a lot ofalliances with well-equipped organizations. By allying with a well-endowed partner that has areputation and consequently many other partners, an organization might get access to knowledge thatis accumulated in the sub-network and provide links to other well-established players (Hagedoorn etal., 2006; Gulati, 1998).

Another important aspect of alliances and networks is the partner management process; how anorganization keeps the alliance alive and valuable. Much literature on alliances addresses the point oftrust, which forms the basis for inter-firm alliances. Trust in alliances is complicated, thesecomplexities arise from incomplete contracting. A contract cannot specify every possible contingency,



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consequently there is a risk for opportunistic behaviour by the partner. Firms can reduce this risk bycreating trust with partners. If a firm wants to share tacit knowledge with a partner, a certain level oftrust is needed (Gulati, 1995; Hitt et al., 2000; Mowery et al., 1996). Trust will increase over time withrepeated ties (Gulati & Sytch, 2008). Management literature generates a general understanding of trustin terms of the confidence regarding: the predictability of behaviour of another organization, thegoodwill of another organization, the willingness of another organization to fulfil obligations (Zaheer

et al, 1998). Thus an alliance is preferably based on trust and contracts prevent opportunistic behaviour. Trust provides access to new or additional resources, enhanced learning through /with partners, reduction of risk and speed of market entry.

Trust creates reputation, reputation tells how a partner is likely to behave and signals a firm’s quality.It creates a barrier that prevents partners from behaving opportunistically and creates trust between

partners (Gulati, 1998). Partners with a high reputation are preferred. Reputational considerations playan important role in alliances (Gulati, 1995). It is Fair Trade Original reputation as a fair tradeorganization which gained partnerships with supermarket chains.

However too much focus on reputation and building trust can be difficult. Firms can be too focused ondeveloping close bonds with each other through long-term interaction that they overlook the fact thatthe alliance over time generates less knowledge and resources. There is a chance for a completeoverlap in knowledge and resources, in which there is little to learn and to gain from the alliance. Longterm alliances with partners are preferred if there is no complete overlap. Finally there must be astrategic fit between partners. As long as there are assets that are complementary and the alliancegenerates synergies, both organizations will learn and benefit from the alliance. There should be noconflicting objectives, partners must have the necessary competitive advantage and contributesomething to the alliance that is beneficial or necessary for the joint project.



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2.5 Conclusion

This chapter has provided an answer to sub question one of this thesis:

How is the landscape of the fair trade market changing and what are the challenges oftransforming fair trad e?

In this chapter both the global and national fair trade landscape have been described. Focus has beengiven to the changing fair trade landscape that is caused by the mainstreaming of fair trade.Accordingly, this changing landscape is a source of new opportunities in terms of fair trade. Now, fairtrade is offered at mainstream retail channels. As a result, consumers’ choice in fair trade products hasincreased drastically and fair trade products are now available in regular mainstream outlets. Ofcourse, the mainstreaming of fair trade has some negative aspects and challenges, these issues allcentre around the basic question in mainstreaming of fair trade: do fair trade branders/sellers andATO’s have different commitments to fair trade? This thesis will explore this question on the Dutchmarket. In addition, Davies (2009), has proven that inter-organizational alliances and networks are avital element in the mainstreaming process of fair trade. Alliances and networks allows fair trade

branders and sellers to rapidly learn about fair trade and receive support in their fair trade activities.

Fair trade branders and sellers are relatively unknown to the fair trade concept and do not have muchexperience, therefore alliances might be a key tool for these corporations that simplify the integrationor expansion of fair trade in their business. This thesis will explore this question on the Dutch market.

In short, previous research shows that mainstreaming of fair trade has pros and cons due to thecomplex market, dominated by both mature ATO’s and new arriving fair trade branders/sellers who alloperate with the same ideology in a global network. The global network is occupied by manyorganizations who are part of greater associations that control the market, FLO being the biggest andmost important of all international players. The market is relatively new and is still trying to expand its

position. The ideology to trade under fair principles is what drives this market. As more companies become aware of the benefits of fair trade, the challenges for fair trade increases. Fair trade does notinvolve anymore the traditional practice of going to a special store and buying fair trade products. Fairtrade is changing and moving beyond not-for-profit organizations to profit-making organizations. The

profit driven companies dedication to fair trade raises several challenges, the question remains whetherfair trade branders are just as dedicated to fair trade as the original ATO’s. One of the main concerns isfairwashing practices by fair trade branders/sellers. Another concern is the growing popularity of A-

brand products offered by fair trade branders over products offered by ATO’s. Fair trade branders canoffer better conditions to consumers such as better price and quality in comparison to ATO’s. The

biggest threat is related to the differences between ATO’s and fair trade branders/sellers, who bothhave different visions towards fair trade. This thesis tries to uncover the transition of an organizationin between being not interested in fair trade and being fully dedicated to fair trade. The extent ofinvolvement is partly determined by the alliances and networks fair trade branders/sellers engage in toenhance their fair trade brand. Alliances provide access to knowledge and resources and access toother valuable partners in the network. The goal is to develop a basis for understanding theimportance of networks in the Dutch fair trade market. This study now proceeds into developing aresearch method to examine the mainstreaming on the Dutch fair trade market. The thesis will firststudy the commitment of various actors to fair trade and followed by investigating fair trade theimportance of alliances and network benefits, that reduces the risks of organizations involved in fairtrade.



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3. Methodology

In the previous chapters the theoretical background was presented and the main questions elaborated.This chapter explores the other research questions posed in chapter one. The theoretical background inchapter two provides theoretical support and background for these research questions. In addition,chapter two has answered research question one of this thesis by means of desk research. This chapter

will provide further insight into the research methods that will be applied to answer research questionstwo and three. It will provide an explanation on the research methods that will be used including theresearch setting, type of research, sample and data collection methods. The next chapter, will exploreand answer the research questions.

3.1 Study design

In general, there exist two types of studies: quantitative and qualitative studies. The choice betweenconducting a quantitative or qualitative study depends on research problem, objectives and the type ofinformation the research wishes to obtain. For this thesis purposes, it has been decided to investigate

the research problem qualitatively. Qualitative research primarily uses interviews and case studies, thatallow for detailed information gathering (Blumberg et al, 2008). The objective of this thesis is not togeneralize, but to explore organizational practices. Therefore, any quantitative research that is basedon large-samples is not useful for the purpose of this thesis. Quantitative studies rely on quantitativedata such as numbers and figures, which would be appropriate for assessing number of volunteers inATO’s, income, profits or to study consumer behaviour.

Primary data

Generally, research on fair trade is explorative and conducted in one of the two types of researchapproaches: interviews with individuals responsible for managing fair trade - or case studies. For thisthesis it is especially important to gain insight into organizations by asking questions related torelationships with other organizations involved in fair trade and on their commitment and futureoutlooks. This information can best be obtained by personal interviews. The greatest advantage of the

personal interview is the depth and detail of information to be acquired (Blumberg et al, 2008). On theother hand, a case study is more appropriate when exploring the operations and strategies of a fairtrade organization. A disadvantage of a case study is the long period of time required for conductingthe case study. In fact, several small studies must be conducted in order to compare the differentorganizations, this requires a long period of time. Therefore, a case study is especially suited forstudents following an internship that allows them to supplement their study with practical experience.For the purpose of this thesis, a case study provides too much detailed and in-depth information andthis research is constrained by the limited time available. Therefore, a face to face interview will beconducted.

The qualitative (explorative) research will be conducted by means of personal interviews with the persons responsible for managing fair trade. A qualitative interview can be: structured, semi-structuredor unstructured. In a structured interview, the interviewer asks a predetermined set of questions,mostly closed questions. An unstructured interview is an open-ended interview in which theinterviewer does not have a fixed set of questions to be answered instead the interview is an informaldiscussion. A semi-structured interview usually begins with fixed questions but as the interview

progresses the interview develops into a more informal discussion. Given the focus of this research, itis most appropriate to conduct the interview in form of semi-structured interview. This allows the



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interviewer to cover all the necessary questions, while the interviewer has the possibility to askadditional questions or to change the order of the questions. In addition, the interviewee is free to

provide more information than the questions address (Blumberg et al, 2008).

Secondary data

Next to primary data that will be obtained through semi-structured personal interviews, gathering ofsecondary data is important information that forms the basis for the research design. Secondary datawill be gathered for each organization selected for the interview, the first step of the data gathering

process consist of an analysis of the organization based on secondary information followed by primarydata collection. Relevant secondary information sources that will be consulted include organization’swebsite, annual report, CSR report, press releases, promotional materials, mission statement, otherresearch conducted. The secondary data will be supplemented with the primary data collected frominterviews, to enrich the overall information set. Moreover, secondary data will support and provide a

basis for primary data collection. Usually primary data relies on secondary data sources, generalinformation such as an organization’s annual report provide useful information for analyzing thecurrent situation of an organization and determining its general context.

3.2 Research landscape

The sampling of organizations is essential, because the selection of sample has a great impact on theresults of this research. Therefore careful selection of organizations in the sample is required. Inchapter one of this thesis, the choice for the fair trade commodity market is presented. The fair tradecommodity market is a relatively small market, there are only a limited number of organizations activein the Dutch commercial fair trade sector. In addition, the market is characterized by organizationswith a commercial and mass-market approach to fair trade, these organizations are optimal to examinethe mainstreaming of fair trade. The most prominent players are ATO’s, fair trade branders and fairtrade sellers. Another reason for the focus on the commodity market is that fair trade is mostconcentrated in this market. In other sectors such as the craft and apparel sector there is a negligible

profitability and in the Netherlands these industries are fragmented with only one or two players ofreasonable size mostly selling the non-commodity products only in the not for profit World Shops(Randall, 2005). Therefore attention is especially given to the commodity sector.

This thesis will only focus on organizations active in fair trade on the Dutch market, this does notinclude the large international organizations such as Ben&Jerry’s, Nestlé and Starbucks, which areactive on the Dutch market as well. Reason is that these organizations carry out their fair tradeactivities based on their international described CSR policy. These international organizations offerfair trade products in all countries in which they operate. As a result, no clear picture will appear of theDutch market if these organizations are added to the sample. In addition, a lot of research has been

conducted on these multinational fair trade branders/sellers.Appendix F, shows a list of all licensees on the Dutch markt, note that many licensees are individualshops or small businesses. This thesis will not focus on the smaller organizations involved in fairtrade, only at those organizations that offer fair trade products throughout the Netherlands and not onlyat specific places or in specific areas. For the validity and value of the research, this thesis focuses onthe larger players. As a result of this criteria, only a limited number of organizations are valid for thisresearch.



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3.3 Interview selection

Table 3.1 shows the organizations active on the large-scale, commercial fair trade market. The mainorganization in non-commercial phase is Wereldwinkel (World Shop). The intention of this researchis not to generalize, therefore organizations will be selected across the value chain with a focus onorganizations engaged in commercial, mass market approach to fair trade.

Table 3.1 – Larger organizations engaged in commercial, mass-market approach to fair trade

ATO's Fair trade branders Fair Trade SellersFair Trade Original AgroFair B.V. Albert Heijn B.V.

Ben&Jerry Plus retailKoninklijke Verkade N.V. Jumbo

Nestle Nederland B.V. Super de BoerC-1000LidlAldi

ATO’s

This table provides an overview of all the organizations considered for this research. The table isdivided into the three types of fair trade players, ATO’s – fair trade branders – fair trade sellers, asexplained in chapter one. At least one of each fair trade player must be included in this research inorder to compare the different players. Initially, only one ATO received consideration for thisresearch: Fair Trade Original (FTO). Reason for considering FTO is the long history the organizationhas with fair trade. Moreover, the organization is a well-known fair trade organization on the Dutchmarket, which sells its products in specific stores but also at mainstream fair trade sellers. In fact, fairtrade sellers are expanding the number of FTO products in their assortment. This participation atmainstream retail channels and the reputation of the organization are the main reasons for includingFTO in the research. Max Havelaar was at first not considered to be included in this research. Mainreason is that Max Havelaar does not offer fair trade products, instead the organization main task islicensing the fair trade certification. Thus, Max Havelaar licenses organizations to use the fair tradecertification if they comply with the fair trade standards set by FLO. Max Havelaar is member of theumbrella organization FLO. However, after the first interview with a fair trade seller, it was clear thatMax Havelaar should be included in this research to make the results more valuable. Max Havelaarturned out to be the most important allying partner.

An interview with the two most prominent ATO’s: Fair Trade Original and Max Havelaar enhancesthe value of this research. Interviews with these ATO’s are especially useful and valuable for questionthree concerning alliances and networks. These ATO’s might be key players in networks and allying

with them can provide fair trade branders/sellers with key benefits discussed in the literature review



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Fair trade branders

Nestlé, Ben&Jerry’s are multinational organizations which are not included in this research, asexplained above these fair trade branders are driven by international prescribed fair trade criteria.Agrofair is a fair trade brander, however in its vision and mission statement Agrofair acts as an ATO.Main reasons to exclude Agrofair in this research is its international orientation, making it almost

impossible to acquire national information. Another reason is that Agrofair vision and mission are thesame as an ATO’s vision and mission, both organizations share the same idea and operate on a not-for-profit basis. However the mainstreaming of fair trade is characterized by fair trade branders that

pursue dual purposes of on the one hand satisfying shareholders and raising profit/sales and on theother hand creating a positive image to the public. In addition, Agrofair is owned by several ethicalorganizational and fair trade producers. For this thesis it is important to explore the real fair trademainstreaming by examining companies that are new to the fair trade market and face the dual-

purpose problem. As a result, only one fair trade brander remains valid for this research: Verkade.Verkade can be considered as the most successful fair trade brander on the Dutch market. Since theintroduction of fair trade certified chocolate bars in 2008, the percentage of purchases of fair trade

product(s) per household has increased with 40% during 2008 (NCDO, 2009). Verkade purchases

around 20% of the global fair trade cocoa (Max Havelaar, 2008c).Fair trade sellers

The fair trade sellers considered for this research are mainstream supermarket channels locatedthroughout the Netherlands. There are other mainstream fair trade sellers, these include hospitality

businesses such as Starbucks but also department stores and other retail chains such as Hema, VeroModa sell fair trade products and web-shops. All these categories are excluded in this research. Thereason to not include any hospitality businesses is that no such fair trade seller is interesting enoughfor this thesis. Often these hospitality businesses are individual business, located at specific places. Nonational-wide hospitality business located throughout the Netherlands exists that offers fair trade

products. The reason to exclude department stores and other retail chains is that often these stores do

not offer commodity fair trade products, but offer fair trade apparel or handicrafts. However,department store Hema sells commodity fair trade products, it introduced in 2009, fair trade wine andtea. However, this initiative is rather limited, in total 7 different fair trade wines and teas wereintroduced. Other fair trade sellers offer a significantly larger and more diversified range of fair trade

products. Web shops such as ecogoodies.nl – fairygood.nl, sell different fair trade products rangingfrom apparel, handicrafts to skin care products. The main reason to exclude web shops is that theyoften primarily focus on the sales of non-commodity fair trade goods. In addition, these web shopsattract consumers that want to purchase fair trade products, in other words these web shops do notreach the mainstream consumers. These web shops do serve customers that are worried about thesocial aspect of trade. Only the fully convinced customers will put the effort to order fair trade

products from such a web shop. While, mainstream fair trade sellers attract all types of customers

even the non-sustainable customer, because they sell many regular products. These customers mightfinally be attracted to purchase fair trade products.

As a result, the fair trade sellers that remain interesting enough for this research are supermarkets.Reason is that supermarkets attract a wide range of mainstream customers. Offering fair trade productsin major retail channels is more convenient for customers and even less convinced customers are

perhaps willing to purchase fair trade products. In addition, it will improve the credibility and popularity of fair trade. Thus, interviews with supermarkets are crucial since supermarket involvementin fair trade facilitate mainstreaming of fair trade. At the start of the fair trade certificate in 1988,



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supermarkets offered only a small number of fair trade products sourced from ATO’s. Today, thenumber of fair trade products in supermarkets is increasing. Supermarkets are taking more and moreresponsibility for sustainable issues in their business. Consumers, in turn, are increasingly demandingsustainable products that carry a clear traceable label. Because of the growing fair trade market,consumer approval, and enhanced image, fair trade represents an opportunity for supermarkets toexpand their CSR policy and tap into the new fair trade niche markets. This results in an increased

involvement of fair trade sellers in fair trade, see figure 3.1.

