Examination of Witnesses (Questions 60
- 79)
TUESDAY 27 FEBRUARY 2007
MS SANDRA
TAYLOR, MR
CLIFF BURROWS
AND MR
MIKE BARRY
Q60 Chairman: What is the general
market trend in relation to those products? Are they static, declining
or rising?
Mr Barry: In the market-place
overall it is level or declining. It is a very difficult market-place,
so our commercial teams were very pleased with a 6% uplift in
sales.
Q61 Mr Singh: Did you just jettison
the other producers with whom you dealt?
Mr Barry: Very few of the producers
with whom we have dealt historically have left our supply chain
because of this shift. One is talking of a few large coffee plantations,
but they are negligible in number. The vast majority of the producers
we worked with have stayed with us.
Q62 Ann McKechin: I should like to
clarify with the witnesses from Starbucks whether the coffee and
farmer equity practice scheme applies only to the company, or
is it a type of scheme used elsewhere in America? Obviously, it
is based on an American scheme.
Ms Taylor: So far these are purchasing
guidelines that only Starbucks has used. It is not proprietary.
We have talked about it to others in the industry. We believe
that it is an ethical purchasing programme that can easily apply
to other coffee companies. We launched it about three years ago,
and last year we met our goal of increasing our purchases under
the programme by 100%. Therefore, it is about 155 million lbs
primarily in Latin America and some in Asia. We have just started
to introduce this in East Africa.
Q63 Ann McKechin: Obviously, the
FAIRTRADE Mark is well known here in the United Kingdom and there
are similar schemes in other parts of Europe. Is there something
of a similar nature already in existence in North America, or
is your scheme unique among coffee retailers?
Ms Taylor: Certainly, fair trade
is well established in the United States and obviously we are
a partner with TransFair USA. We have fair trade licences in 22
countries. There are a number of other coffee schemes, for example
Rainforest Alliance, but CAFÉ practices is one that we
have talked a lot about to other companies.
Q64 Ann McKechin: Earlier today we
took evidence from the Fairtrade Foundation. We were told that
when it gave the FAIRTRADE Mark it went really to small-scale
operatives and not large-scale plantations. Does your scheme apply
to large plantations?
Ms Taylor: It applies to all producers
and it is a verified scheme. Farmers have to meet fairly stringent
criteria. There is an independent certification process. Verifiers
verify farms, but it applies to all sizes.
Q65 Ann McKechin: Would it include,
for example, ILO[8]
recognised standards on employee organisation?
Ms Taylor: The social equity criteria—there
is a checklist—include ILO standards for child labour and
worker rights and provisions.
Q66 Ann McKechin: In light of the
success of Fairtrade here and in Europe, can you say why you decided
to go along with your own scheme at the end of the day, three
years ago, as opposed perhaps to a scheme which had wider recognition
among producers and retailers?
Mr Burrows: Again, this is not
either/or for us; it is complementary. Today, fair trade accounts
for about 2% of world coffee production. We are responsible for
purchasing about 2% of global coffee. Those two numbers are coincidentally
the same. We are a global business where fair trade recognition
and the brand are different in different countries. We referred
to TransFair USA; it is Max Havelaar in France, Belgium and some
other countries in Europe. It is the Fairtrade Labelling Organisation
which is the association. Equally, we had a big commitment to
the sustainability of farmers' crop and that was why for us CAFÉ
practices support our future growth, our commitment to quality
and the payment of a premium price. We paid $1.42 on average per
pound last year which is a premium on the prevailing commodity
price.
Q67 Joan Ruddock: What percentage
of the coffee that you purchase for the US market is done through
TransFair USA as opposed to your own scheme?
Mr Burrows: Six per cent of our
total purchases are made through TransFair.
Q68 Joan Ruddock: For the US market?
Mr Burrows: In total, it is 14%
of fair trade coffee and the vast majority is through TransFair.
Q69 Joan Ruddock: So, it is 6% in
the US?
Mr Burrows: Yes.
Q70 Joan Ruddock: What percentage
of the coffee that you buy for use in the UK market is Fairtrade?
Mr Burrows: We buy coffee and
use roasting plants in the US and also Amsterdam. We tend to measure
at one level which is the total purchase, that is, 14% of the
global market. That is bought at a premium price of $1.42. In
terms of the retailing element—we will not buy specifically
for the UK market—we have seen a consumer increase in ethical,
including fair trade, products over the past few years. We offer
Fairtrade as a fresh-brewed coffee daily in the UK stores, and
we offer whole bean. One of the range is a Fairtrade Café
Estima blend which includes Fairtrade coffees from Latin America
and East Africa. It is always available in our stores and today
probably 6% of our whole bean coffee is under the FAIRTRADE Mark.
