Ethics and transformation as marketing tools

Compliance with transformation and ethical codes in agriculture has become a very costly exercise – but it appears that consumers and, especially, retailers are increasingly supporting compliant producers. Phil Bowes, transformation manager for the South African Table Grape Industry, explains how this is playing out for the fruit sector.

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South Africans often struggle to see beyond the difficulties of broad-based black economic empowerment (B-BBEE) and land reform. However, in terms of the ethical trade debate, which currently tops the agenda in terms of private market standard requirements, South Africa appears to be more advanced than we’re prepared to communicate.

In terms of demographic transformation, succession and worker living conditions, South Africa is doing very well compared to other developing economies in the supply chains of the UK and EU. The average number of rooms per farm worker home in the table grape industry is three, with in-house running water in 96% of cases. From a demographic ownership perspective, between 2008 & 2009 and 2009 & 2010, the value of table grapes sold by black owners and co-owners grew from R121 million to R161 million, with another increase in value expected for the 2011/2012 season.

Overlaps: B-BBEE and ethical trade
It’s no longer only governments that are driving and rewarding transformation efforts. B-BBEE, ethical trade and land reform have many corresponding marketing attributes, and markets are taking note and re-drafting what they require from producers. But it’s not only about the marketing traits they share: B-BBEE and ethical trade efforts (like Fairtrade) also overlap broadly in their intent and implications.

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Fairtrade accreditation, for example, regards the South African B-BBEE scorecard as a credible supporting document for compliance. There are also overlaps between GlobalGap and Fairtrade in terms of their intent and implications for skills development.

A unique story to tell
The Southern Hemisphere Table Grape Congress of 2011 was held in Somerset West. One of the market recommendations it produced was that South Africa needs a unique story ? a market differentiator. Dominic Weaver, former chief editor of Fresh Produce Journal (FPJ) in the UK, is currently employed by RED Communications, a UK-based agency that assists the South African fruit industry with promotional activities.

He suggests that although many South Africans are disheartened by the failings of land reform, many shoppers are inspired by the story of transforming an agricultural landscape, striving to improve livelihoods and promoting rural stability. Some export agents challenge the merits of telling the ethical story of South African produce, saying that many consumers shop on price, eating quality and food safety alone.

However, consumers who typically buy Fairtrade products from South Africa demonstrate that they’re prepared to ‘do the right thing’. The issue is not just storage and eating quality, but differentiating ‘brand South Africa’ as a reliable supplier, with equitable industries creating space for disadvantaged people. Whether this will ensure higher prices for our produce is uncertain, but it does create opportunities to promote South African fruit by sharing our unique story.

The cost of compliance
It’s debatable whether it is retailers or consumers who are leading the drive towards sourcing from ethical and sustainable producers. But the introduction of ethical trade audits on South African fruit farms shows that retailers understand that dealing with unethical suppliers can expose them to public scrutiny, and may lower their share prices. Therefore, emerging and commercial farmers alike pay dearly to stay certified under various market standard codes. Some large table grape producers pay over R100 000 a year in compliance and auditing costs.

Fruit South Africa, a body of the CEOs of fruit industry associations, currently runs an ethical programme co-ordinated by Colleen Chennells. She is heading up the development of a manual, including an auditing platform, to serve as the industry’s newest private standard. The thrust of Fruit SA’s ethical trade process isn’t to deny that unethical trade practices take place in isolated cases, but to work with producers to remedy apparent concerns. It will also play an active role in defining standards.
It takes many years and deep pockets to build a viable brand. Fortunately, South African table grapes already have a strong reputation for their eating quality. It’s time to expand that reputation to include ethically traded fruit.

Risk and reward
In many respects, consumers are being bombarded by several confusing messages when it comes to market differentiation on the basis of product attributes other than quality. Certain market standards are the product of authentic concerns for the health and safety of both consumers and the production staff. But more recently, they’ve also become about the consumer’s perceptions of the retailer’s morality.

An example is the ethical trade audit that measures producer performance against South African legislation on workers’ rights. Participating retailers, such as the UK’s Tesco and Sainsbury’s, seek to ensure that they’re associated with ethical suppliers, to mitigate reputational risk. It’s clear that many consumers merely seek to buy a conveniently merchandised, safe, tasty product at a reasonable price.

Most EU and UK retailers, on the other hand, currently want to be seen as informing the sustainability and ethical supply chain debate, and to use this to their advantage in the market place. In the information age, retailers cannot afford the reputational risk of sourcing products from suppliers who are perceived as not acting ethically. However, organic marketing shows that the discerning consumer will often spend more money on other categories in their favourite retail store than consumers buying conventionally grown produce.

According to Organic Farms, one of the UK’s largest suppliers of organic produce, organic customers can spend up to three times as much as others do in retail stores – not only on organic products, but on other purchases also. Organic produce can therefore be described as a ‘loss leader’, attracting the kinds of consumers who’ll spend a lot of money on other items, even though the produce itself is not a large mover. This makes having an organic category important to UK retailers, even though it’s a very small market with limited short-term growth prospects. It remains to be seen whether this ‘loss-leader’ tag will hold true
for ethically traded fruits.

Email Phil Bowes at [email protected].

The views expressed in our weekly opinion piece do not necessarily reflect those of Farmer’s Weekly.