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Fair Trade: A Marketing Boon and Production Challenge



For Megy Karydes, fair trade carries some pretty clear benefits.

Karydes is the founder of World Shoppe, a purveyor of jewelry produced by women in the developing world. Along with the satisfaction that comes from knowing those who craft her jewelry are fairly paid, fair trade is also a powerful way of attracting consumers with a conscience.

Being a fair trade business, Karydes said, allows her to talk about how customers’ purchasing power can impact the lives of the women who produce their jewelry.

It sends a strong message, and it’s one that an increasing number of consumers are seeking from the companies that produce their food, clothing, jewelry and accessories.

Making the grade

Businesses that seek “fair trade certification” for their products must meet a strict and expansive set of criteria.

The Oakland, Calif.-based Fair Trade USA is a nonprofit that determines whether a product qualifies as “fair trade." Spokeswoman Katie Barrow said that for her organization to confer this sought-after certification on a product, the company that sells it must show the production process harmed neither workers nor the environment.

Barrow said companies seeking Fair Trade USA certification must ensure their workers enjoy fair labor conditions, show they are investing in developing the communities from which the product’s raw materials come, and prove that the farming or manufacturing methods that produced the product are environmentally sustainable .

More than 9,100 products currently for sale in the U.S. have been certified as fair trade, Barrow said. (Fair Trade USA has not certified all of the companies in this story.)

“They can be found in all aisles of the grocery store , from coffee and tea to products that contain fair trade ingredients like lotions, baking mixes and bottled beverages,” she said.

Consumer demand

Earlier this year, Fair Trade USA released data showing a 24 percent increase during 2010 in sales of fair trade certified products in grocery stores. Barrow said her organization has found that once they're aware of fair trade products, eight out of 10 shoppers will regularly buy products with this certification.

Research from Spins, Inc., a company that provides sales data on natural products, suggests demand for fair trade certified products grew steadily even during the depth of the recent recession. The company found fair trade sales grew by 31 percent increase between August 2008 and August 2009.  

Not just food

Of all fair trade certified products, coffee tends to get the most attention, with other grocery store staples closely following. But manufacturers of hair accessories and clothing have also earned notable successes integrating fair trade standards into their business models.

Evan Goldsmith heads a company called Hope for Women, which imports items such as handmade greeting cards and hair bands from producers in the developing world.

One of Hope for Women’s biggest sellers is a hair band that features polished slices of tagua nut, carved down by family producers in Colombia.

Last year, the cosmetics giant Aveda bought 400,000 of Hope for Women’s tagua nut hair bands to include in gift baskets it sold throughout North America and Europe.

“It’s a value-added thing,” Goldsmith said, “that [Aveda] doesn’t have to source it themselves; they can work with a vetted fair trade company.”

Hope for Women sources the hair bands from approximately 1,000 family producers in Colombia. Working within fair trade parameters offers clear advantages — such as a personal relationship with producers and a strong value proposition to customers who seek sustainably produced goods .

It also comes with challenges.

Goldsmith said his company struggled at first to develop a system to train the hair band producers — most of whom work from their homes in varied regions of Colombia —to create a product of consistent quality and appearance.

Hope for Women’s producers also require payment up front to purchase materials. Meeting this need, Goldsmith said, can pose cash flow challenges that companies paying producers on net 30 terms do not encounter.

Tompkins Point Apparel is another company that has reaped the benefits and confronted the challenges of fair trade.

Last year, the company’s polo shirt line secured fair trade certification.
Scott Leeder founded Tompkins Point Apparel after a stint as the CFO of a farmer-owned organic trading company in Hyderabad, India. He sought a way to leverage America’s massive demand for cotton to provide fair compensation for the farmers with whom he’d worked

“Our fair trade certification has been a great way to distinguish ourselves in the market,” Leeder said.

He noted, though, that a commitment to fair trade slows production time. Pressuring factory workers to produce garments faster, Leeder said, would likely force workers to work longer hours with less breaks, thus contradicting the principles on which he founded the company.
Leeder cites this challenge as a negative, but a manageable one.

Karydes’s fair trade commitment has caused her some challenges, too, but she said she’s committed to her company’s principles.

“We stand true to our convictions,” she said, “and [we] believe we can be a strong and successful business while not exploiting others in the process.”