Q71 Joan Ruddock: Six per cent of
the coffee consumed in your outlets comes under Fairtrade?
Mr Burrows: Yes, indeed.
Q72 Joan Ruddock: I confess that
I have not been in one recently. My hours are such that I do not
get out enough, but I understand—I have checked with those
who know—that if one goes to a counter to buy a cup of coffee
in a Starbucks outlet one must specify that one wants the Fairtrade
coffee. Obviously, it is a minority product within the café,
so when one goes to the counter one needs to ask for the Fairtrade
coffee.
Mr Burrows: Most stores will offer
two coffees every day: one will be a single origin or blend from
somewhere round the world; the second one will consistently be
a Fairtrade coffee, and that is a Café Estima Fairtrade-certified
blend. It is always on offer in our stores, as are the whole beans.
If one orders a latte that will not be a Fairtrade product; it
will be one purchased predominantly under the CAFÉ practices
mark because we have the same mix, recipe and standard in all
our stores round the globe. Indeed, that has been a blend which
is proprietary to our product since 1986.
Q73 Joan Ruddock: Given that practice,
what is the scope for increasing—would you wish to do so—the
amount of Fairtrade coffee that you sell here?
Mr Burrows: If one looks at the
Fairtrade purchase, over the past several years it has gone from
1.2 million, to 2.4 million and then 4.8 million. We then broke
through 10 million and last year it was 18 million lbs. We have
a commitment to grow that and to offer our customers a range of
coffees in terms of both origin and quality. There is a continuing
interest in Fairtrade, so I see it growing. In my time with the
UK business we introduced whole bean first, ironically, through
Sainsbury. Then we introduced whole bean in all our stores and
moved it forward to work with the Fairtrade Foundation to develop
the Café Estima blend which gave us consistency that we
can offer round the globe. In a sense, I think that has been one
of the major achievements. We now have a recognised Fairtrade
product that we are proud to share with our consumers round the
globe.
Q74 Joan Ruddock: It is now 6%. Where
might it be in five years' time?
Mr Burrows: I really do not know,
because equally we are committed to paying a premium for all our
coffee and to ethically sourcing all our coffees. Part of that
range will include Fairtrade. Mr Singh asked whether if it did
not bear the Fairtrade label it was unfair trade. We have the
commitment that in time all our coffees will meet all the criteria
of transparency, price and quality and also social and economic
criteria. That was how we started as a company. If we are to achieve
our ambitions we have to ensure an ever-growing supply of sustainable
quality coffee.
Q75 James Duddridge: We heard earlier
that DFID had funded work in schools and a number of projects
through Fairtrade to increase awareness. One of our jobs on this
Committee is to hold the Government to account and make sure that
that money is being spent well. Whilst not condemning that expenditure,
it strikes me that perhaps some of that money should have come
from supermarkets and retailers. Do you agree that that may happen
longer term, and what more can supermarkets and retailers do to
promote fair trade generally?
Mr Burrows: That is a valid question.
I believe that Fairtrade has done an amazing job especially in
this country in raising awareness of the Foundation and the fair
trade issue generally. We contribute to that through the promotion
advertising and the payment of a licence for using the Fairtrade
logo. In a sense there is funding. The other matter—I am
sure that I also speak for Marks & Spencer—is that we
need to talk to our consumers. They are incredibly inquisitive;
they want to know what you are doing these days and they along
with the workforce hold you to account. We spend a tremendous
amount of time talking to and training our own employees in stores—we
call them our partners—so they can share that information
and conversation with consumers. I have here a fairly standard
leaflet that we provide both for consumers and for educating our
partners in the stores. It is about how we source our coffee.
Mr Singh asked whether if it was not labelled Fairtrade it was
fairly traded. Those are the types of questions being asked, whether
by those in schools, by our own people who work in the stores
in the UK or the more than one million customers who visit our
stores every week.
Mr Barry: I think that this is
the best money this Government has ever spent in addressing social
and environmental issues. The change that has taken place in terms
of consumer awareness of social issues and the awareness of retailers
that they have to progress and make changes to their supply chain
and mobilise change among producers has made a huge difference.
