‘Fair Trade’ in Fashion

 

April 24, 2011

 

Many consumers will opt for “Fair Trade” coffee over the alternatives—even if the price rises significantly, a study finds.

The “fair trade” movement seeks to improve conditions for farmers and other producers in developing countries. The study took place in 26 stores of an unnamed upscale chain.

In one test, in half the stores researchers put “Fair Trade Certified” stickers on the two most popular coffees sold in bulk: $10.99-a-pound Coffee Blend and the more-popular $11.99 French Roast. In the other stores, the researchers placed similar stickers that just named the coffees. (The stores sold six other coffees in bulk, priced similarly.) With a Fair Trade label, sales of French Roast rose 8% and sales of Coffee Blend climbed 13%, as overall coffee sales remained level.

In a second test, the price of each Fair Trade coffee was raised by $1 a pound while competing coffee prices stayed fixed. Sales of more-popular French Roast actually rose 2%, demonstrating the allure of the label for some consumers. But sales of the cheaper Coffee Blend, evidently the choice of price-focused shoppers, tumbled 30%.

“Consumer Demand for the Fair Trade Label: Evidence from a Field Experiment,” Jens Hainmueller, Michael J. Hiscox and Sandra Sequeira, Working Paper (April)

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