Comment - Soft Drinks & Water - The Question of Ethics
Weather-beaten consumers are keen to jump back on board the ethical express, when it comes to soft drinks and water. Whilst companies operating in the sector are well-tuned to say what they'll do in the ethical arena, Annette Farr asks if they also mean what they say.
Here's the scam: a recently-arrived bottled water company with an eye-catching label says x% of its profits will go to support, say, water harvesting in a third world community. Being a 'start up', the company is unlikely to make much profit for the first few years of its life, if at all. But it grabs the headlines and gets kudos for its benevolence whereas, in reality, the community is likely to receive little, if any, help.
Is this situation ethical? Many soft drink entrepreneurs are tapping into the current zeitgeist, with an ethical and environmental marketing ethos. Having done their research, they will know that humanitarian concerns - embraced under the corporate social responsibility umbrella and heightened recently by the earthquake in Haiti - will be instrumental in driving growth as economies emerge from recession.
According to analyst Mintel: “Ethics will play a large part in building up brands and influencing purchase. For businesses to rebuild brands through ethical efforts they will need to consider the connection with the consumer – giving an emotional reason to buy.”
Environmental and ethical issues retain the power to attract attention and spend, says Mintel, with nearly 50% of UK adults (25m) viewing them as important or very important; in the US, 39% say they would pay more for environmentally friendly products. Awareness is fast becoming a key driver in consumer engagement. Currently 30% of tea drinkers in the US, for example, say they usually purchase fair trade- certified tea.
Ethics, too, has been flagged up by Datamonitor as a key driver of product innovation as consumers seek out 'value driven' branding. The analyst's figures show manufacturers bombarded the FMCG market with over 1,600 product innovations launched globally between 2007 and 2009, creating an environment where it is easy for new products to become lost. A USP which taps into ethical principles, such as one conveyed by Fairtrade or Rainforest Alliance certification, provides a point of difference.
In Europe, there are a number of different ethical schemes in the food and beverage sector, including Max Havelaar, Rainforest Alliance, Equitrade and Utz, each with its own set of criteria and logos. It has been reported that, last year, the European Commission estimated the market to be worth some EUR1.5bn (US$2.06bn) at retail, having grown 70 fold since 1999.
The latest news is that the European Economic and Social Committee has published an opinion that more resources and regulatory support are needed to develop fair trade schemes, but warns that some form of harmonisation is required since the plethora of schemes only adds to confusion in the market place,
The evidence for ethical soft drinks is powerful, yet the choice on UK shelves is pitifully confined to a clutch of niche juice companies. (A look at the UK's Fairtrade Foundation's website shows that there are just eight juice, three retail own-label, three cola and one tea producer marketing Fairtrade drinks).
Calypso Soft Drinks is amongst these. The company reports that, while the mainstream industry pure juice sector saw a decline last year, it has recorded a 25% growth in Fairtrade pure juice sales. Richard Cooke, sales and marketing director, says his company's strategy is “to double the amount of Fairtrade pure juices we sell during the next two years. We want to help change customer habits too and will support ethically sourced juice drinks 100%. These products are important to the lives of millions of producers in developing countries and despite adverse market conditions their popularity continues to grow”.
The Fairtrade Foundation will no doubt be hoping that its forthcoming Fairtrade Fortnight (22 Feb – 7 March) will heighten consumer awareness and attract new converts to its principles of fair terms of trade for framers and workers in the developing world. So far, mainstream brands, apart from Innocent's link with using Rainforest Alliance certified fruit, have not entered into the ethically-sourced ingredients arena.
But this could - and should - change. Last month, The Coca-Cola Co, non-profit TechnoServe, and the Bill & Melinda Gates Foundation launched a partnership to enable over 50,000 small fruit farmers in Uganda and Kenya to increase their productivity and double their incomes by 2014.
This four-year, US$11.5m partnership will enable mango and passion fruit farmers to participate in Coca-Cola's supply chain for the first time. With a $7.5m grant provided by the Gates Foundation to TechnoServe, $3m provided by Coca-Cola, and $1m by bottling partner Coca-Cola Sabco, the project aims to create new market opportunities for local farmers whose fruit will be used for Coca-Cola’s locally-produced and sold fruit juices.
Coca-Cola says the partnership will serve as a model as it expands its juice business in other markets. What's the betting that others will follow, and aim to improve on Coca-Cola's initiative?
For the here and now, the challenge that brands face is in winning back customers who have become accustomed to buying retailers' own heavily discounted soft drinks. But, as growth returns, consumers will be looking for 'value driven' branding; thus an opportunity for beverages which ally themselves to an ethical cause.
And as consumers are ever more demanding it is hoped that ethical claims will be scrutinised for their accuracy, be it the use of sustainable packaging, sourcing of ingredients or donations to charitable causes.
Regulation, harmonisation and transparency are needed to separate the genuine and worthy from the chancers and opportunists.
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