Do retailers have to contribute? Yes, and we do so via the licence
fee and Fairtrade price that goes back to the producers and all
the marketing that we put into it. Interestingly, just after Christmas
we had a team of 50 people in the room preparing for Fairtrade
Fortnight: merchant buyers who make sure that we have the right
products in the right store at the right time, technologists who
manage the supply chain and marketers. Those 50 people across
the business were involved in Fairtrade. That is a valuable commitment
by the business to make a change. It is right that Fairtrade should
be something to which retailers contribute, but I believe that
those are the primary vehicles by which they should do it.
Q76 Chairman: That raises a question
which perhaps is slightly unfair given that Ms Lamb has left the
witness table, although she is sitting behind it. One of the matters
that you have said is that there is Fairtrade which is a registered
trade-mark and there is also the concept of fair trade. I just
wonder whether there is a danger of confusion. We go back to Mr
Singh's question. People are asked whether they want Fairtrade
coffee or Starbucks coffee. That is not a good mix. Looking at
it the other way round, if the Fairtrade Foundation says that
it is the only fair trade organisation there is a danger of compromising
other good practices. How do you reconcile Fairtrade as a registered
trade-mark and the development of fair trade practices and ensure
that they do not collide but operate in a synergistic way and
add value to the concept?
Mr Burrows: That is an excellent
point to make. Obviously, there are other marks alongside Fairtrade.
You mentioned the Rainforest Alliance. There are other marks such
as the Organic and Soil Association. We must as a country with
the support of government, select committees and DFID work—I
do not say "educate"—to achieve standard criteria
for trading. The more we can get synergy across marks or what
they stand for not only in this country but elsewhere—TransFair
and Fairtrade are two different logos but they are committed to
the same end—publicise them and share them with the public
the better the public will be informed.
Mr Barry: All our market research
tells us that consumers want a minimum number of trusted labels
in the line. There is a high degree of trust in Marks & Spencer
and many other retailers in the UK, but what they are saying is
that they still want us to use an independent mark where possible.
We believe that the ground-breaking work of the Fairtrade Foundation
particularly with commodities—cocoa, cotton, sugar, coffee
and tea—gives huge reassurance to the consumer about how
to do that. One must remember that the British consumer has been
on a journey. Back in 1990 the British consumer was probably the
most trusting in the world. There was a succession of food scares
in the 1990s: GM food, mad cow disease, foot and mouth et cetera.
That left the consumer in the UK pretty bruised. Consumers became
concerned about what they were being told by scientists and government.
As a result of that uncertainty consumers are saying to us that
they want to make sure there is an independent voice just to check
it and keep an eye on it in order to understand what is going
on. Would we be better off if every British retailer had a different
approach to social development? I do not think we would. By all
of us backing the FAIRTRADE Mark we support each other and become
a much stronger set of retailers in terms of what we are doing
and how we deliver it.
Q77 John Barrett: I want to move
from coffee to cotton. Mr Barry, you said that this was an area
in which Marks & Spencer was involved. I think that the plan
is to purchase one-third of the world's current supply of fair
trade cotton. Can you explain how it will work? You will buy cotton
and then make a Marks & Spencer cotton shirt. How will you
know through the supply chain exactly what has happened at different
stages, and how can you guarantee that the cotton you have purchased
under this label and the product that ends up on your shelves
is the result of fair trade right through the supply chain?
Mr Barry: Cotton is a great example
of an industry which cries out for fair trade. It involves millions
of small producers across the world and it has some major social
and environmental challenges. Cotton is the most heavily used
fibre for clothing production round the world. About 50% of clothing
is made from cotton. For many years we have been trying to work
out how we can drive better standards and understanding of our
cotton supply chain. Frankly, we struggled. We are the biggest
clothing retailer in the UK and we use about 60,000 tonnes of
cotton. We were banging our heads against a brick wall. Along
came Fairtrade which has given us a route to build that traceability
down through our supply chain. One must understand that in clothing
production there are probably six or seven steps between the producer
of the cotton and the shop floor on which it is sold. Marks &
Spencer as a big clothing retailer is almost unique in understanding
not only the garment factories that make the finished product
but the mill that makes the fibre that is used and the dye house
that puts the colour into the garment. We can go back three steps
into the supply chain. Even we struggled to get back to the cotton
field. What Fairtrade has done is help us to bridge the gap from
the fibre mill back into the field. It has forced us to put into
place certification and traceability systems such that there is
in effect a passport that follows a batch of cotton through the
supply chain. That was one of the main reasons why we had additional
cost in the first range of Fairtrade cotton garments that we launched
last year. It cost about £1 more. That £1 represented
the social premium in terms of the Fairtrade price and also the
audit systems and, to be fair, big inefficiencies in the supply
chain in order to maintain traceability. A small example of that
is that the huge cotton mills round the world operate 24 hours
a day and process hundreds of thousands of metres of cloth each
day. Every time a Fairtrade batch comes through one has to stop
the mill, take out the main production and put that production
through in order to maintain traceability and then start up the
mill again. It is very inefficient for a volume operation. Last
year we used about 100 tonnes of cotton in that way. We shall
be using 7,000 tonnes over the next 12 to 18 months. Again, that
is built upon traceability audited at each step of the supply
chain to make sure it is done properly right down to the cotton
field where the FAIRTRADE Mark is concentrated. To go back to
some earlier questioning about how all these different standards
fit together, I turn your attention to the Ethical Trading Initiative.
