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1.2 The Danish fair trade market - PURE

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1.2 The Danish fair trade market - PURE

Study program: Written by:

    Bsc(IM) 6. Janne Pløen Mortensen

     Parya Salami

     Advisor:

     Liisa Lätheenmäki

Understanding the Danish consumers’ intentions to the

    purchase of fair trade coffee

    - and how to use it in marketing

    Department of Marketing and Statistics

    The Aarhus School of Business

    2009

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    Summary

The aim of this thesis is to examine which factors influence Danish consumers’

    intentions to purchase fair trade coffee, and how the understanding of these factors can help the marketing of fair trade products in the Danish market.

    The thesis consists of a theoretical foundation based on an existing theory and an empirical study of consumers’ intentions to purchase fair trade coffee. This is used to develop marketing tools in order to help increase the awareness of fair trade in the Danish consumer market. The theoretical part of the thesis is based on the Theory of

    Planned Behavior and previous studies in the field of ethical consumption, which are mostly in relation to fair trade consumption. The purpose of this thesis is to generate knowledge about the consumers’ intentions to purchase fair trade coffee through an

    understanding of the influences, which affect the consumers during the fair trade purchasing situation.

Our analysis shows that Danish consumers’ intentions to purchase fair trade coffee is

    influenced by the attitudes the consumers hold toward performing the action, the social pressure of a consumers environment, and last but not least the idea of being a morally concerned individual.

    According to our study the intention of buying fair trade coffee is influenced by the factors attitude to behaviour”, subjective norm and moral self-identity. The

    reasons for the increases in the three variables are determined by their underlying beliefs. A change in these beliefs would also be likely to cause a change in the variables. Therefore, it is also valuable to understand which beliefs form the basis for the variables that influence the intention to buy fair trade coffee. Advertisers and marketers of the fair trade organizations can use the found understanding of these beliefs in order to create a good marketing plan with the objective to increase awareness of fair trade coffee.

    In this thesis we have used results from a conducted consumer survey and analyzed them in a marketing perspective, in order to create an optimal marketing plan for fair

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    trade products in the Danish market. Our results showed that the Danish consumers are highly influenced by the moral aspect of consumption. Therefore, a marketing plan should be constructed to emphasize the emotional and self-expressive aspect of the purchase of fair trade coffee. A marketer can do this by using ads that display fair trade farmers and workers in the developing countries. Such advertisement could help increase the consumer’s awareness of what the fair trade label represents and thereby increase the consumer’s emotions towards the product, which in the end should result in a purchase.

    The marketing implications of this research are that the marketers of fair trade have to communicate their ethical standards better and spread more information about the fair trade products and producers, in order to explain fully what they represent. Many consumers are sceptical and hesitant of the operations of relief organizations, like the fair trade organizations, and therefore the marketing of the fair trade labelled products should try to eliminate this scepticism. This can among others be done if the organizations become more transparent in their business operations.

    The focus of thesis is on the Danish fair trade market, as it has experienced a large increase in sales during the last ten years. The fair trade organizations believe that this increasing tendency will continue in the future, mainly because the Danish consumers have become more concerned with the ethics of consumption.

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Table of Contents

    Summary 2

    1. Introduction 6 1.1 The fair trade concept 8

    1.2 The Danish fair trade market 11 1.3 Is fair trade fair enough? 13 2. Understanding the intentions to purchase fair trade coffee 14 2.1 Theory and methodology 14

    2.1.1 Theory of Planned Behavior 15 2.1.2 Comparative studies on fair trade consumption 16

    2.1.2.1 “In search of fair trade: ethical consumer decision making in France” 17 2.1.2.2 “French fair trade coffee buyers’ purchasing motives” 18

    2.1.3 A modified version of the Theory of Planned Behavior 19

    2.1.4 Research design 21

    2.1.5 Hypothesis 21

    2.2 Method 21

    2.2.1 Method of data collection 22 2.2.2 Respondents 24

    2.2.3 Data analysis 26

    2.3 Results 29

    2.3.1 Behavior 30

    2.3.2 Intention to behavior 30 2.3.3 Attitude to behavior 31 2.3.4 Subjective norm 31

    2.3.5 Perceived behavioral control 32 2.3.6 Moral self-identity 33

    2.3.7 Political self-identity 33 2.3.8 Multiple regression analysis 34 2.3.9 The credibility of the fair trade organizations and producers 35