Figure 3.1 – Average number of fair trade products per supermarket in the Netherlands

Source: Milieudefensie, 2009

The number of supermarkets selling fair trade products is increasing and supermarkets are expandingtheir fair trade assortment. The supermarkets’ own label fair trade products is the latest trend in themainstreaming of fair trade. Appendix G shows a list of all supermarkets that sell fair trade productsand the number of products available in 2009 compared to 2008. In addition, a graph shows the long-term trend in fair trade products available at supermarkets. Appendix H, shows the market shares ofsupermarkets in the Netherlands. By combining the figures of both appendices, a clear picture can bedrawn of the most important supermarkets which sell most fair trade products. Table 3.2, shows a listof fair trade sellers according to the availability of fair trade products in stores and their market share.The table (3.2) shows that the supermarkets: Jumbo, Plus, Super de Boer and Albert Heijn offer mostfair trade products in their stores and have a large market share. Therefore, these fair trade sellers will

be considered for this research. The supermarket Vomar, Dirk v.d. Broek and Bas v.d. Heijden offeralso many fair trade products, however these supermarkets have a small market share and are locatedat specific areas in the Netherlands.



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Table 3.2: selection of fair trade sellers

2009 Products available Market shareJumbo 48 4.9%Plus 26 6.0%Super de Boer 25 6.5%

Albert Heijn 23 32.8%Vomar 17 1.7%Dirk v.d. Broek 21 4.2%Bas v.d.Heijden 16MCD 15 -(Super)Coop (15)13 2.4%Dekamarkt 14 -C1000 13 11.7%

Nettorama 11 -Golff 11 -Em-Té 11 -Lidl 9 5.4%Boni 8 -Spar 8 2.3%Poiesz 5 0.9%Aldi 0 8.3%


The supermarkets to be interviewed, will be selected according to this ranking in table 3.2. Based onthis ranking the supermarkets Jumbo, Plus, Super de Boer, Albert Heijn sell most fair trade productsrespectively (mileudefensie, 2009).

Since 2010, supermarket chain Plus only offers fair trade certified bananas instead of conventional bananas sold under free trade. This initiative represents the largest supermarket commitment to fairtrade, till now. Next to Plus, the supermarket chain Jumbo offers the largest assortment of Fair TradeOriginal products. Based on these facts, an interview with Plus and Jumbo is important for thisresearch. In addition, the supermarket chain Albert Heijn is characterized by the growing sales of ownlabel fair trade products under the label of ‘puur en eerlijk’ (pure and fair). The label is an umbrellalabel consisting of several sustainable labels including fair trade products (Ahold, 2009b). The own-label fair trade products do carry the FLO certification label. Based on these facts, an interview withAlbert Heijn can be interesting. In addition, Albert Heijn sells FTO’s fair trade products and fair tradeflowers. Also Super de Boer sells many fair trade products from FTO.



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Table 3.4

Information sources used

Interviews with fair t rade organizations

Interviewee Interviewee position Length Date Interview Place ofinterview

O

Albert Heijn Jitske van Zanten-de Ruiter

brandmanager AlbertHeijn

20' 5 July 2010 Telephone Maastricht Annual (Corporate R(Ahold, 2009a-b)2010a), Puur en EHeijn, 2010b).

Plus Arie vanDoesburg

unitmanager Vers,Plus Retail

20' 9 July 2010 Telephone Maastricht Annual Report (Plus,

KoninklijkeVerkade

Jessica Zomerdijk brandmanager,Verkade

written 19 July2010

Email Maastricht Annual CR Report

Fair TradeOriginal(FTO)

Harrold Goessens Office manager, FTO 75' 16 July2010

In person Culemborg Annual report (Fair(Fair Trade Origi

MaxHavelaarStichting

Peterd'Angremond

Algemeen directeur,Max Havelaarstichting

30' 23 July2010

Telephone Maastricht Annual Report (Mafoundation doing



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3.6 The interview questions

The interview will start with more general questions related to the organization’s experience with fairtrade, the reasons for the initiative, the main challenges for transforming part of the product range intofair trade products, the pricing strategy of fair trade products etcetera. Followed by more specificquestions in order to gather detailed information concerning the two research questions. The second

research question concerning the commitment of different organization active in the fair trade marketto the fair trade principles, will be analyzed according to methods that have already been used in

previous research (Bezencon & Blili, 2009). Research on the commitments of different organizationsto fair trade has already been conducted in other markets. As a result, a method to analyze thisquestion has been established. Thus, the research methods established in a previous study, fromBezencon & Blili (2009), will be replicated in this research. For research question three concerningalliances and networks, no existing interview questions exist for measuring benefits derived fromengaging in these alliances and networks. The only study conducted on alliances and networks in thefair trade market is based on a case study approach. However, this research by Davies (2009) providessome direction and guidance for this thesis’s interview questions. Therefore, the questions asked will

be based on this research by Davies. The focus will be on the mainstream Dutch market, therefore the

partners more downstream of the supply chain are of particular interest. Questions will be centeredaround the main partners of each organization and the position of partners in the network including inthe supply chain, distribution, retailing and fair trade associations such as EFTA. Furthermorequestions are related to the main reasons for engaging in networks, partner selection, management of

partnerships, but most importantly benefits derived from partners. The study by Davies (2009) has provided guidance in developing interview questions related to alliances and networks. This articleinvestigated the success in the UK fair trade market by engaging in alliances and network. The goal ofthe interview questions is to develop a basis for understanding the importance of networks andalliances in the Dutch fair trade market. See appendix I for the questions asked during the interview.



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4. Results

Chapter three discussed the research methods used in order to answer the research questions. Thisthesis assumes that organizations involved in fair trade differ in their commitment towards fair trade,dependent on their CSR strategy and fair trade activities. This thesis also assumes that success in thefair trade market is dependent on the extent to which organizations engage in alliances and networks.

In order to gain new insight on the Dutch fair trade market and to find evidence for the propositions(expected findings), a careful analysis by means of interviews has been conducted with a range ofdifferent organizations active on the Dutch fair trade market. This chapter will provide an analysis ofthe information gathered during the interviews. The information obtained during the interviews will

provide an answer to the two research questions of this thesis namely:

2 What is the stage in the development process of organizations involved in fair trade in theirengagement with fair trade principles?

3 To which extent organizations create inter-organizational alliances or engage in networks whenselling and marketing fair trade products?

This chapter provides the results of the interviews conducted with the five organizations, see table 3.4.All organizations have provided a significant source of information, valid for this thesis. Appendix Idescribes the range of interview questions used in order to obtain the necessary information. Thischapter will present the information obtained during the interviews. This chapter will start with adescription of the interview results to answer the second research question, followed by a section

presenting the interview results to answer the third research question.

4.1 Commitment of organizations towards fair trade

The next section analyzes research question two regarding the engagement of organizations to fair

trade. This section is based on interviews with five organizations on the Dutch fair trade market andaims at analyzing whether these organizations denote a certain engagement with fair trade values. Theresults indicate that firms differ in their fair trade engagement, differences exist especially betweenATO’s and fair trade branders/sellers, but also among fair trade branders and fair trade sellers. Ingeneral, fair trade organizations (ATO’s) seek to transform the existing trading practices and structuresin support of the poor and dispossessed. However, fair trade branders/sellers communicate a differentmessage and indicate different reasons for their involvement in fair trade. A review of theorganizations’ engagement with fair trade principles is presented. The results show a synthesis of thekey management factors for each organization. Table 4.1 provides an overview of the main results.Based on this analysis the scale of Mirvis & Googins (2006) is used to define the stage for eachorganization concerning its engagement with fair trade principles.



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4.1.1 Albert Heijn

The core business of Albert Heijn is retail trade by means of its ± 835 supermarkets. Albert Heijn is asubsidiary of the parent company Ahold. The supermarket employs around 55,000 people andgenerated € 9,843 million in turnover during 2009. Given the high turnover Albert Heijn is consideredmarket leader on the Dutch retail market with a 32.8% market share (Ahold, 2009a). In 2009, Albert

Heijn launched a new label for responsible products, AH puur&eerlijk (pure & honest). This is AlbertHeijn’s private label for responsible products. Puur&eerlijk label comprises five different categories:organic products, fair trade products, sustainable catch (fish) products, free-range meat andecologically produced non-food products (Ahold, 2009b). The fair trade products within puur&eerlijkassortment all carry the Max Havelaar certification, indicating that the products comply with theinternational fair trade standards set by FLO. In addition, Albert Heijn sells several fair trade productsnot under puur&eerlijk assortment but carry a brand name, for instance Fair Trade Original and CaféOk. Recently, this retail chain has introduced fair trade certified flowers and is expanding the range offair trade flowers and in may 2010 the supermarket introduced fair trade certified cotton clothing. Anindependent investigation called Ekotellingen, counts the average number of organic and fair trade

products in supermarket. According to this study’s results, Albert Heijn sells 23 fair trade products per

store on average, this provides Albert Heijn with a fourth place in the ranking (Milieudefensie, 2009).Albert Heijn main source of income is generated through the sales of regular products. As a result, thecompany sells many non- fair trade products. A specific department is responsible for the puur&eerlijkrange, there is not a specific department for fair trade. The purchasing process of fair trade products isnot different than for conventional products. The difference lies with the producers, Albert Heijn wasforced to make new deals with different suppliers in order to sell fair trade products. Max Havelaar

proved to be a valuable organization in this process. In addition, several fair trade products of FairTrade Original carry the puur&eerlijk label. The prices of fair trade products offered by Albert Heijnare higher than of conventional products. Albert Heijn maintains the same profits margin on both itsfair trade products and conventional products. As a result , final fair trade prices are higher. AlbertHeijn does not apply a loss-leader strategy on its fair trade products, only in the case of specific

promotions. However, the price is always above the cost price and fair trade products in promotiongenerate high-volume sales.

The sustainable label puur&eerlijk was introduced to meet the rising consumer demands, who areincreasingly demanding sustainable products. The different product categories in one label, allowsAlbert Heijn to sell different categories of sustainable products. Consumers are able to quicklyrecognize the sustainable products by the puur&eerlijk label. Albert Heijn wants to communicate theirethical identity to the public by means of several communication mediums: promotions, website, tvcampaigns, website, Allerhande (magazine of AH).

We can argue that Albert Heijn’s strategy is based on diversification , the company sells many ethicallabels and fair trade is one label of the many labels. Albert Heijn sells these different labels in order toappeal to different consumer groups and to communicate itself as a environmentally and sociallyresponsible company. Concerning the five stages presented in chapter two of this thesis, Albert Heijnfits into the second stage called Innovative (pro-active fair trade organization) , although Albert Heijndoes not operate a special fair trade department, the available fair trade product range in itssupermarkets is expanding. However, Albert Heijn pursues several sustainable initiatives includingfair trade, which represents only one category within its total sustainability (puur&eerlijk) range. Inaddition, the company has not integrated the fair trade principles in its operations.



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4.1.2 Plus Retail

The core business of the Plus Retail (Plus) is retail trade through its 268 outlets. Plus is a relatively big player on the Dutch market and holds a market share of 6%. Plus is a well-known supermarket on theDutch market, which characterizes itself by ‘value for money’ and ‘service’. Recently Plus is showingan increasing commitment towards sustainability, with a clear focus on organic and fair trade products.

The company is ranked on the second place in Ekotellingen, indicating that the Plus sells an average of26 fair trade products per outlet compared to 23 products in Albert Heijn. In addition, Plus offers the

broadest range of organic products; on average 175 per outlet (Milieudefensie, 2009). Plus is veryactive in corporate social responsibility, the CSR strategy focuses on several product categories:animal-friendly, fair trade, organic and local commitment products. Each product category isrepresented by a different label (uniform labels for organic and fair trade products). The CSR policy isfocused on three p’s (people, planet, profit). Fair trade plays a main role in the CSR policy. Sales ofthe different responsible product categories (animal-friendly, fair trade, organic and localcommitment) shape the CSR policy of Plus.

No specific department is responsible for fair trade. The fair trade product purchasing process is notdifferent compared to the conventional product purchasing process. On average, the price of fair trade

products are higher than for conventional products; the extra costs are added. This pricing principleaccounts for all products except for bananas. Plus revealed, in December 2009, that all of its bananaswill be fair trade. This transition is the largest fair trade commitment from a Dutch supermarket ever.Plus sells around 130 tonnes fair trade bananas each week, this initiative will increase the sales of fairtrade certified bananas significantly and enhance the impact of fair trade for thousands of plantationworkers. Plus is the first retailer in the Netherlands able to change towards fair trade purchasing on alarge scale. This initiative provides Plus with a unique position on the Dutch market. The transitioninto 100% fair trade bananas has already proven to be successful in the UK, where Sainsburyintroduced the concept of selling only fair trade bananas. With this initiative, Plus meets consumerdemand for sustainable products, without raising the price. The prices for fair trade bananas are thesame as the prices for conventional bananas, the fair trade costs are absorbed in the price. As a result,

Plus receives a lower profit margin for its fair trade bananas. This initiative shows commitment fromPlus to fair trade due to the lower profit margin compared to conventional bananas. In addition, thetransition towards fair trade bananas, has increased sales with 20%. This initiative turns out to be awin-win situation in which Plus sells more bananas generating more or same profit as sales ofconventional bananas, while satisfying consumers who demand sustainable products and increasingthe impact of fair trade for plantation workers. Now around 6500 tonnes fair trade bananas are soldinstead of the 500 tonnes fair trade bananas before the initiative. Concerning the future, Plus is

planning to shift entirely towards fair trade mango’s and pineapples. In addition, Plus wants to expandits assortment of fair trade products. Plus tries to communicate their engagement to fair trade through

promotions, magazines and website. It does not explicitly communicate the fair trade image throughadvertising, but informs the consumer about the large availability of fair trade products and other

sustainable products in its stores. Plus does not select fair trade as the only sustainable product, but provides a range of sustainable choices for the consumer.

Concerning the commitment of Plus towards fair trade, it is possible to conclude that Plus shows agrowing commitment to fair trade. Plus is expanding its range of fair trade products and is generatinggrowing fair trade sales. The banana initiative is the largest fair trade initiative ever made by a Dutchsupermarket. Indeed Plus shows an above-average supermarket commitment towards fair trade, theintroduction of fair trade bananas is only an additional element in its CSR policy. Plus is catergorizedthe same as Albert Heijn: Innovative + (pro-active fair trade organization) , because Fair trade is part



38

of Plus strategy but it did not require a drastic change in their business process, the only changerequired was a switch in suppliers. However, Plus is more committed to fair trade than Albert Heijn is.

The next stage for the Plus would be Integrated (value driven organization) in which fair trade isintegrated throughout the entire business and is part of their identity. Plus can reach this stage byincreasing the amount of fair trade products and communicating fair trade more intensively. So that it

becomes part of their image. It is still doubtful whether supermarkets such as Plus will want to reachthis integrated stage. Supermarkets want to offer a large variety of products to its customers due to themany diverse customers demanding different products. The integrated stage means that supermarketsmust integrate fair trade through all its business practices, focusing primarily on fair trade productsinstead of other sustainable products. Therefore, it is more likely that mainstream supermarkets suchas Plus and Albert Heijn will remain in the innovative stage.

4.1.3 Verkade

The fair trade brander Verkade is a Dutch manufacturer of biscuits, chocolates and related products,

and part of the UK United Bicuits group. Not much inside information on the company is revealed, theannual report of the United Biscuits group only presents the group results. In addition, Verkade wasnot willing to reveal sensitive information during the interview. As a result, figures on the turnoverand market share remain unknown. Verkade is a well-known mainstream brand on the Dutch marketand should hold a considerable market share of around 20%. Around 550 employees work forVerkade. The United Biscuits group launched in 2008 have a wide-ranging CSR program: achievingsustainability, in which it sets clear measurable goals for the company as a whole such as reducingcarbon emissions, waste sent and landfill, packaging waste etcetera (United Biscuits, 2009). Verkadedecided to make all its chocolate products (chocolate bars) fair trade from October 2008. Since then allcacao and sugar is sourced from fair trade producers. Verkade has a history of sustainability: i t wasone of the first to offer jobs for women, to have a work council before it was legally required and to

provide kindergarten. Sustainability is deeply rooted in the company and especially on the socialaspect. Verkade introduced fair trade because Verkade wanted to make a difference and contribute tothe quality of life for families in the developing world. Fair trade is integrated throughout thecompany. Since all chocolate of Verkade is fair trade, it affects all the processes throughout theorganization such as purchase, sale, marketing, product development, logistics, finance etcetera. Nospecific department for fair trade exists because fair trade is standard in the business operations andmindsets of the employees. Purchase of fair trade ingredients is part of the standard purchasing

process, Verkade tries not to change producers often. Verkade maintains the same profit margin on its products as for conventional products, therefore prices of its fair trade products are higher than forconventional products. However, Verkade achieved to keep its prices accessible, while offeringfarmers a premium price, by taking away inefficiencies in the supply chain.The move of Verkade into fair trade required new suppliers who could offer the same quality cocoa.Verkade found fair trade ingredients with the right quality and ended up with an even better taste. Intotal Verkade processes 1500 tonnes of cocao annually, this is 20% of the world market in fair tradecocao (Max Havelaar, 2009) . In addition, all sugar is purchased according to fair trade standards.Verkade tries to communicate its fair trade initiative with specific campaigns, advertisement, website.At the start of the fair trade initiative, Verkade launched introduction campaigns, including the auctionof the first fair trade chocolate bar. This action raised €15.800 reserved for development aid. Alsoduring ‘Sinterklaas’ (St. Nicholas) Verkade made consumers aware of its fair trade chocolate letters.Verkade is working together with the supermarkets on promotion and creating awareness.