It has been funded by DFID and it is a very similar organisation
but involves different stakeholders. That is focused on the factory
that makes the garment or finished product that we as retailers
sell. They are driving better labour standards. That is not a
mark that we talk about to the consumer; it is a supply chain
tracing tool to demonstrate that we are managing our supply chain
well. We are driving the disciplines of the ETI down each stage
of the supply chain to meet the Fairtrade Foundation coming the
other way, which is about making sure the cotton producer is well
looked after. That is how cotton is working. As to where it will
end up, in the next 12 months we shall be converting the entire
range of our £5 T-shirts to 100% Fairtrade cotton and keep
it at that price. We will not change that price. As to scale,
that represents 12 million garments. Putting that in context,
we sell about 270 million garments a year, so that is a heartland,
mass market product that can go Fairtrade, but it has been a challenge
and we will have challenges in the future to maintain traceability.
Q78 John Barrett: What would be the
price differential for cotton producers under the Fairtrade system?
You said that you were able to produce an end product that is
kept at the same price, but is there a certain percentage increase
applicable to the cotton producer, as we talked about earlier
in relation to bananas, or is it sustainability of the market
or something else that attracts the producer?
Mr Barry: Obviously, we leave
it to the Fairtrade Foundation to work out what the market price
for fair trade should be, but typically it is 15 to 25% in the
case of the cotton industry. As volumes increase it will probably
come down a little. Typically, it is at least 15%.
Q79 Richard Burden: In addition to
ensuring traceability, obviously in view of the approach of Marks
& Spencer there is investment in various community projects,
paying a social premium for social projects and so on. In a way,
that presents you with other challenges, does it not? In one sense
you can become another major international donor essentially;
looked at another way you can just be involved in a philanthropic
charitable transfer. There is nothing wrong with that, but in
development terms it is fairly old thinking. How do you come to
a decision as to what projects you invest in, with whom you engage
and how you ensure that maybe the more marginal communities are
involved?
Mr Barry: Clearly, we are a retailer
or shop-keeper; that is what we know best, and we shall never
lose sight of that. We are a shop-keeper that wants to use our
everyday selling business model and align it so it makes a difference.
Clearly, Fairtrade allows us to do that. Rather than Marks &
Spencer developing its own model to help communities round the
world, Fairtrade helps us do it. We get professionals from the
Fairtrade Foundation involved. How do we identify which products
to go with? That is a complex discussion with the Fairtrade Foundation
and producer groups back down the supply chain to suppliers as
to what can be done. When we looked at the £5 T-shirt that
we were converting we wanted a simple range that every consumer
would buy—it would have mass market consumer appeal—and
that we would buy in a steady way, in that we would sell the £5
T-shirt every year. We worked with suppliers that we had had relationships
with for many years in producing those T-shirts. They are trusted
suppliers that meet all of the ethical standards that we require
of them. In addition, these are supply chains that go back in
directions that work for us: India and West Africa. There is no
point in having a supply chain that produces cotton in one part
of the world and you do not have access to that. For all those
reasons, we identified cotton as the product that we wanted to
work on next after coffee and tea. There are many conversations
but, as the Prime Minister said earlier, we believe that trade
can be a real driver for social development provided it lines
up everybody: the consumer, the retailer, the supply chain, the
producer and aid agencies and donors such as the Government, DFID
and other organisations like that. Perhaps I may paint a little
picture about our experience here. Over the past two or three
years we have worked with a donor organisation called the Shell
Foundation. That foundation has been investing money in our supply
chain and helping producers meet the standard required so they
can head towards fair trade production. It has done a very good
job, but it has been very hard work. We do not want to get into
a situation where we become a development agency. Marks &
Spencer wants professional organisations such as the Fairtrade
Foundation all the way down the supply chain to make sure that
everybody's interests are lined up with the market-place.
8 International Labour Organisation (ILO). Back
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