UK: Fairtrade feels pain of supermarket price war

The supermarket price war and a looming change to EU sugar tariffs has made life more difficult for…

The supermarket price war and a looming change to EU sugar tariffs has made life more difficult for the Fairtrade Foundation, which is increasing its reserves to £2.4m to shore it up against further volatility.

The charity, which works to get fair deals for farmers, has felt the effects of a 3.7pc fall in Fairtrade-labelled goods to £1.67bn during 2014, the first decline in its 20-year history.

When the fall was announced in February, the group pointed to the fierce competition among supermarkets that was driving down prices, making some Fairtrade products seem relatively expensive.

Donations to the group also declined 13pc to £99,000 during 2014, according to recent accounts, although most of its £11.6m income comes from project grants and licence fees for the Fairtrade name. Fairtrade remains in talks with the Department for International Development to secure government funding beyond 2016.

Fairtrade bananas were increasingly popular last year, helped by a relisting in Tesco, and coffee enjoyed a 3pc increase in British sales. However, the price of sugar crashed ahead of the European Union reform of beet sugar quotas, which could flood the market with cheap sugar at the expense of sugar cane growers outside of Europe. Tate & Lyle Sugars, Britain’s last remaining refiner of cane sugar, is among the groups protesting that the change will hurt cane sugar farmers.

The group has now downgraded its previous target to hit £2bn in sales carrying the Fairtrade logo by this year, instead aiming to slow the decline. Fairtrade is also working with sugar producers to supply new markets in southern Europe in an attempt to offset the impact of the price slump.

Despite the turbulent year, Fairtrade has not made redundancies and continues to work on new projects.

“It’s right to be prudent because of the turbulence in the sector, and the supermarkets haven’t settled down yet,” said chief executive Michael Gidney. “If you take sugar out of the equation, there are some really interesting things going on in the market. Fairtrade as a movement is going from strength to strength.”