39

Verkade surpassed the Innovative (pro-active) stage, the fair trade values are integrated within allactivities of the company. Consequently, Verkade is at an early stage of the Integrated stage (valuedriven organization) ; fair trade is embedded throuhout the company and has become part of theiridentity and image. However, this is a new image, since Verkade only recently introduced fair tradenamely in 2008. Fair trade has to become part of the corporate culture of Verkade. This involves thatthe fair trade principles are incorporated in all activities of the business and in many of its products.

Verkade is still at an early point of the integrated stage, in order to become truly integrated Verkademust integrate fair trade ingredients in all of its products.

4.1.4 Fair Trade Original

The ATO: Fair Trade Original (FTO) is a non-profit foundation, the foundation imports fair trade products for sale on the Dutch market. The turnover was €17.8 million over 2009. FTO is an importer,wholesaler, and coordinator of development programs. Besides, FTO is a product brand, which iswell-known and mainstream, see appendix L. The products of the foundation are well-known andavailable at mainstream food retail channels (fair trade sellers) and in gift retail shops such as World

Shops. FTO sells a range of ‘Food’ items (including beverages) and non-food items calledGift&Living. FTO offers around 150 Food products and many Gifts&Living products. FTO wasestablished in 1959 and currently employs 52 employees, although this is a small number ofemployees. The foundation appears large for its size because it has outsourced many activities to

partners. FTO’s mission is to contribute to eradicating poverty in developing countries, with a focuson sustainability and justice for producers.

The fair trade products are bought and imported by FTO and sold directly in mainstream retailchannels or specific fair trade shops. The foundation is closely involved with the producers of its

products, who are located in developing countries. FTO intensively collaborates with producers of fairtrade products. FTO provides a development program for producers in order to support and improve

business operations. The Food items of FTO all carry the Max Havelaar label, however products fromGifts&Living do not have the Max Havelaar certification. Reason is that the FLO has not establishedfair trade criteria for non-food items with an exception for flowers, cotton etc. As a result, FTO hasestablished its own fair trade criteria for this sector. Food accounts for 42% of the total turnover andGift&Living 58%, however sales of Food products are growing while sales of Gift&Living productsare stagnating. The reason for this growth in Food products is the increasing interest of fair tradesellers towards fair trade products, as a result fair trade sellers accept a wider range of FTO products inits stores. The prices for fair trade products are higher than for conventional products, the extra costsof fair trade are added to the overall price. This price includes the costs purchasing Max Havelaar’slicense. In order to raise awareness for FTO’s products, the foundation stimulates sales. In 2009, thefoundation focused on promotion of fair trade during the fair trade week and through its own brandcampaign. During the fair trade week, FTO products were demonstrated in supermarkets. Moreover,fair trade sellers promote FTO’s products by discounts on these products or advertises FTO productsin their magazines.

FTO is a typical Alternative Trade Organization (ATO) established in 1959, before any fair tradecertification scheme. Traditionally, FTO sold its fair trade products through World Shops, nowadays alarge part of its sales is generated through retail channels. The foundation is 100% dedicated towardsfair trade, the values of fair trade are present in the daily activities of FTO. FTO is a typical fair tradeorganization, distributing fair trade products among consumers and raising awareness. FTO has



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become a mainstream brand on the Dutch market. Concerning the stage of commitment, FTO is positioned in the last stage Transformative (fair trade organization) . The foundation is entirelycommitted towards fair trade, all its activities are fair trade oriented. Its overall goal is to decrease

poverty and inequality by guaranteeing a fair trade minimum price to its producers and the additional positive contributions associated with fair trade. The foundation sells the products under its own brandname (or to retail chains under own-label), it is not-for-profit and raises consumer awareness for fair

trade.

4.1.5 Max Havelaar Foundation

The ATO: Max Havelaar main responsibilities are certification and product labeling by means of providing fair trade certification label to its licensees, who pay a fee to Max Havelaar in order to beentitled to use the certification on fair trade products. The foundation is not-for-profit and aims tochange the position of producers in the world who often do not earn sufficient income for living. Thefoundation was established in 1988, when a NGO called Solidaridad created a certification label and afoundation (Max Havelaar). The label guarantees products are purchased under fair trade criteria. The

certification was a success and provided the opportunity for mainstream channels to offer fair trade products, consumers can easily select fair trade products. Consumers who want to stimulatedevelopment and poverty reduction can choose for products carrying the label. The vision of MaxHavelaar is: a world where justice and sustainable development forms an obvious basis ofinternational trade, so that everyone can build a decent and worthy living by means of its work and canfully exploit opportunities.

The main activities of the foundation are – to offer independent certification by means of MaxHavelaar certification for fair trade, - stimulating demand for fair trade products by promoting fairtrade and convincing consumers to purchase fair trade products, - cooperation with partners to support

producer organization and their members, - creating awareness across society for fair trade and theimportance of the Max Havelaar certification, - supporting licensees and cooperate with them todiscover and realize new product possibilities (expanding the range of fair trade products at licensees),- actively seek for new licensees willing to sell fair trade certified products, - inspecting companiesusing the Max Havelaar mark. The foundation is the driving force behind many fair trade initiatives offair trade branders/sellers on the Dutch market. In the Max Havelaar system, a licensee is anorganization that signed an agreement with Max Havelaar to be entitled to apply the Max Havelaar fairtrade certification on its products covered in the agreement. Max Havelaar is a national operatingfoundation, on international level FLO (Fairtrade Labeling Organization) operates. Max Havelaar ismember of the umbrella organization FLO. Max Havelaar provides fair trade branders/sellers with alicense to use the fair trade certification if these organizations comply with the fair trade standards set

by FLO. At present, nineteen national labeling initiatives are member of FLO.

The values of fair trade are present in the daily activities of the foundation. The foundation isrelatively small, only fifteen employees and one volunteer work for Max Havelaar. Nevertheless theMax Havelaar foundation is well-known. It is the fair trade certification that is well-recognized byconsumers. All fair trade products in ‘food’ category (including beverages) carry the Max Havelaarcertification. The foundation is expanding the range of products, recently two non-food items cancarry the fair trade label: flowers and cotton. Max Havelaar is involved in all kinds of activities tocreate awareness for fair trade, in 2008 Max Havelaar introduced a new category under fair tradecriteria: cotton. The new fair trade certified cotton was introduced with the ‘wrong campaign’ and



41

included a series of activities such as the guerilla-catwalk in the middle of the PC. Hoofdstraat(mainstreet) in Amsterdam. These activities have received much media attention and press coverage.In addition, ambassadors are active for the organization. Also Max Havelaar has intensivelycooperated with other organization to make the fair trade week a success. The objective of all theseactivities is to raise awareness for potential commercial partners and consumers.

Max Havelaar is a not-for-profit foundation that focuses entirely on fair trade. The organization iscontinuously working, with ambition, on the reduction of poverty and injustice by means of fair trade.Max Havelaar obviously is in the last stage Transformative (fair trade organization) , Max Havelaar isan organization in which fair trade is central in their mission statement, identity and strategy. Theorganization is completely devoted towards fair trade .



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Table 4.1

Results of the interviews by key management factors

Factors Albert Heijn Plus Verkade Fair Trade OriginEconomic activity Retail trade (supermarket) Retail trade (supermarket) Biscuits, chocolate industry Retail trade

Size (employees) ± 55,000 550 52

Turnover in € (2009) 9 million 1,91 million unknown 17,8 million

Distribution date In general since 1988 / 'puuren eerlijk fair trade' 2009

In general since 1988 / bananassince start of 2010

sep-08 Since 195

Fair trade productselection

Food, flowers and cotton Food Chocolate products and sugar Food, Gifts & Living

Fair trade specificdepartment

No No No NA, because the wholorganization is fair troriented

Department size(employees)

NA NA NA NA

Employees' personalinterest in fair trade

Employees are not directlyconcerned with fair trade



Commitment to fair one of the criteria wh

people.

Main CSR policy Fair trade is part of the mainCSR policy. CSR is integratedin activities.

Fair trade is an importantelement within the CSRstrategy.

The company is active insustainability, Verkade wantsto make a difference.

Application of fair trin all of its activitiesand vision are based trade values.

Supply chainmanagement

Use their usual purchasing department, purchase of fair trade does not differ from conventional purchasing process

Organization only im products from fair tra producers / traders

Personal relationswith producer groups

Close relationships with Max Havelaar and formal relationships with producers and traders Yes, product development programs are establishelp producers to in



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4.2 The importance of alliances and networks

Next section will give an overview of the results from the interviews for each participatingorganization. Chapter two of this thesis explained that networks and alliance provide severaladvantages to organizations active in fair trade, these advantages are analyzed through: competitivedevelopment (purpose 1), intellectual development (purpose 2), ideological development (purpose 3).

In addition, several factors determined the benefits derived from alliances and networks: partnerchoice, partner use, partner management (Davies, 2009).

Each organization is different, consequently the questions asked during the interview differ. Althoughthe main interview questions, presented in appendix I are asked, each organization collaboratesdifferently and adaptation of the questions to each organization is required. Accordingly the questionsare adapted for the best results.

4.2.1 Albert Heijn

Competitive development: Albert Heijn works intensively with several fair trade partners. The mostvaluable partners are Max Havelaar and Fair Trade Original (FTO). Max Havelaar providesinformation and support to its partners and is an intermediary key player that connects fair trade

producers with fair trade branders/sellers. In addition, FTO supplies many fair trade products for AH.A large part of the products supplied by FTO are sold under AH own brand: puur&eerlijk. As a result,of this collaboration with the two ATO’s, quality and continuous availability of fair trade products inthe supermarket is guaranteed.

Intellectual development: developing alliances with partners is crucial for obtaining the necessaryinformation and knowledge of the fair trade market. Especially Max Havelaar proved to be a valuable

partner, this alliance allowed Albert Heijn to learn fast about the fair trade market. Max Havelaarsupports Albert Heijn in almost all of its fair trade activities. Max Havelaar connects producers and

companies, it provides a list of fair trade suppliers for a range of products and provides advice on thedifferent suppliers. As a result, Albert Heijn did not have to spend much time, effort and money insearching for fair trade suppliers for its products. For example, if Albert Heijn wants to offer fair tradecashew nuts, Max Havelaar will provide the necessary information about possible producers/suppliersof the cashew nuts and will support the communication between Albert Heijn and the

producer/supplier. Max Havelaar provides all the information and supports Albert Heijn requests tooffer fair trade products. As a result, Max Havelaar simplifies the whole fair trade process for AlbertHeijn; ranging from providing information about suppliers and contacting these suppliers todistribution of fair trade products. In addition, Max Havelaar provides knowledge of the fair trademarket; the foundation is aware of all the developments in the fair trade market including new fairtrade products, suppliers, licensees. This knowledge and contacts Max Havelaar holds, are

complementary assets Albert Heijn does not possess internally. Consequently, Albert Heijn has a closeand intensive relationship with Max Havelaar, the two organizations meet each other monthly. Duringthese meetings various fair trade related issues are discussed. In turn for the knowledge and supportMax Havelaar provides, Albert Heijn sells fair trade products carrying the Max Havelaar certificationin its supermarkets and increases the credibility of fair trade products. In addition, Albert Heijn mustsign a license agreement with Max Havelaar and pay a fee to be entitled to apply the fair trade mark on

products.



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Ideological development: The main idea of the ideological development is to discover whether thereexist a network of companies pursuing fair trade values. According to the research by Davies (2009), anetwork of organizations active in fair trade on the U.K. market exists. Question remains whether sucha network exists on the Dutch market. Max Havelaar is the main organization, who connects with allorganizations active in fair trade. In addition, Fair Trade Original sells many of its products throughfair trade sellers. Often Max Havelaar and Fair Trade Original are the only organizations that are in

direct contact with the fair trade sellers. Albert Heijn provides evidence for this finding, the companyhas only developed partnerships with Max Havelaar and Fair Trade Original. In addition, thesupermarket sells Verkade’s products, however the main reason behind sales of Verkade is not fairtrade related, instead Verkade is a mainstream brand, that is demanded by consumers and available inall main retail channels.

Partner Choice: Max Havelaar is the obvious choice for companies who want to sell fair trade products. This partner possesses a range of competencies that are of great value for fair trade sellers,which do not internally possess these assets. Albert Heijn chose specifically to work with ATO’s: MaxHavelaar and Fair Trade Original because it offered considerable credibility to the own-labelled

products.

Partner Use: Max Havelaar provides much unexpected information. The organization provides marketinformation and extensive support to Albert Heijn’s fair trade activities. Albert Heijn leverages manyadvantages from the partnership. Max Havelaar underlying aim behind this extensive support is the

possibility to demonstrate and expand fair trade. The organization enthusiastically supports companieswith their fair trade activities. Max Havelaar views the increase in companies selling fair trade, as oneof its main goals to achieve in order to expand the impact of fair trade. In addition, the growingadaptation of fair trade by fair trade sellers leads to growing credibility for fair trade products fromconsumers, especially if mainstream retail channels start selling fair trade or expanding their range. Asa result, Max Havelaar profits directly from the partnership with Albert Heijn. The monthly meetingsare an opportunity for Max Havelaar to promote fair trade products and keep an eye on particular fairtrade interests of Albert Heijn.

Partner Management: partnerships are based on a contract; Albert Heijn has signed a licenseagreement with Max Havelaar to be entitled to carry the fair trade certification on fair trade productswithin the puur&eerlijk range. However, the partners create close bonds with each other throughrecurrent interactions. If partners work together over an extended period of time, trust develops.

4.2.2 Plus Retail

Competitive development: the focus of the interview was especially on the banana initiative. The banana initiative is a success, sales of bananas have increased with 10-15%. Due to this success, Plus

introduced in week 19 of 2010 the fair trade banana for children. The transition from conventional bananas into 100% fair trade bananas at the start of 2010, required Plus to cancel certain supplierssuch as Dole. Now Fyffes, supplies almost all the fair trade bananas for Plus. Fyffes imports anddistributes tropical products in Europe. The company is involved in the production, procurement,shipping, ripening, distribution and marketing of pineapples, melons and bananas (Fyffes, 2010).Fyffes is a license holder of the Max Havelaar certification. Fyffes sells only a small percentage oftheir entire production fair trade, in 2009 this was about 2-3%. Fyffes is Plus’ main supplier of fairtrade bananas, Agrofair also supplies fair trade bananas. Agrofair is a company entirely dedicated tofair trade, it sells fair trade bananas to stores. The Agrofair fair trade banana is recognized by its ‘Oké’



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sticker and are Max Havelaar certified. Agrofair signed a license agreement with Max Havelaar to sellfair trade bananas (Agrofair, 2010).Plus has a close relationship with Max Havelaar. Max Havelaar is an important intermediary for Plus,the organization connects fair trade sellers such as Plus and fair trade branders to producers andsuppliers.

Intellectual development: Alliances with other partners are essential to get access to resources, know-how and skills the organization does not possess internally. Whether much valuable information andresources are shared is dependent on the partner and the kind of relationship. Max Havelaar is themain fair trade partner of Plus and transfers much valuable information necessary for creatingcompetitive advantage. An example: Plus wants to sell fair trade tea under its own label in itssupermarkets. Subsequently, Plus uses its partnership with Max Havelaar to search for a suitable

partner that is able to provide the right volume, quality and continuity of fair trade tea. Max Havelaarcollaborates intensively with tea plantations and offers Plus a choice in fair trade tea suppliers. Afterthis stage, Plus can introduce fair trade certified tea under its own label. Max Havelaar further

promotes fair trade products at Plus and discusses possibilities with Plus for future possibilities for fairtrade products. If Plus shows an interest to introduce new fair trade products, then Max Havelaar

collaborates intensively with Plus during all stages of the fair trade product development andintroduction of fair trade products in the supermarket.

