Monday, February 25, 2008

Fair Trade Foods' Memo: Sugar Gaint Tate & Lyle to Convert All of its Retail Sugar Products to Fair Trade by the End of Next Year

United Kingdom-based international sugar company giant Tate & Lyle has made a major move which will give the international Fair Trade foods' movement a big boost in its efforts to get more food and grocery companies to procure and market Fair Trade-certified products. The food and ingredients company, which has operations throughout Europe, the Americas and Asia, announced on Saturday it would commit to making all of its retail sugar products Fair Trade by the end of next year, 2009.

Tate & Lyle operates over 50 sugar and related sweetener ingredient production companies in Europe, Asian and the America's, and is one of the biggest refiners, marketers and retail sellers of sugar products in the world. It's the biggest sugar company--and one of the only actually--to make such a commitment to Fair Trade product sourcing and marketing to date. Tate & Lyle is the number one sugar brand in the UK.

The sugar and sweetener company says its first retail product to carry the Fair Trade mark will be its Tate & Lyle Granulated White Cane Sugar. The sugar comes from an accredited Fair Trade producer/partner in the Latin American country of Belize; Belize Sugar Industries, which is the only sugar refiner in that small country, and buys its sugar cane from over 6,000 local small farmers. These small farmers will now be paid the higher, Fair Trade price for their sugar.

The accreditation comes from the established UK group Fairtrade, which worked with the supplier and Tate & Lyle for the last two years, setting up the agreement. The UK-based sugar company has purchased non-Fair Trade sugar from Belize Sugar Industries for 35 years. Tate & Lyle says it plans on exporting at least 70,000 tons of the Fair Trade cane sugar from Belize in the first year.

According to industry estimates, the weekend announcement from the sugar company will increase the Fair Trade segment of the retail sugar category in the UK from just ~4 million (British pounds), to a whopping ~60 million by the end of 2008. Tate & Lyle will be the largest UK food company to carry the Fair Trade logo on its retail products.

Tate & Lyle is an iconic sugar brand in the United Kingdom, and is known throughout most of the world. Think Tide for laundry detergent or Best Foods and Hellman's for Mayonnaise in the United States, in terms of its brand equity. Having such a popular and even loved brand such as Tate & Lyle sugar carrying the Fair Trade logo--and containing Fair Trade sugar--will go a long way towards establishing "Fair Trade" as a common scheme in the UK--and help to do so throughout the world.

The timing for Tate & Lyle in making this change--and for the Fair Trade movement in the UK and internationally--couldn't be better. Sales of Fair Trade food and grocery products are growing by leaps and bounds in the nation. a just-released report said sales of Fair Trade ethical goods (food, groceries and other products) increased by a huge 44% in 2007, over 2006 sales. The same report pegged total Fair Trade goods' sales in the UK at ~225 million. Further, at least two in three UK households buy at least one Fair Trade product, the report says.

Tate & Lyle and the upscale British supermarket chain Waitrose have struck a deal in which Waitrose will be the first UK grocery retailer to sell the company's new Fair Trade granulated white cane sugar at retail. the sugar products' will then be sold at all of the UK's leading grocery chains after that.

In fact, we suspect the UK's "big four" supermarket chains--Tesco, Sainsbury, Asda and Morrison's (plus the Co-op)--will all be anxious to sell the initial 1 kilogram bags of Tate & Lyle Fair Trade cane sugar even before the agreement with Waitrose expires. The T&L brand is a major one in the UK as we mentioned earlier, and its a power-brand for supermarkets at retail. The added cache of Fair Trade should excite these retailers considerably.

Merchandising and sales of Fair Trade products by UK supermarket and other retailers is growing as fast as the 44% consumer growth rate. Currently, Sainsbury's--the UK's third-biggest food retailer--leads in the total dollar sales of Fair Trade products in the nation. The Co-op chain is second, followed by Tesco (the country's number one chain) and Waitrose.

The UK's number two retailer, Wal-Mart-owned Asda, doesn't make it in the top four Fair Trade-selling retailers' list. However, that should change soon, as the retailer is currently adding more Fair Trade goods to its stores to reflect the growing across the board demand for the products in the United Kingdom.

Belize Sugar Industries buys all of its sugar for refining from 6,000 small sugar cane farmers in that country. These farmers are represented by a group called the Belize Sugar Cane Farmers' Association. Giovanni Loria, the chairman of the farmers' association, says the extra money paid to the farmers because of the new Fair Trade policy will be used not only by the growers to improve their businesses and the quality of life of their families, but a portion of the premium will be put to work to build new schools and health clinics in the impoverished country.

The move by Tate & Lyle, one of the largest vertically-integrated sugar and sweetener corporations in the world, to go Fair Trade with its entire retail sugar products' line is a big one for both the company and for the international Fair Trade movement.

For Tate & Lyle, it means a substantial initial investment, and an ongoing increased cost of goods, since it will pay higher prices for the Fair Trade-certified sugar than it currently pays for non-Fair Trade certified sugar. However, it's likely those extra costs can be offset easily over time since the company will be able to charge a slightly higher premium for the Fair Trade sugar to its retail customers.

Further, being the largest sugar brand in the UK and parts of Europe--where Fair Trade product sales are soaring--we expect that once the Tate & Lyle brand begins carrying the Fair Trade logo, sales will increase considerably overall, as consumers who are currently buying one of the smaller brands of Fair Trade sugar at supermarkets will switch to Tate & Lyle brand.

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