    2.3.10 The importance of product attributes 36 2.4 Discussion and conclusion of the survey 36

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3. Integrated brand promotion (IBP) 38

    3.1 Introduction 38

    3.1.1 A comparative study on fair trade with a marketing perspective 39

    3.1.1.1 “In search of a Golden Blend: Perspectives on the Marketing of

     Fair Trade Coffee” 39

    3.2 STP marketing 41

    3.2.1 Segmentation of the coffee market 41 3.2.2 Target audience of fair trade coffee 42 3.2.3 Positioning strategy for fair trade coffee 43 3.3 Consumer decision making 45

    3.3.1 Four modes of consumer decision making 47 3.4 Psychological processes behind advertising 50 3.5 Marketing plan 51

    3.5.1 Affective association 52

    3.5.2 Situating the product socially 52 3.5.3 Define the brand image 53

    3.5.4 Sales promotion 53

    3.6 Conclusion of the integrated brand promotion 55 4. The future of fair trade 57

    5. Final remarks 58

    5.1 Acknowledgements 58

    5.2 Workload 59

    6. Appendices 60

    6.1 Appendix A 60

    6.2 Appendix B 63

    6.3 Appendix C 70

    6.4 Appendix D 83

    6.5Appendix E 84

    6.6 Appendix F 87

    6.7 Appendix G 92

    6.8 Appendix H 93

    7. Bibliography 94

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1. Introduction

    In a world where the gap between rich and poor are continuously growing, the focus on equality is increasing. Fair trade is a way to decrease this gap by creating sustainable development mainly in the developing countries in economic, social and environmental areas (FT-DK, 2009b). The fair trade label requires that producers and traders fulfil the fair trade standards in order to qualify for the fair trade certification. The standards are a way to support disadvantaged, marginalized farmers and plantation workers, and to ensure that producers get fair prices for their products and that the hired labor receives a fair wage. A fair price or wage is defined as a pay that covers at least the costs of

    production and support the living expenses of the workers and producers (FT-DK,

    2009b). However, in order for the fair trade program to work, consumers have to be willing to buy the products.

    The objective of this research thesis is to understand the Danish consumers? intention to purchase fair trade coffee, through the factors that influence this decision. The influencing factors can be used to develop a marketing plan to increase the awareness of fair trade coffee. The research questions are therefore - What influences the Danish

    consumers’ intentions to purchase fair trade coffee? And - How can the knowledge of

    consumers’ intentions to purchase fair trade coffee be incorporated into a marketing plan?

    Additionally, we believe that the decision making process is also highly affected by political and moral considerations, and therefore a further aspect of our thesis will be to understand how these two measures affect the decision to purchase fair trade coffee. Further questions we wish to answer are therefore: What is the relationship between

    consumers’ moral stance, and their intentions to the purchase of fair trade coffee? And

    also: What is the relationship between consumers’ intentions to purchase fair trade

    coffee, and their political engagement?

The consumers’ scepticism of relief organizations might also influence their intention to

    purchase fair trade coffee, therefore we also wish to examine: Does the credibility of the

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    fair trade organizations and producers affect consumers’ intentions to purchase fair trade coffee?

    We have chosen this subject because we find the concept of fair trade, as an alternative way of supplying international aid, very interesting. Though, we also wish to understand how the affective and moral attitudes motivate the ethical consumer to purchase fair trade coffee. Despite the fact that this is an interesting subject and even though the Danish fair trade market is fairly well established, the public focus has previously been relatively low (EFTA, 2009a). Through this research project, we hope to discover measures that can help increase the public awareness of fair trade coffee, and thereby increase the focus on improving the living- and working conditions for plantation workers in the developing countries.

    We have decided to limit our study to only cover the purchase of fair trade coffee. The initial idea was to do the study for fair trade food products. However, in order to keep the thesis within the requested format, we made the decision to limit the study by only taking fair trade coffee into account. Additionally, we decided not to focus too much on

    1 aspect of the fair trade products, even though it is worth mentioning that the organic

    approximately 75 % of the fair trade products available in the Danish market are organic. Despite the fact that we have chosen to limit our study to the purchase of fair trade coffee, we expect that the result would be applicable to other product groups of fair trade. Fair trade food products such as tea, bananas, or sugar will most likely be applicable, as it could be expected that the intentions to purchase these fair trade products is influenced by many of the same factors as the purchase of fair trade coffee.