Ideological development: Plus is not involved in a particular network of organizations active in fairtrade. The company has established individual partnerships with a range of organizations: MaxHavelaar, Fair Trade Original (Plus sell products of Fair Trade Original in its supermarkets), Agrofairand Fyffes. Max Havelaar has created a network of different organizations involved in fair trade bothdownstream and upstream of the supply chain, since the foundation has many contacts with bothsuppliers/producers and fair trade branders/sellers, the foundation directly links these organizations.

Partner Choice: In general Plus applies three criteria to fair trade producers/suppliers, the suppliersmust ensure good quality, accessible pricing and continuity. Currently Plus is searching together with

Max Havelaar for fair trade suppliers for mango’s and pineapples that fulfill the three partner criteria.Plus intents to change from conventional mango’s and pineapples into 100% fair trade mango’s and

pineapples, which is a copy of the banana initiative. Accessible pricing remains an issue for fair trade products. Plus sells its fair trade bananas for the same price as it used to sell conventional bananas, no price change has occurred. The extra fair trade costs are included in the prices, consequently Plusreceives a lower profit margin for its fair trade bananas, due to the extra fair trade costs of bananas.Plus intends to apply the same concept to fair trade pineapples and mango’s. Consequently, thesuppliers must offer reasonable fair trade prices to Plus in order to offer fair trade mango’s and

pineapples to consumers at a reasonable price.

Partner Use: the main partner of Plus is Max Havelaar. Initiatives of Plus to sell more fair trade products requires two-way intensive communication with Max Havelaar. Plus communicates itsinterest in fair trade products to Max Havelaar and together they plan the fair trade initiatives.

Partner Management: relationship are based on a contract and trust develops during the partnership.



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4.2.3 Verkade

Unfortunately, the fair trade brander: Verkade was only willing to participate in this research to alimited extent. The company refused to answer any ‘sensitive’ questions and persisted on aquestionnaire. Verkade answered only a few questions asked on the questionnaire and attached ageneral powerpoint presentation of their fair trade initiative. However, by persisting on an answer tosome of the most important question in combination with the use of the internet and a brochurereceived from Fair Trade Original containing a story on Verkade (Fair Trade Original, 2009a), somevital information was gathered for this research.

Verkade’s fair trade products are available in all mainstream channels, Verkade is working togetherwith supermarkets on promotion and awareness of their fair trade initiative. The fair trade initiativeallows the company to meet its customers’ needs and at the same time pay a fair price to the farmers.Verkade has a wide support program, two of the most important partners of Verkade are: MaxHavelaar and Oxfam Novib. Oxfam Novib is a member of Oxfam International, which is the overallinterconnected network of thirteen independent development organizations. The organizations pursue

similar goals, the overall aim of Oxfam Novib is to generate worldwide support to enhance the ideathat poverty and inequality is unnecessary and not sustainable. The organization does not only focuson fair trade but considers fair trade as a vital tool to reduce inequalities and empower producers whoare often exploited by the free trade system. Oxfam International uses its moral, staff and financialresources to fight against poverty and injustice; ‘demanding justice’ (Oxfam Novib, 2010). Oxfam

Novib supports fair trade in its fight against poverty. The foundation has supported Verkade in itstransition towards fair trade. Oxfam Novib and Verkade have discussed the different sustainableoptions for Verkade and Oxfam has supported Verkade in its search for the best sustainable cacao.Both organizations agreed fair trade is the most suitable option for sustainable cacao. As a result,Verkade and Max Havelaar started a partnership based on jointly transforming the company into a fairtrade brand. Max Havelaar has intensively collaborated with Verkade and still is a valuable partner for

Verkade. Max Havelaar’s knowledge and contacts with different fair trade suppliers, simplifies the process of searching for a good supplier significantly. Verkade’s main selection criteria in fair tradesuppliers was: quality & continuity for a reasonable price. Verkade found fair trade suppliers able tooffer fair trade ingredients with the right quality and volume. In fact, the fair trade ingredients resultedin an even better taste for its products. Since the introduction of fair trade sales have increased with10%. The partnership between Max Havelaar and Verkade was crucial for the transition to fair tradeingredients. Max Havelaar has provided much knowledge and expertise Verkade did not possessinternally.

4.2.4 Fair Trade Original

Competitive development: Fair Trade Original (FTO) is an importer, wholesaler and coordinator ofdevelopment programs. FTO sells its products at major retail channels and in specific fair trade shops(world shops). The organization has many partners both upstream and downstream of the supplychain. Upstream are many producers organizations active in food or handicrafts. Appendix M providesan overview of the trading partners per continent. FTO has many trading partners producing differentfair trade products. The organization establishes development projects with its trading partnersincluding projects to improve product quality, logistics, management and product development, inorder to ensure product quality and development . Especially for handicrafts, product development



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programs are established. Since FLO (Fairtrade Labeling Organization) has not set certificationstandards for handicrafts produced under fair trade conditions. Producers of handicrafts are usuallysmaller corporations, as a result, producers of handicrafts often require assistance regardingcoordination and financial management. FTO provides this assistance where necessary, theorganization regularly (once every three years) checks the state of the trading partners and verifies ifimprovements are necessary. Certain bottlenecks and obstacles may be visible within the organization

(management, information systems, logistics) or at product level (quality, product development) of the producer. In addition, work and living conditions of farmers, craftsmen and employees are examinedand where necessary improved. In addition, external parties often provide financial support for thesedevelopment programs such as the Ministry of foreign affairs and several not-for-profit organizations(ICCO, Hivos, PSO) provide support to development and contribute to social issues as eradicating

poverty, injustice and inequality.

Downstream of the supply chain are partners that sell FTO’s products. Partners include major foodretail channels: Jumbo, Albert Heijn, C1000, Plus, Super de Boer and more and smaller gift retailstores: WAAR shops, world shops, webshops and more. Jumbo, Plus and Albert Heijn are the mostsignificant clients of the FTO’s food products. Since major retail channels are expanding their fair

trade range significantly, sales of FTO’s food products are increasing.Intellectual development: FTO imports fair trade products. Partners are crucial for FTO and without its

partners FTO could not exists. FTO has created itself as a mainstream brand providing quality products. FTO is an importer, the organization sources its products from trading partners and stocks its products for sale to retail stores. However not all the products are immediately ready for sale when the products arrive. Most products are semi-finished and require some additional operations before beingsold in stores. FTO outsources these activities, such as roasting of coffee, pouring honey in jars tovarious companies in the Netherlands. In addition, other products arrive complete and immediatelyready-for-sale, an example is wine, no barrel of wine is imported, instead the producer organization

bottles the wine and put stickers on the wine bottles. Partners are crucial for FTO, the organization provides expertise to its partners upstream of the supply chain, in return for quality products. The

organization is continuously active in assessing existing trading partners especially for handicrafts producers. Producers of food items are controlled on their fair trade standards by FLO (for handicraft producers the FLO has not created fair trade standards and the organization does not control these producers). As a result, no certification exists and consequently FTO established its own fair tradecriteria, trading partners of handicrafts must conform to.

FTO and EFTA (European Fair Trade Association) jointly developed a criteria system in order toassess trading partners / producers according to their compliance with fair trade. The trading partnersof handicrafts are assessed every three years, if FTO notices some imperfections the organizationattempts to collaboratively solve the problem. EFTA was established in 1987 by FTO, nowadays theassociation consists of eleven fair trade importers in different European countries. EFTA stimulates

and supports cooperation between the importers, it facilitates the exchange of information andnetworking and recognizes joint projects. The association stimulates close contact among its members,meetings for the EFTA members are organized regularly. See appendix N for an overview of all theEFTA members.

Ideological development: EFTA has created a network of fair trade importers in Europe, these fairtrade importers collaborate. In addition, EFTA co-developed in 1998 an alliance called FINE togetherwith FLO, NEWS and IFAT. For an explanation of the three organizations please see chapter 2:



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literature review. EFTA has close relationships with the three organizations and together they formone global fair trade network.

Partner selection: trading partners in ‘food’ sector almost always provide the right quality andcontinuity. FTO states that the search for new producers in the fair trade ‘food’ sector is relativelyeasy, due to FLO (including Max Havelaar). The registers managed by FLO, are all approved

producers listed who conform to the FLO criteria. As a result, quality and continuity are guaranteedand producers can be identified and contacted relatively easy. But in the handicraft business no suchglobal organization such as FLO exists and consequently no uniform control on handicraft producersis possible. As a result, it is a complex process to find the right producers. For instance, FTO finds a

partner who produces nice vases, however after five years, the trend for this specific vase is over. Atthis point, FTO must invest in its partner and provide support in the development of a new product.Despite of the product development program, there is a high risk the trading partner resists to changeits products. Consequently, FTO is forced to exit the relationship with this specific partner and find anew partner. At the moment, all the producers of handicrafts are located in Asia and not in Africaanymore. The former African producers resisted to change and FTO did switch to other suppliers. Theorganization creates the development program in order to avoid a switch to another supplier.

Innovation is essential, and partners must constant develop themselves. The fair trade handicraft sectoris characterized by small producers, who are less likely to innovate. On the other hand, the food sectoris characterized by large cooperatives who innovate on their own initiative, for this reasons a switch infood suppliers is uncommon. Partners cannot be dependent solely on FTO, the organization purchasesregularly from its partners, but the amount purchased is not enough to earn a decent income. Thisaccounts especially for small handicraft organizations too, the organization purchases only twice ayear handicrafts from its partners.

Partner Use: through development programs with trading partners the organization attempts toimprove product quality, management, logistics, innovation etcetera. This support is often provided tohandicraft trading partners, characterized as small organizations who often do not have the knowledge,experience and capacity to innovate. FTO provides support to these producers to remain competitive.

Partner Management: relationships are long-term and trust develops as time pass.

4.2.5 Max Havelaar foundation

Competitive advantage: Max Havelaar started in 1988 and introduced the certification label, thisinitiative was soon replicated in other markets across the world. In 1997, FLO was established, FLOunited the national labeling initiatives under one umbrella organization and established fair tradestandards and certification. The Dutch Max Havelaar foundation is the national labeling andcertification organization. Max Havelaar enables organizations that purchase fair trade certified

ingredients to carry the fair trade certification on their products. The licensees must sign a licenseagreement and pay a fee to Max Havelaar. Max Havelaar aims at improving the position of farmersand workers in developing countries, the foundation works with businesses, consumers and civilsociety organizations to expand the fair trade movement. Max Havelaar aims to create a more visible,attractive, better available and widened range of fair trade certified products. An increasing number offair trade sellers adopt a large assortment of fair trade products, and are responsible for this rise insales of fair trade products. The foundation expands its fair trade message, by building new contactswith potential consumers and businesses and invests much time and effort in maintaining existing



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contacts. The foundation keeps regular contacts with businesses that show initiative in fair trade. Withsome more frequently than with other, weekly, but in general monthly.

Max Havelaar maintains a register of producer organizations. The number of producer organizations isgrowing due to the increasing demand for fair trade products. FLO-Cert certifies the producerorganizations. At the end of 2008, 750 producer organizations were certified. Around 1.5 million

farmers and workers in Africa, Latin-America and Asia are directly involved with fair trade. In 2008around 1800 organizations were active in one or more of the stages of the product chain in fair trade.

Intellectual development: Max Havelaar provides companies interested in adopting fair tradeinitiatives into their business with vital information and knowledge. This support is vital for acompany starting in fair trade market. This support is still of crucial importance even after the fairtrade brander/seller is familiar in the fair trade market. Max Havelaar collaborates intensively withorganizations which want to adopt fair trade initiative(s). The foundation provides support in all areasrelated to the fair trade initiative, the foundation provides contacts with suitable suppliers (by means ofimporters or direct contact with corporations), the foundation is intensively involved in theintroduction of the fair trade initiative and communicates the fair trade initiative to the public. Anexample is the intensive collaboration between Max Havelaar and Verkade at the start of their fairtrade initiative, the introduction was a success and received much press coverage. The introductionincluded an auction of the first fair trade chocolate tablet of Verkade. There is still a close cooperation

between the organizations. Max Havelaar maintains close contacts with all of its partners, even afterthe fair trade initiative of a company is introduced, regular contact remains. For example, once amonth, Max Havelaar holds meetings with supermarkets. Max Havelaar discusses potential areaswhere the company can expand its fair trade activities, products that can be offered fair trade andmore. If supermarkets show an interest in offering a specific product fair trade, Max Havelaardiscusses the options for purchasing the specific fair trade product with the supermarket. In addition,Max Havelaar attempts to identify if supermarkets have a particular interest in expanding fair trade.Alliances are an important tool for Max Havelaar to coordinate the fair trade brander/seller’s fair tradeactivities. Max Havelaar is able to promote and provide support for fair trade initiatives and is

involved in the decision-making process regarding fair trade to ensure fair trade activities are done properly. At the moment Max Havelaar is in an active collaboration with Cadbury to find new producers. Trading partners of Max Havelaar benefit directly from the partnership, the partnerships arelong-term.

Ideological development: Max Havelaar is engaged in a global network with other fair trade actors.Max Havelaar is one of the nineteen members of the FLO covering twenty-three countries. All thesemembers are fair trade labeling initiatives. There are three producer networks representing small scale

producers and workers in Africa, Asia and Latin-America & Caribbean. Together these members formone global network. Max Havelaar has intensified its collaboration with labeling organization ofBelgium (Max Havelaar Belgium) and France (Max Havelaar France). The Belgian, French, Spanish

(Asociación del Sello de Comercio Justo) and Dutch labeling initiatives form a cluster. The foundationwants to intensify collaboration with its sister organization in France and Belgium, to divide jointresponsibilities. The idea is that every organization takes certain responsibility for a number ofspecializations such as cacao or bananas. Consequently, each organization is specialized in a few tasksinstead of each organization being skilled in all the tasks.On the Dutch market, Max Havelaar plays a leading role in creating a network, the foundation activelycollaborates with organizations involved in fair trade. Collaboration with Max Havelaar is essential forcompanies that want to introduce or expand its fair trade activities.



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Partner Choice: all trading partners have to conform to the fair trade principles created by FLO. Thesearch for new producers is not a complicating process, often it is a producer’s own initiative to

become a fair trade producer. However quality is a more complex process, in order to ensure the fairtrade producers provide good quality ingredients, Max Havelaar cooperates with producers on a locallevel. A number of people work on behalf of Max Havelaar and are locally located to develop with

producers plans to improve quality.

Max Havelaar collaborates with all organizations who wish to introduce or expand fair trade andactively promote fair trade to companies. As soon as a company shows interest in fair trade, MaxHavelaar creates an intensive collaboration with the company. In addition, the foundation attempts to

promote fair trade to companies that do not yet have any fair trade activities. Hoewever, if over timethis company, still does not show any interest, the foundation stops the promotion and avoids to wastemore time and money on this particular company.

Partner Use: Max Havelaar shares much expertise and knowledge with its partners, in return thecompanies expand their fair trade activities. Max Havelaar has worked for years on increasing therecognition of fair trade sellers for its products. Now finally all the hard work pays off, more and morefair trade sellers are expanding their range of fair trade products. Even budget supermarkets as Lidl

make shelf space available in their outlets to sell fair trade certified products. Supermarkets as theJumbo, Albert Heijn and Plus are providing sufficient and good shelf space to offer fair trade products.The future for fair trade looks bright, there is much more attention for fair trade. Max Havelaar iscurrently busy with introducing new products on the market such as soy sauce and beans.

Partner Management: The start of a partnership is based on a contract; this is the license agreement to be entitled to carry the fair trade certification on certain products. Later trust is created during the partnerships.

4.2.6 Overall results

In order to explain the success of alliances and networks, this section will provide an overall review ofthe general results.

