Watershed moment alert: chocolate giant Cadbury is stepping up its activities in bakery. While you may have spotted the marketing splash about its switch to Fairtrade for consumer chocolate, you may not yet be aware that it is also ramping up the hitherto less-developed part of its business bakery cocoa supply. Such is the potential for Fairtrade growth in bakery, the chocolate giant is targeting craft bakers and bakery manufacturers by launching Fairtrade cocoa into the market.
With everyday products like PG Tips going Fairtrade, it’s time to stop talking about Fairtrade as a niche. The Fairtrade Foundation’s strategy projects big growth from around £700m in sales now to £2bn by 2012. Whereas Fairtrade coffee currently makes up around a fifth of the coffee market, bakery products using Fairtrade ingredients are viewed as the next big untapped market. With the biscuits and cakes category worth close to £3.5bn, it’s no wonder that the Foundation’s eyes have lit up at the prospect of getting bakers on board.
"If we can achieve coffee’s growth on the bakery side, it would be phenomenal," says Samantha Dormer, business development manager for cocoa at the Fairtrade Foundation. "The bakery sector is uniquely positioned because it opens up opportunities, not just for cocoa producers, but for sugar, nuts, dried fruit and vanilla. If the bakery market was to get more behind Fairtrade, that could have a huge impact on a broad range of producers and lift people out of poverty."
Message to the market
The moves by Cadbury, PG and Starbucks this year mark a "step change" for Fairtrade, she says, and will have a knock-on effect. Asda, Sainsbury’s and Co-op have all launched own-label Fairtrade bakery products. "Because of big players joining the Fairtrade movement, it has definitely sent a message into the market," says Dormer. "It says consumers believe in it. We’ve seen renewed market interest, so it’s a great time for key players in the bakery sector to start engaging with Fairtrade."
In fact, research suggests 64% of people would support ethically-traded products and 70% recognise the Fairtrade logo a factor not missed by Cadbury. "Cadbury has been ethically trading with Ghana for over 100 years and joined forces with the Fairtrade Foundation to strengthen the support that the Ghanaian Cocoa farmers receive," explains Sharon Loizou, account manager at Cadbury. "The cocoa that we produce is from Ghanaian cocoa beans, which are among the best-quality cocoa beans in the world."
One thing that has hampered take-up in bakery is availability of Fairtrade ingredients and the price premium. Fairtrade cocoa works by having a minimum price set for raw cocoa US$1,600 per ton. A Fairtrade premium of US$150 is paid in addition to that for investment into community projects, from healthcare to schooling to improving yields. Manufacturers’ costs will then vary.
As more manufacturers like Cadbury sign up, availability becomes greater and costs reduce. Cadbury’s cocoa is being made available Fairtrade-certified in 4kg tubs and in 25kg bulk sacks for industrial bakers (currently not Fairtrade-certified). Note, it is being supplied as a baking ingredient only. That means a baker would need to have a licence to use the Cadbury name against any product.
Lower ingredient costs are a crucial factor as there seems to be a price point that consumers won’t cross for Fairtrade. For example, Delice de France has reformulated and relaunched two impulse products this week, Fairtrade Chocolate Chunk Shortbread Fingers and Fairtrade Chocolate Chunk Cookies, having dropped the price by 15%. "We found consumers weren’t prepared to pay a huge premium for Fairtrade," says Delice de France marketing director David Girdler.
"As Fairtrade producers have become bigger and better supported, we’ve been able to reformulate two products. Fairtrade does sell at a premium; we would like it not to, but the traceability of the ingredients sadly does cost a little bit more. We do see people sticking with Fairtrade though, if not organic, in the current climate."
Record highs in cocoa pricing have also made Fairtrade cocoa more accessible. "The cocoa market price is very high at the moment so the price differential between the two is less," says Richard Williams, UK sales manager for Belcolade chocolate at Puratos, which supplies Fairtrade & Organic low viscosity chocolates for moulding, enrobing, dipping and spraying, as well as in chunks and inclusions. "Demand for Fairtrade and Rainforest Alliance is rising, definitely, as the bigger brands get behind ethically sourced products. Fairtrade may grow more slowly now we are in recession, but it is a strong long-term brand. We’re involved in more and more briefs for Fairtrade products."
Another cost to consider is licensing and accreditation for use of the logo. There is a licence fee to use the Fairtrade mark for marketing purposes, and licensees are charged 1.7% on wholesale value up to £5m; that reduces with higher values or if your entire range is Fairtrade.
While the system is set up for bakery manufacturers and brands, the Foundation says it is open to tweaking this model if it encourages retailers like bakery chains to join up. "Bakery is a really new sector for us," says Dormer. "There is a lot of opportunity to engage with bakery chains and look at the model again, for businesses large and small."