The recent BBC story about ‘brand Masai’ reminded us of a similar theme we have observed in the ‘ethical’ food markets.
Take tea as an example. The bulk of the profit margin goes to the retailer and to the ethical brands that have become increasingly popular in the West. Fairtrade brands market themselves on the back of the poverty of the smallholder growers with the attached promise of payment of a ‘fair price’ and ‘social premium’ (depending on the fairtrade label and commodity).
The reality is that the fair price is rarely any better than market pricing, often lower. And the premium does not go to the farmer, but to his/her representative association or cooperative for spending on local social projects that need to be approved by fairtrade.
So the brand gets the marketing value of the peoples sentiment to the poor farmer. The farmer gets no direct additional cash at all.
If the same brand used the image of David Beckham or Jamie Oliver, say, to sell their product, then the star would certainly receive a significant payment and/or royalty from product sales.
So why are the poor farmers not making more cash in their pocket from selling to these ethical brands? Maybe they don’t have the same agent and lawyer.
We believe improved models will emerge that could better align the interests of the farmer and brand buyer. Ones that are not based on sentiment and patronage, but straight up trade based on quality and any other value-add the farmers can bring, such as their stories, which consumers have, after all, shown that they value.