Competitive development: the ability to create and manage successful partnerships with otherorganizations. Partnerships are managed both upstream and downstream of the supply chain.Downstream: major retail channels (fair trade branders/sellers) partner with Max Havelaar foundation.Max Havelaar has proven to be the main partner for many organizations active in fair trade. Apartfrom labeling, the foundation provides a source of information and resources for partner organizationsin the area of fair trade. Max Havelaar created a partnership with fair trade seller Albert Heijn to createAlbert Heijn’s own label fair trade products as part of the puur&eerlijk range. In this way, the productsare branded with Albert Heijn’s own label and carry the Max Havelaar certification. This gives Max

Havelaar access to the 835 stores across The Netherlands. The same concept applies to other fair trade products.Upstream: fair trade branders/ATO’s sell consumer-ready fair trade products. The fair trade seller

purchases the products directly from brand owners (incl. Fair Trade Original and Verkade) or the fairtrade seller purchases directly from a trading partner or producer organization. An example is the fairtrade bananas offered by Plus, Plus purchases the bananas directly from Fyffes. The fair tradeorganizations Max Havelaar and Fair Trade Original have contacts with many of these fair trade

producers / traders that supply fair trade products. At the end of 2008, Max Havelaar certified 750 fairtrade producers, Fair Trade Original around 60, see appendix M. FTO is relatively small (52



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employees) in relationship to the market they serve, the organization is dependent on alliances andnetworks to structure its operations. They do not manufacture of package their own brands, theseactivities are outsourced. In this way FTO has benefited from economies of scale without being a largeorganization. FTO appears to the market as a much larger organization than they actually are.However, working with upstream partners has made organizations active in fair trade dependent onother organizations for high quality and product consistency.

Intellectual development: developing alliances with partners is crucial for obtaining the necessaryinformation and knowledge of the fair trade market. The organizations in the interview all use their

partnership to expand their knowledge and receive support. Alliances and networks are not onlycreated to receive market information and business knowledge about fair trade. Transfer ofinformation is especially valuable for organizations not familiar in the fair trade market and that wantto introduce fair trade activities into their business, then close collaborations with other organizationsare needed to remain competitive. An interesting fact is that every fair trade brander/seller indicatedthat the most important partner is Max Havelaar. Although this has a logical explanation due to thelicensing agreement these companies must sign in order to be entitled to carry the fair tradecertification on their products. Max Havelaar invests much time and effort in creating a close and

intensive relationship that goes far beyond the licensing agreement. The foundation provides all thenecessary support and information for companies willing to expand or introduce fair trade into their business. “Max Havelaar are the strongest allies in fair trade” (Albert Heijn Interview). In addition, thefoundation is active in maintaining a good relationship with fair trade branders/seller and plansmeetings with them every month. In these meetings fair trade branders/sellers are free to discuss allaspects of fair trade with Max Havelaar. It is clear that the foundation welcomes fair trade initiativeswith open arms. Max Havelaar provides a list of fair trade suppliers for a range of products and

provides advice on the different suppliers. As a result, (potential) fair trade branders/sellers do nothave to spend time, effort and money in searching for a fair trade supplier that fulfils the companiescriteria for their products. Max Havelaar collaborates intensively during all stages of the fair trade

product development and introduction of the fair trade products in the supermarket.

Ideological development: Fair trade organizations (Max Havelaar & FTO) are engaged in globalnetworks. FTO established EFTA that directly connects them to all the important fair trade importerswithin Europe. EFTA is directly related to FLO, who are related to all the fair trade certified food

producers and trading partners and to other associations such as WFTO (World Fair TradeOrganization). Max Havelaar is a direct member of FLO and collaborates intensively with its sisterlabeling organizations of Belgium and France. Together, they are working on a division of tasks. Onthe Dutch market, Max Havelaar plays a leading role in the creation of a network, the foundation hasdirect intensive contacts with fair trade branders/sellers and promotes fair trade at companies that havenot yet considered fair trade as part of their business. However, a true network of organizations activein fair trade on the Dutch market does not yet exist. Unlike in the UK, fair trade has not formed aninterconnected network, referred to as the “ideological network, of organizations pursuing similar

goals in relation to improving living conditions in the developing world” (Davies, 2009, p. 118). Themain reason for the ideological network formed in the UK market is that different fair tradeorganizations jointly or individually develop new organizations active in fair trade; they create asubsidiary or duplicate an organization, subsequently the organizations split to allow the neworganization to operate independently. In the UK market Twin has created several organizations forwhich it is co-founder or owner (Davies, 2009). As a result, a close interconnected network isdeveloped. This situation is different for the Dutch market, where an interconnected network does not



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exists. The relationships Max Havelaar creates are close, but the different organizations together donot collaborate; there is no interconnected network of organizations active in fair trade.

Partner Choice: What is interesting is that organizations active in fair trade look for partners withassets the organization does not possess internally. Partner choice is an important factor in developingsuccessful alliances. The organizations must select partners that shape the organization’s reputation

and provides access to valuable resources and know-how they do not possess internally. In general, allfair trade branders/sellers partner with Max Havelaar, because the foundation provides muchinformation and support. From another perspective, reputational considerations play an important rolein selecting Max Havelaar as partner, who offers considerable credibility especially to own-labeled

products. In the reverse, fair trade branders/sellers provide Max Havelaar with the ability to enhancethe fair trade label and increase the popularity of fair trade.Fair trade branders/sellers base their decision on fair trade producers based on the following criteria:quality, continuity, volume and accessible pricing. Max Havelaar maintains a register of all certifiedfair trade producers / traders the fair trade branders/sellers can source from. Partner selection throughthese registers is a simplified process, however the partner selection process is complicated when nosuch register exists. This accounts for handicraft products distributed by Fair Trade Original,

handicraft products are not included in the fair trade standards set by FLO and do not receivecertification. As a result, FTO has developed their own criterion and select trading partners. Selectingtrading partners is a difficult process, as the small handicraft producers often have a low level ofinnovation. As a result, FTO is constantly working on development projects. This is not the same forthe general larger cooperatives active in the fair trade ‘food’ sector certified by FLO, they tend toinnovate on their own initiative.

Partner Use: the partner that shares most valuable information with companies is Max Havelaar. MaxHavelaar provides much unexpected information. The foundation provides market information andextensive support to fair trade branders/sellers. Initiatives of fair trade branders/sellers to sell more fairtrade products requires two-way intensive communication between the organizations. Max Havelaarshares much expertise and knowledge with its partners. Max Havelaar invests much in the

relationships with its partners and shares information that is essential for companies to organize theirfair trade activities.Upstream: ATO’s invest in partner development projects to ensure trading partners provide quality

products and innovate their production process.

Partner Management: once partners have developed a relationship, the relationship must be managed.In general, the relationship starts with a contract. In the beginning of the partnership, collaboration isclose, however when the main aspects of the contract are settled out and completed, intensivecollaboration disappears and maintaining the relationship becomes harder. Max Havelaar attempts tokeep close relationships with larger fair trade branders/sellers after the main fair trade activities arecompleted (development and introduction of fair trade products). Max Havelaar insists on monthly

meetings. The supermarkets Albert Heijn and Plus meet Max Havelaar monthly and still have regularcontacts. Max Havelaar invests in a trustful relationship, organizations develop close bonds with eachother through recurrent interactions.



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5. Discussion & Conclusion

The previous chapter presented the most important results of the interviews. This chapter willelaborate on and further explain the main results of the research. First, the main results will bediscussed. After the discussion a general conclusion of this research will be drawn, followed by anexplanation of the theoretical and practical relevance of the research. Finally, acknowledgements of

the limitations and suggestions for future research are provided.

5.1 Discussion

In this section the results of the research will be compared to the findings in the literature presented inchapter two. Similarities and contradictions between practice and theory will be discussed .

5.1.1 Engagement with fair trade principles

RQ2: What is the stage in the development process of organizations involved in fair trade in theirengagement with fair trade principles?

Mirvis & Googlins (2006) state that the stage of organizations in their commitment to corporatecitizenship differs. Some organizations are integrated, others are innovative and still others just getstarted. This kind of variation can also be found in the fair trade market; two ATO’s interviewed are‘transformative’, fair trade brander is ‘integrated’ and the two fair trade sellers are ‘innovative’. Thetwo fair trade sellers posit a different level within the ‘innovative’ stage. Plus is at a higher level thanAlbert Heijn. So even within a specific stage, differences occur. There are several factors that mightexplain the variety among organizations. First, the rise in corporate social responsibility, companiesare increasingly looking for ways to be sustainable. Second, the increasing consumer demand forsustainable products including fair trade products. Fair trade has become a niche market and receivesincreasing acceptance and credibility from consumers. The rising popularity of fair trade leads toincreasing company participation. There is an increasing variety of fair trade products available at fairtrade sellers. Third, the support of Max Havelaar to companies willing to introduce or expand fairtrade products. Finally, ATO’s seem to have fair trade ‘DNA’ that ensures that they constantly pursuefair trade values, they are motivated by ‘doing the right thing’, while fair trade branders/sellers aremotivated by creating the positive image. These factors explain the differences between organizationsin fair trade and consequently the commitment of organization to fair trade. There are still many otherfactors that can influence an organization’s commitment towards fair trade such as pressure of NGO’s,organizational reputation and their ranking in, for instance, the Dow Jones sustainability index.

Table 4.1 shows the different stages for each organization. The research demonstrates that some

mainstream fair trade branders/sellers can have a real commitment towards fair trade, while at thesame time being oriented to competition and profit. Fair trade perhaps provides these fair trade

branders/sellers with an additional value competitors do not have. Fair trade is implemented by fairtrade branders/sellers as part of their CSR policy and consequently companies do not limit theirsustainable activities to solely fair trade, but often include other sustainable initiative into their CSR

policy. Supermarkets (fair trade sellers) are competing with each other in terms of who offers the mostsustainable products and it seems that supermarkets’ commitment to fair trade is primarily a result of



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the increasing interest of consumers in sustainable products. On the other hand, a fair trade brandersuch as Verkade, has proven that fair trade can successfully be the only CSR focus of a company.

Despite the fact that some mainstream fair trade branders/sellers show a certain commitment towardsfair trade, previous research (Raynolds et al, 2004; Raynolds, 2009; Argenti, 2004; Fridell, 2009;Moore et al, 2006; Murray et al, 2006) has often criticized corporate participation in fair trade,

suggesting that it diminishes or weakens fair trade principles. A major issue in the engagement ofmainstream fair trade branders/sellers in fair trade is that they do not seek to transform existing tradingstructures as a new form of trade. Fair trade branders/sellers view fair trade as an opportunity to tapinto a new niche markets while at the same time position themselves as a socially responsiblecompany, they do pursue the transformative goal of fair trade.

Despite the differences in commitment between fair trade branders/sellers and ATO’s, fair trade branders/sellers still have the power to foster growth in fair trade; the increased involvement ofcompanies in fair trade today, has increased the sales of fair trade products. A fair trade brander suchas Verkade, has a significant impact on the worldwide fair trade market; sales of fair trade cacao haverisen. It is difficult to decide which commitment to fair trade is optimal, although ATO’s are fullycommitted to fair trade, fair trade branders/sellers have the power to foster the fair trade movementand expand the impact fair trade has on producers in developing countries. Companies are increasinglyaware of the fact that CSR activities such as fair trade can positively impact sales. Sales of fair tradeare likely to rise, the question remains whether ATO’s should oblige fair trade branders/sellers to

become fully committed to all fair trade values. In order to prevent fair trade is used as a tool tocommunicate a positive image to the public and to obtain the benefits of fair trade, while at the sametime doing only the minimum required to comply with the fair trade criteria. Such an obligation ishighly unlikely as fair trade branders/sellers will not agree to the new objectives and fair trade willlose popularity by companies. The current system in which companies keep selling the fair trade

products without any further restrictions will be most successful. Fortunately, no fairwashing incidentshave yet occurred on the Dutch market. (Fairwashing occurs when a fair trade brander/seller enjoysthe benefits from its position it takes by being a socially responsible company while putting only the

minimal effort in meeting fair trade standards). Although, this phenomenon is not yet common on theDutch market, it exists in other markets. The difficulty is that fairwashing is totally legitimate.Therefore the real fair trade organizations (ATO’s) and true fair trade value driven businesses shouldcommunicate their fair trade values and objectives to overcome dishonest companies benefit morefrom fair trade than are supposed to.

5.1.2 Advantages of inter-organizational alliances and networks

RQ3: To which extent do organizations involved in fair trade create inter-organizational alliancesor engage in networks?

The question remains whether fair trade branders/sellers benefit from entering into alliances within thefair trade market? Despite the rise in the number of inter-firm alliances and the increasingacknowledgement for alliances in theory and practice. Research on alliances and networks in the fairtrade market remains limited, only Davies (2009) states that the success of organizations active in fairtrade is influenced by networks and alliances. Previous research question has presented thatdifferences exists between organizations active in fair trade; fair trade branders/sellers and ATO’s. Themain issue related to fair trade branders/sellers is that they often pursue two conflicting goals: on theone hand generating profit and increasing sales and on the other hand pursuing societal responsibility



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through fair trade. These different purposes fair trade branders/sellers pursue, can be a source ofconflict. It seems that alliances and networks can be a valuable tool for fair trade branders/sellers inrealizing both goals. An undeniable result of this research is that all fair trade branders/sellers haveallied with Max Havelaar (ATO), this type of alliance must create value for fair trade branders/sellers.Meanwhile, Max Havelaar has the chance to direct fair trade branders/sellers and support theiractivities, in this way ATO’s can keep control on the fair trade branders’/selllers’ fair trade activities

and avoid ‘fairwashing’ practices.

The results reveal that alliances are an excellent tool for the exchange of resources and know-how.However there are several important determinants that might influence the success of alliances: thestrength of the relationship between the partners, complementary assets of the partner, access to know-how and resources, whether partners are well-connected in a network (Davies, 2009; Powel et al,1996; Gulati, 1998). It seems that Max Havelaar possesses all of these determinants. Especially fornew firms on the fair trade market, the resources and know-how Max Havelaar provides are of vitalimportance.

One major issue concerning the alliances created on the Dutch fair trade market, is that a realinterconnected network of organizations active in fair trade is missing. Research of Davies (2009) inthe U.K. fair trade market reveals a rather complicated interconnected network. The successful inter-company network consists of many fair trade organizations, while the network was created by a fewfair trade organizations. A good example to understand how this network was developed in the U.K.fair trade market is by explaining Twin’s (ATO) contribution to this network. The organization is co-founder and owner of several fair trade branders in the U.K. Twin helped to establish Cafédirect (thelargest fair trade hot drinks company in the U.K), – Divine Chocolate (fair trade chocolate brander), -expansion of Agrofair (fair trade fruit brander), - Liberation (fair trade nut brander). Twin seeks toexpand the impact of fair trade by proactively establishing new fair trade branders/sellers. In turn,these fair trade branders/sellers establish links with other fair trade organizations such as Oxfam,Traidcraft, Equal Exchange and the Body Shop. The body shops sells Divine Chocolate and Oxfam,Traidcraft and Equal Exchange helped Twin in establishing the Divine Chocolate company. The

partner organizations developed and established further relationships, expanding the reach of the fairtrade network. The network has grown and sustained the fair trade principles. As a result, no‘fairwashing’ incidents occur from the organizations within the network.

This situation is different in the Dutch market. Fair Trade Original already indicated in their interview,that they envy the U.K. fair trade market, due to their network and number of fair trade branders

pursuing fair trade principles. The results of the Dutch fair trade market, indicate that alliances arevital on the Dutch market. However, such an interconnected network consisting of organizations

pursuing similar fair trade purposes, is not yet established. An interconnected network of organizationsthat share the same purposes (in more or less extent, depending on the type of organization) willdiminish the conflicting purposes, explained earlier, caused by fair trade branders/sellers. Moreover,

networks provide easier access to information; in a network in which partners are connected to eachother, the partners share resources more intensively. An interconnected network creates trust, resourcesharing between organizations (Ahuja, 2000) and is a source of valuable resources, know-how andreputation (Stuart, 2000). These network benefits can support the competitive positioning oforganizations. Currently, Max Havelaar is the main alliance partner for fair trade branders/sellers andthe foundation provides vital know-how and resources to its partners.

Generally, it can be stated that i t is difficult to point out which market situation contributes more positively to fair trade. Though the U.K. market seems more organized, well-connected and has more



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intense network relationships and the network has a large impact on the fair trade sales and publicawareness, the Dutch market must not be underestimated. The U.K. can be used as an example of howa fair trade market might proactively expand itself and create new opportunities.

5.2 Conclusion

The central question of this thesis was:

How is the mainstreaming of fair trade on the Dutch market and how do different players in this fairtrade market operate?

This question was divided into several sub-questions:

RQ1: How is the landscape of the fair trade market changing and what are the challenges oftransforming fair trade?

This question focused especially on the impacts of mainstreaming of fair trade. This research question

has been answered by means of a literature research, therefore chapter two provides an answer to thisquestion. In general, what once was a unique partnership promoted by ATO’s has grown in popularityand companies are more and more implementing fair trade into their business. The fair trade challengeis related to the mainstreaming of fair trade or to the increasing entry of fair trade branders/sellers whohave dual purpose of on the one hand generating profit and sales and on the other hand communicatinga positive image to the public.

RQ2: What is the stage in the development process of organizations involved in fair trade in theirengagement with fair trade principles?

An essential component and a turning point in fair trade was the introduction of a certification system.The certification system offers companies the chance to integrate fair trade into their business without

being a non-for-profit fair trade organization and consumers can clearly identify fair trade products inretail channels. Several organizations have grabbed this opportunity to sell fair trade products.Recently, the positive attitude of companies for social responsibility and the rising consumer demandfor sustainable products, is increasing. As a result, companies are increasingly introducing fair tradeinto their business; recently supermarkets have increased their fair trade product range(Milieudefensie, 2009). This involvement of different companies in fair trade leads to differentcommitments to fair trade. This thesis researched the different types of commitments to fair trade bymeans of interviews with five organizations. The organizations differ in their motivations andstrategies regarding fair trade. Fair trade seller: Albert Heijn integrated fair trade into their own label,the own label contains several sustainable products. Therefore, Albert Heijn focuses on a uniformlabel to communicate the responsibility of the firm. The other fair trade seller: Plus is increasing the

number of fair trade product availability but more importantly the transition to sales of 100% fair trade bananas, represents the largest fair trade commitment of a supermarket ever on the Dutch market.Thus, Plus uses fair trade as a vital component in their CSR strategy. As for fair trade brander:Verkade, all its cacao and sugar is sourced from fair trade producers, therefore the sustainabilityinitiative is integrated in the business activities. The ATO: Fair Trade Original imports and distributesfair trade products to expand fair trade sales and raise awareness. Finally, the other ATO: MaxHavelaar connects with businesses, organizations and consumers to enhance the fair trade movement.The type of engagement with fair trade differs, especially among fair trade branders/sellers (Bezencon& Blili, 2009). Certain fair trade brander/sellers are more involved in fair trade than others while each



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receives recognition for its fair trade activities. It can be concluded that fair trade initiatives stem fromdifferent motives and the level of effort put in fair trade initiatives differs. Fair trade organizationsvision and mission is related to improving the trading position of producers in developing countriesand to enhance justice and sustainable development. This vision is different for fair trade

branders/sellers, who are driven by shareholders demands and focus on generating profits andcommunicating a positive image to consumers in order to compete. This diminishes the likelihood that

firms will adopt their CSR policy fully to the visions of fair trade. Fair trade branders/sellers shouldfocus on satisfying stakeholders demands first. In the end, a conflict between the fair trade vision andthe profit seeking company will remain. The different visions of fair trade provides room fordiscussion on the future of fair trade.

RQ3: To which extent do organizations involved in fair trade create inter-organizational alliancesor engage in networks?

This thesis proposed that alliances between organizations active in fair trade are crucial to achievesuccess on the fair trade market. It can be concluded that fair trade would not be able to grow andextend its reach into business successfully without alliances. Alliances have provided access to marketknowledge, support and resources. Today, supermarkets are turning into a driving engine for fair trade,expanding their fair trade product range. The answer to the previous research question has showed thatcompanies involved in fair trade have conflicting purposes. On the one hand the company must satisfyshareholders, generate profit and on the other hand the company wishes to communicate itself as asocially responsible company. Alliances can help these fair trade branders/sellers in reaching both

purposes.

The impact alliances and networks have on organizations active in fair trade on the Dutch market hasnot yet been researched. In fact, only evidence is available for the success of alliances and networks onthe U.K. fair trade market (Davies, 2009). In the U.K. market an interconnected network of fair tradeorganizations exists. The organizations within this network have direct ties with each other based ontrustful relationships in which partners share knowledge and skills. The organizations within the

network pursue and share similar fair trade goals and provide support to each other, as a result no partner will purely pursue commercial desires that damage the fair trade values. However, such aninterconnected network does not exist on the Dutch market. Despite the absence of an interconnectednetwork, alliances with other fair trade organizations are crucial and important to be successful on themarket. This research was based on five interviews, all organizations indicated Max Havelaar as mainallying partner. Max Havelaar helps organizations to learn fast about the fair trade market. Thefoundation provides support to companies that want to introduce or expand their fair trade activities.Max Havelaar intensively collaborates with fair trade branders/sellers and is a valuable partner. MaxHavelaar’s knowledge and contacts with different fair trade suppliers, simplifies the process for fairtrade branders/sellers in searching for a good supplier. The foundation transfers important informationon fair trade, that fair trade branders/sellers do not possess internally and provide intensive support in

the fair trade activities and maintains close contacts. Furthermore, Fair Trade Original partners withfair trade sellers and smaller retail shops to sell their products. Alliances on the Dutch fair trade marketare important for fair trade branders/sellers to attain knowledge and support. Alliances are importantfor fair trade organizations (ATO) to increase awareness for fair trade. Companies have the power tofoster fair trade, they possess the resources, investments, capacity and reach to enhance fair trade.Consequently, fair trade branders/sellers are responsible for the increase in fair trade sales. MaxHavelaar recognizes this need to cooperate with companies and collaborates with all organizationswho wish to introduce or expand fair trade.



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5.3 Theoretical and practical relevance and implications

This research contributes to previous research and provides further insights into the Dutch fair trademarket, that has been rarely researched. The few studies related to fair trade conducted on the Dutchmarket relate to consumer behaviour and attitudes towards fair trade products (Pelsmacker et al, 2005).Other studies focus on global fair trade market or popular national fair trade markets such as the U.K.,U.S., and Switzerland (Fridell, 2009; Argenti, 2004; Renard, 2003; Raynolds et al., 2007). All thesefair trade related researches cover a wide range of areas in fair trade that can be researched. This studyfocuses on the area of mainstreaming of fair trade and combines two research areas of fair trade thathave been independently researched. However together, these two areas of fair trade provide a betterinsight into the mainstreaming of the Dutch fair trade market.

First of all, this research provides insight into the changing landscape of fair trade due to themainstreaming and growth of the fair trade market. The mainstreaming is characterized by a growingentry of companies into fair trade, that are market driven and constantly searching for new ways toenhance success of the company. This mainstreaming has changed the landscape of fair trade

significantly, the fair trade market is not anymore solely characterized by ATO’s which pursueideological goals. The fair trade market is characterized by a combination of fair trade branders/sellersand ATO’s pursuing different goals. This research provides insight into the different players active onthe Dutch fair trade market. But moreover, this research analyzes players’ engagement to fair tradevalues. The mainstreaming has resulted in a range of different fair trade players with differentcommitments to fair trade. In addition, the mainstreaming has also resulted in an increasing number of

partnerships between organizations active in fair trade. More and more ATO’s and fair trade branders/sellers cooperate and support each other. ATO’s view fair trade branders/sellers as a valuablesource to increase fair trade sales and expand its popularity. ATO’s are willing to help fair trade

branders/sellers and do even promote fair trade activities to companies. This resulted in many partnerships between fair trade branders/sellers and ATO’s.

This study provides further contribution to the field of alliances and networks. The mainstreaming ofthe fair trade market is successful due to the many alliances and networks that have been establishedon global and on national level, both downstream and upstream of the supply chain. It is almostimpossible for a company to enter the fair trade market without the help of ATO’s who possess awealth of information, resources and experience. Fortunately, most negative aspects of mainstreamingsuch as ‘fairwashing’ has not yet entered the Dutch market, however with the rising number ofinternational companies that are switching to fair trade, the fairwashing and other negative aspectsmight become a problem. One might consider changing the fair trade standards, companies have tocomply with, however this will only result in a decrease of popularity of fair trade. Extensive

partnerships and preferably an interconnected network of organizations active in fair trade must try toavoid these negative aspects of mainstreaming of fair trade. It seems that alliances and networks are ofvital importance that connect the different actors. In this way, the ATO’s can assure a validcommitment of fair trade branders/sellers, due to the interdependence between the ATO’s and fairtrade branders/sellers.

This research also provides further insights for companies that would like to use fair trade as part oftheir CSR strategy. The stage of engagement in fair trade does matter, the company will start in stageone and must decide until which stage it prefers to grow. Consequently the company can adjust its

business practices to it and make long-term plans. Moreover this research provides insight to potential



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fair trade branders/sellers in how they can enter the fair trade market. For a company unfamiliar withfair trade, the idea of introducing fair trade all by its own, might be a primary reason to rethink its fairtrade ambitions. However, if the company is aware of the fact that ATO’s provide extensive support tofair trade branders/sellers, that significantly simplifies the entire process of introducing fair trade in thecompany, the companies might be more likely to implement fair trade. An important conclusion of thisthesis is that support through partnerships is of vital importance, especially for young and new firms

on the fair trade market. This research makes companies aware of the extensive support they canexpect to receive when entering the fair trade market and the resulting easy process of implementingfair trade. Also this research, further provides evidence from fair trade branders/sellers whose business

became more successful as a result of fair trade. This together with the valuable partnerships, might positively impact companies initial ideas and biases against fair trade and perhaps view fair trade as anmatching aspect within their CSR policy.

5.4 Limitations and suggestions for future research

This section reveals the limitations of this research. Although this research provides valuable results

and insights into the mainstreaming of the Dutch fair trade market. Acknowledgement of itslimitations is important, these limitations indicate the validity of this study and might direct futureresearch.

First of all the interview strategy selected in this research can be criticized. Several theories haveindicated interviews provide too much space for the interviewee’s own interpretation and interviewsare criticized as not trustworthy. Participants can provide inaccurate or incomplete information. On theother hand, interviews provide much in-depth information that cannot be obtained by any quantitativeresearch. Quantitative research for this type of research is not desirable because the information cannot

be generalized. Therefore the focus is on qualitative study, therefore a case study would be anotherdesirable method for this study, providing a wealth of information. In this way, an organization’swhole department can be analyzed and several people can be interviewed with differentresponsibilities. As a result, case studies provide a more complete picture of the whole organization ora specific department compared to interviews. Different opinions, viewpoints and arguments can beexplored. Consequently, future studies might use case studies to get more detailed and in-depthinformation from different viewpoints in the organizations.

Another limitation is that interview participants might desire to communicate a good image of theorganization. It should be taken into account that participants theory about the motivations tointroduce and expand fair trade might not be consistent with the reality. The sensitivity of the topicand the fear of participants to give confidential information, might cause participants to modifyinformation to enhance the positive image of the organization. Verkade’s fear to provide sensitiveinformation resulted in interview questions that remained unanswered. The main reason for Verkade’s

switch to fair trade is the increasing pressure of FairFood. The organization launched a couple of yearsago a campaign called ‘the children of Verkade’ which is almost similar with Verkade’s slogan ‘thegirls of Verkade’. The publicity stunt focused on raising awareness for child labor in the cacao sector.As a result, Verkade started to cooperate with Max Havelaar. However, this specific information is notcommunicated to the public (Fairfood, 2010).

A minor limitation is that the results are based on interviews with only five organizations. Although participation of more organization was preferred in this research, the Dutch fair trade market is rathersmall characterized by only a few main actors. This research has analyzed a variety of the most



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important fair trade actors, including two ATO’s, one fair trade brander and two fair trade sellers. Thetwo ATO’s: Max Havelaar and Fair Trade Original both have different responsibilities but share thesame vision. Fair trade brander: Verkade is the only Dutch mainstream brand that manufactures fairtrade products. Fair trade sellers: Plus & Albert Heijn are supermarkets that both score high on theEkotellingen ranking and implement different fair trade initiatives. Unfortunately, the supermarketchain that sells most fair trade products Jumbo was not willing to cooperate in this research. The

supermarket indicated that the main reason for not participating in research was the current take-overof Super de Boer supermarket chain by Jumbo and the accompanying hectic circumstances. In anattempt to receive information from Super de Boer, the supermarket indicated the same reason for non

participation. As a result, future research could replicate this research with different participants toobtain further insight.

The research question regarding alliances and networks was based on a research conducted on theU.K. market. In this research, an interconnected network of fair trade organizations was discovered.This network was a vital source of information and support for all the participating organizations.However, such a network does not exist on the Dutch fair trade market. It can be said that U.K. can beseen as an example for other countries in the context of fair trade. Future research can focus on the

opinions of Dutch fair trade organizations on the success of the U.K. market, but moreover futureresearch can focus on the interest in creating this interconnected network of companies in the Dutchmarket and the reasons behind the non-existence of such a network.

Furthermore, interviews with non-fair trade companies can be of value in relation to the questionregarding the commitment towards fair trade. These companies might provide interesting viewpointson the reasons behind the decision to not pursue fair trade values. In addition, given the increasingdemand and popularity of consumers towards fair trade products, the future outlook towards sellingfair trade products of non-fair trade companies is useful to analyze further commitment by companies.

5.5 Recommendation for future research

This section will discuss a new area of research that goes beyond the suggestions provided in section5.4. This new area of research is related to the increasing number of labels for sustainable products.Recently, several labels have been introduced that compete against the fair trade label. Although theMax Havelaar foundation indicated in the interview, that they support more initiatives for sustainable

products, these new labels put pressure on the fair trade label and might impact its credibility.Therefore, new research must focus on the new upcoming labels for sustainable products compared tofair trade. These new upcoming labels, in particular UTZ certified and Rainforest Alliance, arereceiving support of an increasing number of multinational companies that previously rejected fairtrade. The question remains, why these new certification schemes receive so much support ofmultinational companies. Even the market leader of coffee on the Dutch market DE (Douwe Egberts)

recently adopted the UTZ certification. While Max Havelaar has for years put effort on convincing DEto adopt the Max Havelaar certification. Appendix O will provide more information on the differences

between fair trade and other certification schemes based on several researches, that can be used forfuture research.



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5.6 Final remarks

This thesis provides more insight into the mainstreaming of fair trade on the Dutch market. Fair tradestill is a niche market but is expanding vastly. Sales in fair trade products certified under FLO have

been growing 40% on average, annually during the last five years (FLO, 2010c). Fair trade branders/sellers are increasingly viewing fair trade as a value-added aspect of their CSR policy. Evenmultinationals such as Starbucks and Ben&Jerry’s have adopted fair trade. However, with the rise ofother sustainable social labels such as Rainforest Alliance, fair trade will face challenges in the future.The strength of fair trade is that it is a global network with global organizations FLO and FLO-Certensure that farmers and plantations can adopt fair trade easily in their business. It seems that if fairtrade wants to survive in the future, it has to attract fair trade branders/sellers. ATO’s have a key rolein this development, they are the driving engine that promote the benefits of fair trade to potentialcompanies and provide extensive support to fair trade branders/sellers. These ATO’s are often thenational labeling initiatives that work under the umbrella organization FLO on a national level. TheseATO’s have the useful knowledge, experience and contacts to support fair trade branders/sellers. Inthe future, the number of partnerships between these ATO’s and fair trade branders/sellers is likely toincrease as the fair trade movement grows. Perhaps ATO’s can use the U.K. market as an example andexpand the fair trade movement themselves by creating new fair trade branders/sellers such as DivineChocolate on the U.K. market. These fair trade branders will have the same mission and vision asATO’s have. These fair trade branders will be developed by ATO’s and later these new fair trade

branders will operate independently. However, a downside of these new created fair trade branders byATO’s is the fact that these organizations are new to the market and unknown to consumers.Mainstream companies have the reputation and image, therefore ATO’s would also actively promotefair trade at mainstream companies. This is most likely to happen, an increasing number of fair trade

branders/sellers will slowly adapt fair trade into their business. If consumers keep demandingsustainable products, fair trade is likely to grow while at the same time it will experience growingcompetition from other sustainable labeling initiatives.



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7. Appendices



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Appendix A – fair trade certification labels

FLO certification FLO certification in the Netherlands

Transfair Word Fair Trade Organization (WFTO)



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B.3 Cocoa prices



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Appendix C : Figures on the worldwide fair trade market

Appendix C.1: Net retail value, 2007, in 000 €



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Appendix C. 2: Fair trade consumption per capita, in 2007, in €



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Appendix C. 3: Number of licensees of the fair trade certification in 2006



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Appendix D - worldwide fair trade retail sales 2009

Source: FLO (2009)



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Appendix E - WFTO 10 standards of fair trade

WFTO prescribes 10 Standards that Fair Trade Organizations must follow in their day-to-day work and carries outmonitoring to ensure these principles are upheld:

Standard One: Creating Opportunities for Economically Disadvantaged Producers Poverty reduction through trade forms a key part of the organization’s aims. The organization supports marginalized small

producers, whether these are independent family businesses, or grouped in associations or co-operatives. It seeks to enablethem to move from income insecurity and poverty to economic self-sufficiency and ownership. The trade supportscommunity development. The organization has a plan of action to carry this out.

Standard Two: Transparency and Accountability The organization is transparent in its management and commercial relations. It is accountable to all its stakeholders andrespects the sensitivity and confidentiality of commercial information supplied. The organization finds appropriate,

participatory ways to involve employees, members and producers in its decision-making processes. It ensures that relevantinformation is provided to all its trading partners. The communication channels are good and open at all levels of the supplychain.

Standard Three: Trading PracticesThe organization trades with concern for the social, economic and environmental well-being of marginalized small producersand does not maximize profit at their expense. It is responsible and professional in meeting its commitments in a timely

manner. Suppliers respect contracts and deliver products on time and to the desired quality and specifications.

Fair Trade buyers, recognising the financial disadvantages producers and suppliers face, ensure orders are paid on receipt ofdocuments and according to the attached guidelines. An interest free pre payment of at least 50% is made if requested.

Where southern Fair Trade suppliers receive a pre payment from buyers, they ensure that this payment is passed on to the producers or farmers who make or grow their Fair Trade products.

Buyers consult with suppliers before canceling or rejecting orders. Where orders are cancelled through no fault of producersor suppliers, adequate compensation is guaranteed for work already done. Suppliers and producers consult with buyers ifthere is a problem with delivery, and ensure compensation is provided when delivered quantities and qualities do not matchthose invoiced.

The organization maintains long term relationships based on solidarity, trust and mutual respect that contribute to the promotion and growth of Fair Trade. It maintains effective communication with its trading partners. Parties involved in atrading relationship seek to increase the volume of the trade between them and the value and divers ity of their product offeras a means of growing Fair Trade for the producers in order to increase their incomes. The organization works cooperativelywith the other Fair Trade Organizations in country and avoids unfair competition. It avoids duplicating the designs of

patterns of other organizations without permission.

Standard Four: Payment of a Fair Price A fair price is one that has been mutually agreed by all through dialogue and participation, which provides fair pay to the

producers and can also be sustained by the market. Where Fair Trade pricing structures exist, these are used as a minimum.Fair pay means provision of socially acceptable remuneration (in the local context) considered by producers themselves to befair and which takes into account the pr inciple of equal pay for equal work by women and men. Fair Trade marketing andimporting organizations support capacity building as required to producers, to enable them to set a fair price.

Standard Five: Child Labour and Forced Labour The organization adheres to the UN Convention on the Rights of the Child, and national / local law on the employment ofchildren. The organization ensures that there is no forced labour in its workforce and / or members or homeworkers.

Organizations who buy Fair Trade products from producer groups either directly or through intermediaries ensure that noforced labour is used in production and the producer complies with the UN Convention on the Rights of the Child, andnational / local law on the employment of children. Any involvement of children in the production of Fair Trade products(including learning a traditional art or craft) is always disclosed and monitored and does not adversely affect the children’swell-being, security, educational requirements and need for play.



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Standard Six: Non Discrimination, Gender Equity and Freedom of Association The organization does not discriminate in hiring, remuneration, access to training, promotion, termination or retirement basedon race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation,HIV/Aids status or age.

The organization provides opportunities for women and men to develop their skills and actively promotes applications fromwomen for job vacancies and for leadership positions in the organization. The organization takes into account the special

health and safety needs of pregnant women and breast-feeding mothers. Women fully participate in decisions concerning theuse of benefits accruing from the production process. The organization respects the right of all employees to form and jointrade unions of their choice and to bargain collectively. Where the right to join trade unions and bargain collectively isrestricted by law and/or political environment, the organization will enable means of independent and free association and

bargaining for employees. The organization ensures that representatives of employees are not subject to discrimination in theworkplace.

Organizations working directly with producers ensure that women are always paid for their contribution to the production process, and when women do the same work as men they are paid at the same rates as men. Organizations also seek toensure that in production situations where women’s work is valued less highly than men’s work, women’s work is re-valuedto equalize pay rates and women are allowed to undertake work according to their capacities.

Standard Seven: Working Conditions The organization provides a safe and healthy working environment for employees and / or members. It complies, at a

minimum, with national and local laws and ILO conventions on health and safety.

Working hours and conditions for employees and / or members (and any homeworkers) comply with conditions established by national and local laws and ILO conventions.

Fair Trade Organizations are aware of the health and safety conditions in the producer groups they buy from. They seek, onan ongoing basis, to raise awareness of health and safety issues and improve health and safety practices in producer groups.

Standard Eight: Capacity Building The organization seeks to increase positive developmental impacts for small, marginalised producers through Fair Trade.

The organization develops the skills and capabilities of its own employees or members. Organizations working directly withsmall producers develop specific activities to help these producers improve their management skills, production capabilitiesand access to markets – local / regional / international / Fair Trade and mainstream as appropriate. Organizations which buyFair Trade products through Fair Trade intermediaries in the South assist these organizations to develop their capacity tosupport the marginalized producer groups that they work with.

Standard Nine: Promotion of Fair Trade The organization raises awareness of the aim of Fair Trade and of the need for greater justice in world trade through FairTrade. It advocates for the objectives and activities of Fair Trade according to the scope of the organization. The organization

provides its customers with information about itself, the products it markets, and the producer organizations or members thatmake or harvest the products. Honest advertising and marketing techniques are always used.

Standard Ten: Environment Organizations which produce Fair Trade products maximize the use of raw materials from sustainably managed sources intheir ranges, buying locally when poss ible. They use production technologies that seek to reduce energy consumption andwhere possible use renewable energy technologies that minimize greenhouse gas emissions. They seek to minimize the

impact of their waste stream on the environment. Fair Trade agricultural commodity producers minimize their environmentalimpacts, by using organic or low pesticide use production methods wherever possible.

Buyers and importers of Fair Trade products give priority to buying products made from raw materials that originate fromsustainably managed sources, and have the least overall impact on the environment.

All organizations use recycled or easily biodegradable materials for packing to the extent possible, and goods are dispatched by sea wherever possible.

Source: WFTO (2010b)



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Appendix F - Licensees at January, 2010

LICENSEEA.C. Reijgersburg B.V.Agro Bio Connection B.V.Agrofair B.V.Ahold Coffee Company B.V.Albert Heijn B.V.Algra Koffie en Thee B.V.Arcus B.V.Axxent Coffee&TeaBaarsma Wine Group HoldingBeans Coffee B.V.Ben&JerryBio+ Trading Company B.V.Blue Springs Holding B.V.Bonvita B.V.BouquetnetChoco MundoCoffee Fresh Westhoff B.V.Confectiefabriek De Berkel B.V.Delta Wines B.V.De Nieuwe BandDrie Mollen sinds 1818 B.V.Elvee Holland B.V.Eosta B.V.Fair Trade OriginalFair&CoFairConnect B.V.Fleur Products B.V.Foodinvest B.V.Fyffes B.V.Great Grapes Wine BVHilverda De Boer B.V.Hispa FruitHoppe ProfessionalI.C.S. International B.V.Intense Taste/Intense Wines

Jade B.V.Jilderda's BloemengroothandelJoannusmolen B.V.Koetsier - KCA FoodsKoffiebrander G. Peeze B.VKoffiebranderij J.W. Hesselink& Zn.Koninklijke Verkade N.V.Landegent Clothing Consultancy B.V.

Marthomi Allergy Free Foods B.V.Mikmo Management B.V.MongozoMud Jeans B.V.

Nestle Nederland B.V. Neuteboom Koffiebranders BVPeeters Producten B.V.PWG Bedrijfsveilige Kleding B.V.Pronk juweel B.V.Queens ProductsRoyal Taste Company B.V.Santas KoffievoorzieningenSimon Levelt B.V.Smit & Dorlas koffiebranders B.V.Steenland 's Chocoladefabriek B.V.Sustemba Beheer B.V. (Taztu)t Groene LooTamfind Enterprise NetherlandsTB Brown B.V.Tele Flower Auction (TFA) B.V.The GreeneryTiktak B.V.Tony's FactoryVan der Breggen BVVan Duijnen Koffie BVVan Loon - Sealskin BVVan Oordt PortionPack B.V.Van Sillevoldt Rijst B.V.Verdel Bloemenexport B.V.Vital Bedden B.V.Vitality Foodservices inc. (The JuiceHouse)WestfaliaWith a touch of RoseAutobar Holland B.V.BD-TotaalBroektea Rotterdam B.V.Cafe Bar International B.V.De Traay B.V.Fortune hot drinks B.V.Selecta OllandMaas International BVMore Nederland B.V.Sligro B.V.Wijs en Zonen B.V.



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Appendix G - ranking fair trade 2009




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Table: long-term trend in fair trade products available




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Appendix I - Questions

This appendix described the questions that will be asked during the interviews in order to answer thetwo research questions

• Research question 2: What is the stage in the development process of organizations involved in fairtrade in their engagement with fair trade principles?

Previous research has investigated this question in other fair trade markets. Consequently, a researchmethod for investigating this question already exists. This thesis will use the same criteria foranswering the question as other research uses (Bezencon et al., 2009). The criteria relate to severalkey management factors of an organization. Table L.1 presents an overview of these key managementfactors that define the degree of commitment of an organization towards fair trade principles. Thisthesis has not the purpose to define for each key management factor the optimal strategy, but toanalyze an organizations position towards fair trade according to these management factors. Accordingto these management factors interview questions will be asked. Where possible secondary dataresearch is conducted to answer the question.

Table L.1. key management factors

Factors Definition / explanation

Economic activity According to the classification of economic activities issues by Centraal Bureauvoor de Statistiek (CBS)

Size (employees) Size of the company in number of employeesTurnover in € Turnover of the company in euros in 2009Distribution date Date of the beginning of Fair Trade product distributionFair trade product selection Describes the different Fair Trade products sold by the organizationFair trade specificdepartment

Does the organization handle Fair Trade products separately, within a dedicateddepartment? This department could have a broader aim, grouping different social/

environmental productsDepartment size(employees)

Number of employees working in the department specific to Fair Trade, if such adepartment exists?

Employees' personalinterest in fair trade

This variable defines if the employees working in the specific department or ifsome other employees are personally involved in Fair Trade, if they know therelated issues and adhere to the ideology?

Main CSR policy This variable synthesises the company’s strategic orientation concerning CSRSupply chain management Describes how Fair Trade products purchasing is performed, by comparing it with

conventional products

Personal relations with producer groups

Variable describing whether the organization knows the producers of rawmaterial, whether it has regular contacts with them and whether so, the relation’stype that they maintain

Motivations Describes the strategic reasons of the introduction of Fair Trade products in theorganization’s selection

Pricing Describes the pricing strategy concerning Fair Trade products. How are pricesestablished? Is there an increase compared to corresponding conventional

products and why?



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Loss leader strategy on fairtrade products*

Are Fair Trade products used as loss leader strategy where the final price isinferior to its cost, in order to attract clients to buy other products with highmargin?

Type of distribution forfair trade products

Describes the type of distribution channels used by the company to sell Fair Trade products

Fair trade Communication/ advertisement

Describes how Fair Trade is communicated to the clients; is it a communicationassociating the company’s name or brands with Fair Trade?

Source: Bezencon & Blili (2009)

*Loss leader strategy is a marketing tool; a particular products is discounted to a low price, usually below the cost price in order to promote the product

• Research question 3 - To which extent do firms create inter-firm alliances or engage in networkswhen selling and marketing fair trade products?

Prior research by Davies (2009) has provided evidence that engaging in alliances and networks

provides benefits, most of these benefits are related to an increased access to valuable resources andknow-how organizations cannot produce internally. These complementary assets are a key motivatorfor engaging in alliances. Especially for new entrants on the fair trade market, partnering with well-endowed firms in a network is highly beneficial. This thesis argues that alliances and networks

provides a competitive advantage for organizations, in particular for small or young organizations.Therefore the key issue presented in this thesis is whether alliances and networks provides a solidfoundation for competitive positioning of fair trade branders/sellers.

The thesis will answer the research questions according to key findings in previous literature (Davies,2009) on alliances and networks, see table L.2 for a summary.

Table: Benefits and Factor for success in alliances/networks

Key issue Benefits ofalliances

Factors affectingsuccess

Competitivedevelopment

Partner choice

Intellectualdevelopment

Partner use

Whethernetworks

shapefoundation for

competitive positioning

Ideologicaldevelopment

Partnermanagement

Source: Davies (2009)

Benefits of alliances

The ‘partners’ mentioned in the questions are the organizations an organization allies with to facilitateits fair trade operations.

Competitive development – locating competitive capabilities of partners. Questions related to whattypes of organizations enter alliances and whom do they choose as partners?



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development is to discover whether there exist a network of companies pursuing similar fair tradevalues.

Do different fair trade actors work collectively as one solid networked unit to pursue fair tradegoals?

Is the organization engaged in a network of relationships with other fair trade actors?

Which organization(s) play a leading role towards creating network?

Factors affecting success of alliances are:

Partner choice – identify appropriate partnersPartnering with a central connected player provides access to valuable resources and know-how theycannot produce internally (Powell et al., 1996). According to Gulati (1998) a company should allywith a partner that is centrally located in a network and is well-connected to other players. Companiesthat are well-connected in a network are attractive partners, because those partners have ties with otherwell-connected firms. Prominent partners provide valuable resources, skills and reputation. Noresearch questions will be related to partner choice, because questions posed in other categories will

provide an answer to partner choice.

Partner use – leveraging the most out of partners

Are partners willing to share knowledge and expertise with the organization?• If yes, are these capabilities, skills and competencies essential for the organization to remain

competitive? Is the organization willing to share knowledge and expertise with other partners? Does the organization share vital knowledge with partners that helps the partner to remain

competitive?

Partner management – how to manage relationships with partners for long-term mutual benefits.Relationships can be either based on social or legal contracts, legal contracts are often enforced andserve as a tool to reduce risks. While social contracts are purely based on trust. Usually a combinationof the two exists; a contract is necessary especially in the beginning of a partnership due to the chanceof opportunistic behaviour. However, a contract cannot specify every possible contingency.Consequently, there is a risk for opportunistic behaviour by partners. Firms can reduce this risk bycreating trust with partners. If a firm wants to share tacit knowledge with a partner, a certain level oftrust is needed.

Are the relationships based on legal contracts or on informal social contacts?

Is there a level of trust between the organization and some of its fair trade partners or all of its partners?

Are these relationships long-term and based on mutual trust? Does the history of interaction between organizations contribute to the formation of trust between

organizations? (repeated ties with organizations)



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Overview of interview questions related to alliances and networks

Table L.3 - the most relevant research questions

Name a few of the most important partners in the organization's fair trade business? Andtheir role?Does cooperating with these fair trade suppliers allows the organization to ensurevolumes and high quality?

Competitivedevelopment

Which organization(s) are responsible for distribution of fair trade products andretailing?

Which complementary assets do partner share that the organization does not possessinternally?

Is or was the organization engaged in an alliance that allowed the organization to learnfast about the fair trade market?

In what extent is developing alliances with partners crucial for obtaining the necessaryinformation and knowledge required for achieving competitive advantage in the fairtrade market?

Intellectualdevelopment

Is the organization involved or is member of fair trade associations such as EuropeanFair Trade Association (EFTA)?If yes, Does this fair trade association provide a broad range of sources of data andcontacts to people that can be used for enhancing fair trade operations?

Questions only asked to companies and not to ATO’s:In what extent do ATO’s provide support and information required to create and managetransition into fair trade market?

What kind of support do ATO’s provide?How close are the partnerships with ATO’s ?

Are ATO’s active in pressuring or promoting the organization to sell fair trade products?If yes, which ATO’s

Do different fair trade actors work collectively as one solid networked unit to pursue fairtrade goals?

Is the organization engaged in a network of relationships with other fair trade actors?

Ideologicaldevelopment

Which organization(s) play a leading role towards creating network?Partner choice

Partner use Are partners willing to share knowledge and expertise with the organization?If yes, are these capabilities, skills and competencies essential for the organization toremain competitive?

Is the organization willing to share knowledge and expertise with other partners?Does the organization share vital knowledge with partners that helps the partner toremain competitive?

Are these relationships long-term and based on mutual trust?Partnermanagement



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Appendix J – Questionnaire Verkade

Geachte deelnemers,

Momenteel ben ik doende met mijn afstudeeronderzoek aan de Universiteit van Maastricht.Een belangrijk deel binnen mijn afstudeeronderzoek over fair trade, is deze vragenlijst. Hetinvullen van de vragenlijst zal een waardige bijdrage leveren aan het uiteindelijkeonderzoeksresultaat. Het gehele onderzoek zal naar afronding naar de participerende

bedrijven worden opgestuurd.

De vragen zijn allen open vragen.

Heel erg bedankt voor uw deelname!

Linda Romans



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Samenwerking met andere organisaties

Noem een paar van de belangrijkste partners binnen fair trade van Verkade en hun rol?(bijvoorbeeld: Max Havelaar)

Noem een paar belangrijke fair trade leveranciers van Verkade?

Welke organisaties zijn verantwoordelijk voor de distributie van de fair trade producten enretailing?

Is of was Verkade betrokken in een samenwerking met een partner, waarmee Verkade snelkon leren over de fair trade markt? Welke partner is dit (geweest)?

In welke mate is het aangaan van samenwerkingen met andere partijen cruciaal in hetverkrijgen (inwinnen) van belangrijke informatie en kennis noodzakelijk voor het behalen vanvoordelen in fair trade markt?

Zo ja, in welke mate kan deze informatie bijdragen in het versterken van deconcurrentie positie?

Geeft Verkade op zijn beurt weer belangrijke informatie aan partners?

Zijn de relaties met de partners langdurig en gebaseerd op vertrouwen?

Samenwerking met niet-voor-winst organisaties gericht op fair trade

In welke mate geven niet-voor-winst organisaties, zoals Max Havelaar, advies, hulp eninformatie aanVerkade noodzakelijk voor fair trade activiteiten.

Hebben deze organisaties geholpen in de transitie naar fair trade producten?

Welk soort hulp hebben ze aangeboden?

Heeft Verkade nauwe banden met deze organisaties?

Zijn deze organisateis actief geweest in het promoten van fair trade en het overtuigen vanVerkade om fair trade producten te verkopen?

Is Verkade nog betrokken bij andere fair trade associaties zoals de European Fair TradeAssociation (EFTA)?



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Zo ja, is betrokkenheid bij deze associaties van belang voor het verkrijgen vaninformatie en het netwerken met andere personen die iets kunnen betekenen voor defair trade operaties binnen het bedrijf?

Netwerk

Is Verkade betrokken in een netwerk van verschillende organisaties allen actief binnen fairtrade?

Zo ja, welke organisaties binnen het netwerk spelen een belangrijke rol gespeeld in hetcreeren en managen van het netwerk?

Hartelijk dank voor uw medewerking!



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Appendix K –information on the interview provided to potential participants

Management Summary: Onderzoek Succesvol Mainstreaming van Fair Trade

Ontwikkelingen Fair Trade: De fair trade markt is de afgelopen jaren sterk gegroeid. De belangrijkste reden voor deze groei is de toenemende interesse van bedrijven en consumenten

in fair trade producten. Bedrijven spelen een steeds grotere rol in het aanbieden van fair trade producten. Een Engelse term voor deze participatie van bedrijven in fair trade is‘mainstreaming’. De centrale vraag waar dit onderzoek een antwoord op geeft, is gerelateerdaan de mainstreaming van de Nederlandse fair trade markt.

Doel van het onderzoek. Het doel van het onderzoek is om meer inzicht te geven in demainstreaming van de Nederlandse fair trade markt. Het interview richt zich op organisatie-niveau en zal geheel geconcentreerd zijn op de fair trade handelingen van de organisatie. Hetonderzoek analyseert succesvolle mainstreaming van fair trade op twee punten: 1. toewijdingvan de organisatie tot fair trade principes 2. deelname in allianties en netwerken in de fairtrade markt.

De resultaten van het onderzoek bieden o.a. inzicht in mainstreaming van Nederlandse fairtrade markt, de focus zal voornamelijk liggen op samenwerking met andere organisaties en defunctie / doel van deze samenwerking. Het onderzoek veronderstelt immers datmainstreaming afhankelijk is van allianties met andere organisaties. Voor deze reden zal hetonderzoek zich focussen op de vraag of allianties met andere organisaties een cruciale rolspelen in het succesvol mainstreamen van de Nederlandse fair trade markt. De resultatenzullen worden vergeleken met eenzelfde soort onderzoek op de U.K. markt, waarin wordaangetoond dat samenwerking van cruciaal belang is voor organisaties actief in fair trade.

Uw voordeel: Het onderzoek is een primeur en biedt nieuwe kennis op een boeiend gebied.Er is tot nu toe immers weinig onderzoek gedaan op de Nederlandse fair trade markt, vooralop het gebied van allianties en netwerken. Dit maakt het onderzoek zo uniek. Het onderzoekis geheel gratis voor participerende bedrijven en geschied volgens de academische richtlijnenvan Universiteit Maastricht. Alle onderzoeksresultaten worden vervat in een scriptie van demaster opleiding: International Business, specialisatie Strategy & Innovation.

Resultaten: De resultaten van dit onderzoek zullen worden vrijgegeven aan de participerendeorganisaties. Het onderzoek biedt een basis voor inzicht in het mainstreamen van de

Nederlandse fair trade markt en geeft inzicht in de importantie van netwerken en allianties.Het onderzoek biedt een theoretische basis met verbeterde inzichten van de Nederlandse fair

trade markt en de kansen in de toekomst.Contact: Linda Romans

email address + telephone number



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Appendix L – Fair Trade Original



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Appendix M – Trading partners FTO (Fair Trade Original) 2009

Overview of trading partners FTO 2009AfricaTrading partner Country Product Direct purchase Indirect purchase (via third parties) Sidama Ethiopia Coffee - ●

Kuapa Kokoo Ghana Cacao - ●Kasinthula Cane Growers Malawi Sugar - ●ACPCU Uganda Coffee - ●Mauritius Sugar Syndicate Mauritius Sugar ● -Eswatini Swazi Kitchen Swaziland Canned produce ● -K.C.U. Tanzania Coffee - ●K.N.C.U. Tanzania Coffee - ●Mufindi Tea Estate Tanzania Tea - ●Granor Passi South-Africa Apple juice - ●Turqle Trading South-Africa Culinary ● -Tresso Trading/Goue Vallei South-Africa Wine ● -Carmien Tea South-Africa Rooibos ● -Faure Holdings/Ruitersvlei South-Africa Wine ● -

Latin AmericaTrading partner Country Product Direct purchase Indirect purchase (via third parties) La Riojana Coop. Argentina Wine, olive oil ● -Crisil S.R.L. Bolivia Glassware ● -C.A.I. Campesino Ltda. Bolivia Nuts ● -El Ceibo Bolivia Cocoa - ●Acipar Brazil Juice - ●

Vinos Lautaro Chile Wine ● -Apicoop Chile Honey ● -Coop. San Roque/Esperanza Colombia Coffee - ●ANAP/CPA Jose Marti Cuba Juice - ●

ConacadoDominicanRepublic Cocoa - ●

Artesa Arte and Ceramica Ecuador Pottery ● -CREARTE S.A. Guatemala Gifts ● -COPIASURO Guatemala Honey ● -Fedecocagua Guatemala Coffee - ●Manos Campesinas Guatemala Coffee - ●

Unión Majomut Mexico Coffee - ●Cecocafen Nicaragua Coffee - ●Prodecoop S.A. Nicaragua Coffee - ●Manduvira Paraguay Cane sugar - ●Allpa S.A. Peru Gifts ● -Cocla Peru Coffee - ●



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AsiaTrading partner Country Product Direct purchase Indirect purc

BRAC/Aarong Bangladesh

Candles, interior

decoration ● Dhaka Handicrafts Bangladesh Baskets ● Preda Fair Trade Products Philippines Mango ● Conserve India Bags etc ● CRC Exports Private Ltd India Scarves, leather goods ● Eco Tasar Silk India Scarves ●Equitable Marketing Association India Scarves, instruments ● Sasha Exports India Accessories, gifts, etc. ● TARA Projects India Jewellery, gifts ● F.T.C.I./Amdo Food Company India Bags, noodles, etc. ● Sunstar Overseas Ltd. India Basmati Rice ●

United Niligiris Tea Estate India Tea - Pt. Teduh Mitra Utama Indonesia Gifts ● Mahaguthi Nepal Pottery, paper - Yak & Yeti Enterprises Pvt Ltd Nepal Silver, gifts ● Colombo Tea Blenders Sri Lanka Tea - MA’s Tropical Food Processing Sri Lanka Spices ● Y–Development Cooperation Co. Ltd Thailand Gifts ● Samroiyod Food Corp. Thailand Pineapple ● Sang Arun Ceramic Co. Ltd Thailand Pottery ● Kasama Trading Co. Ltd Thailand Pottery ● Progressive Farmers Association Thailand Rice - MAI Vietnamese Handicrafts Vietnam Gifts ●



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Appendix N – EFTA members

Claro (Switzerland)

CTM altromercato (Italy)

EZA Fairer Handel GmbH (Austria)

Fair Trade Original (The Netherlands)

Gepa (Germany)

Ideas (Spain)

Intermon Oxfam (Spain)

Oxfam-Magasins du monde (Belgium)



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Oxfam-Wereldwinkels (Belgium)

Solidar'Monde (France)

Traidcraft Plc (United Kingdom)



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Appendix O - Suggestion for future research: fair trade compared to other certification schemes

In supermarkets an increasing amount of sustainable products are available. It started with coffee ofMax Havelaar in 1988, but meanwhile the variety of sustainable products has increased, covering:fruits, tea, wine, cacao, cotton, cosmetics and innumerable other products. Fair trade is not the onlycertification label for sustainable products. Certificates and inspection marks such as EKO (organic

products) , Demeter, UTZ Certified and Rainforest Alliance assure consumer products are producedwithout involving exploitation or produced under organic conditions.

Western organizations argue on which sustainable label is the best; is it fair trade? This internationalcertification for fair trade, introduced in 1988 by Max Havelaar foundation, dominated the field ofsustainable products for a long time. A research published by Cidin (Ruben & Zuniga, 2010) revealedthat farmers profit more from other sustainable labels such as Rainforest Alliance. These certificationlabels do not guarantee a minimum price, but focus on ensuring better and larger crop yields. Theseother certification schemes aim at achieving ideological goals but moreover the business economicinterests of companies plays a key role in the certification schemes. The certification scheme providesguaranteed production for producer corporations and therefore farmers receive support in the form ofimproved agricultural methods. The research analyzed over 300 coffee firms in Nicaragua andconcluded that the yields of coffee farmers who produce under the private certification labels are onaverage qualitatively and quantitatively better than other labels. But, fair trade provides better prices.The research concluded that fair trade indeed provides the highest price to farmers, but not much morethan other labels. The other labels provide better quality performance and larger volume (Ruben &Zuniga, 2010). See figure ?.

(Ruben & Zuniga, 2010)

Fair trade (NRC Next, 2008)

Recently, an independent research has been conducted by the Radboud University in Nijmegen aboutthe impacts of fair trade. In this research, around 3000 families have been interviewed who are directly

involved in the fair trade coffee and banana production in Africa and Latin America. The researchincluded both individual farmers united in a cooperation and plantation workers. The most remarkableoutcome of this research ‘the impact of fair trade’ (Ruben, 2008) is that the farmers do not profitdirectly by means of a higher income. In the most of cases the income differences between ordinaryfarmers and fair trade farmers are limited. That is logical, seen the higher prices for products in the

previous years. The research was conducted in 2008, this year was characterized by high world prices.As a result, the fair trade minimum price and the world price did not much differ. Another vitalconclusion of the research is that not only the farmer / worker directly involved in fair trade production



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benefits from the fair trade system. The ordinary (independent) farmers profit from fair trade as well.If 30 percent of the farmers in an area work under fair trade conditions, traders will pay other farmersin the area the same price. For instance, the collective employment contracts closed between the fairtrade plantation in Ghana and its employees, provided the trade unions a chance to demand the samesalary and same labor conditions. In addition, a fair trade premium is paid to farmers for the purposeof development, which is in most cases invested in education, health care, electricity or infrastructure.

The whole community benefits from these services. Although the income of fair trade farmers during2008 almost equaled world prices, they profit from a stable price. Ordinary farmers do not benefitfrom long-terms agreements, while fair trade farmers are able to make future plans due to theguaranteed long-term partnerships. The fair trade farmers are able to invest more in matters such aseducation for their children, better housing etc. In the long-term these development projects willenhance the position of the farmers. Fair trade ensures also that the financial position of the farmersand the workers on the plantations improve. They are able to receive more credit from banks and areless dependent on local money borrowers who frequently apply high interest rates.

Other certification labels (Volkskrant, 2010)

Question remains whether the introduction of a variety of sustainable labels on the market is a goodthing? According to the research, fair trade is too small for all coffee to be sold fair trade… The newcertification schemes provides farmers with better production methods. While, fair trade providesguaranteed minimum price, investments for development projects that benefits the local community.The NGO Solidaridad, which co-developed Max Havelaar in 1988 supports the new private labelinginitiatives; by focusing on new production techniques and enhancement of efficiency, farmers arestimulated to deepen their knowledge and raise questions as: what does the neighbor? Which risk arethere? And how can I increase sales? Accordingly the guaranteed prices offered in the fair tradesystem discourages the farmer to invest and innovate. Solidaridad supports the labels: RainforestAlliance and UTZ certified. The multinational Douwe Egberts has adopted the UTZ certification. Themain reason for the support from Solidaridad behind these initiatives rest in the fact that only a few

percent of the worldwide produced coffee is certified. This percentage will rise rapidly if large

multinationals adopt sustainable labeling. The sustainable cacao sector is growing rapidly sincecommitment of Mars, Nestle and Cadbury to labels. According to Solidaridad, fair trade must renewitself, fair trade and coffee corporations must discuss possibilities to divide tasks and improvecooperation.

Cacao farmers in the Ivory coast, the largest supplier of cacao beans globally, are dissatisfied with thenew government’s policy. The government stopped investments in the cacao sector since the civil warin 2002/2003. Cacao is the most important source of income. As a result of the lack of investments,cacao production has decreased. In addition, the lack of pesticides leads to low-quality cacao beans.The cacao problems are tackled by a broad alliance consisting of the largest cacao purchasers andtraders: Nestle, Cargill, Heinz, Ecom, Ahold and non-profit organizations: Solidaridad, World Wildlife

Fund and Oxfam. Together these organizations developed UTZ certification called: UTZ certified(UTZ is mayan for ‘good’).

In 2020 Mars will purchase 100% certified cacao beans, the company now purchases 300 000 tonnescacao beans annually, which is around 8 to 10% of the worldwide cacao production. The company willspread its risks by selecting several certification labels instead of focusing purely on UTZ certification.Around 100 000 tonnes of cacao beans will be purchased under UTZ certifications and an even

proportion under Rainforest Alliance. The rest will purchased under other sustainable certificationlabels. The price will not be raised by the certification, no higher price needs to be paid to the farmer.



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The profit gained by the farmer is derived from the increase in productivity, this means that the farmersignificantly must increase its production. The alliance accounts for 40% of the total cacao production,eventually in 2015, 500 000 farmers in West-Africa will benefit from the certification with a 20%higher income and ability to fertilize a piece of land. This initiative will cover 15% of the total cacaotrade and double production.

Questions remains which certification is truly sustainable. Large chocolate producers such as Nestléand Mars adopt sustainable cacao. This initiative will improve quality of the cacao beans considerably.Question remains whether these multinationals are acting out of compassion with the farmer or actingout of business reasons? The main critique on fair trade is that after 20 years the fair trade concept stillis a small niche market. However, fair trade is increasing in impact and popularity. More companiesare adopting fair trade, but will the sustainable label survive among the other labels that appears to bemore attractive for companies and better fit their profit-seeking purpose.



Tabel P.2 – Product retail value ranking

Rank Product Conventional Organic Total1 Coffee 623,214,076 575,692,964 1,198,907,040

2 Banana 291,251,755 152,678,738 443,930,4943 Tea 95,035,115 103,175,854 198,210,9694 Cocoa 95,521,491 89,346,074 184,867,5655 Cotton 156,088,851 19,813,249 175,902,1016 Sugar 149,230,082 24,185,026 173,415,1087 Flowers and

Plants169,156,298 2,400,000 171,556,298

8 Others 10,368,491 80,498,977 90,867,4689 Fruit juice 66,432,894 1,807,865 68,240,759

10 Freshfruit/vegetable

62,469,718 4,013,573 66,483,291

11 Wine 41,513,677 5,998,317 47,511,99412 Honey 17,920,285 2,073,991 19,994,27613 Rice 9,485,141 9,225,339 18,710,48014 Nut oil seed 10,544,803 3,582,633 14,127,43615 Dried fruit 10,171,223 1,960,595 12,131,81816 Herbs and spices 2,253,737 1,867,129 4,120,86617 Sports ball 2,784,147 84,000 2,868,14718 Quinoa 648,485 2,216,624 2,865,11019 Fonio 0,000 0,000 0,000

Total 1,814,090,270 1,080,620,947 2,894,711,217Source: FLO (2009b)

romans mainstreaming of fair trade

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