    The thesis is split into five main chapters. The first chapter is the introductory part of thesis, were we will introduce the fair trade concept and explain how the Danish fair trade market has developed over the past decade. This is followed by chapter 2 in which we describe the theories and methodology used for the thesis, and furthermore also

     1 Similarly to fair trade products, organic products have to fulfil certain standards. The standards ensure that the organic product is produced without any artificial chemicals or pesticides. Among other things, it also aims at creating a better animal welfare (Økologisk Landsforening, 2009)

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    provide a description of the data collection and data analysis. The empirical part of the thesis will be completed with a discussion and conclusion of the results of the survey. Chapter 3 is the integrated brand promotion, describing how the fair trade organizations can develop an optimal marketing plan in order to increase the general awareness of fair trade coffee in Denmark. Chapter 4 includes a discussion and a conclusion of the results derived from the empirical study and the marketing plan. And discuss the future of fair trade, and what should be the focus of the fair trade organizations, if they wish to increase the Danish consumers’ awareness of fair trade coffee. The text chapter of the thesis is our final remarks and our acknowledgement.

    First we will however, continue with the introductory chapter with a definition of the fair trade concept.

1.1 The fair trade concept

    Today there are a wide variety of definitions of fair trade. Throughout this thesis we will refer to the definition set by the fair trade labelling organization (FLO). According to FLO:

    “Fair Trade is a trading partnership, based on dialogue, transparency

    and respect, that seeks greater equity in international trade. It contributes

    to sustainable development by offering better trading conditions to, and

    securing their rights of, disadvantaged producers and workers

    especially in the South. Fair Trade organizations (backed by consumers)

    are actively engaged in supporting producers in awareness raising and in

    campaigning for changes in the rules and practices of conventional

    international trade (FLO, 2009a).

    For a product to carry the fair trade label, it must first meet the international fair trade standards, which are set by the Fair Trade Labelling Organizations International. A separate international certification company, FLO-Cert, regularly controls the

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    2 and the plantations, in order to ensure that they still fulfil the criteria. cooperatives

    Furthermore, every cooperative and plantation must deliver an annual report, which might be followed by a visit from one of FLO-Cert’s inspectors. The conditions

    concerning sales, production, working conditions, and other things related to the plantation or cooperative will be assessed by the FLO-Cert inspector during the visit. The importers of the fair trade products must provide FLO- Cert with quarterly- and annual accounts, which is followed up through unannounced visits. As a further assurance of the competences of FLO-Cert it was in 2007 accredited ISO 65, which is the leading international norm to ensure that a certification agency is competent. This means that FLO-Cert also is under assessment from an independent control agency (MH, 2009a).

    The general concept of fair trade has been around since the 1950s. The first fair trade label, Max Havelaar, was initiated in 1988 by the Dutch development agency Solidaridad on a request made from Mexican coffee farmers. The coffee farmers claimed that by securing them a fair price for their coffee, the foreign aid would become redundant. Therefore the first product that carried the label of fair trade was coffee. Since then the product range has increased, and everything from food products to clothing and flowers can now qualify to carry the certification of fair trade. Some products are produced or grown by farmers, who then are organised into cooperatives, to enable them to deliver bigger amounts of raw material. An example of this type of product could be cotton used for clothing. The fair trade label serves as a guarantee that the farmers receive a fair price for their products. A fair price being that the farmers receive at least a fixed minimum price that covers the costs of production and living expenses, regardless of the trends on the world market. In addition to this, an extra pay is facilitated in order to develop a positive growth. Other products, such as tea and wine, are produced in large plantations. Under these circumstances the fair trade label works as a guarantee that the working conditions and workers’ salaries comply with the

    standards set by FLO. In both types of fair trade production farmers and workers get a fair trade bonus, which they can jointly decide on what to do with. Building schools or

     2 A cooperative is a gathering of farmers who work together in order to provide larger amount of raw material or products (FLO, 2009a).

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    improving their production methods are just examples of how the fair trade bonus can be spend (FLO, 2009a; MH, 2009a).

    As mentioned earlier, the key objectives of the fair trade standards are to support disadvantaged farmers and plantation workers. Additionally, it is also to ensure a guaranteed minimum price in order to enable investments to enhance sustainable development, and to facilitate long-term relationships between the producers and trader (FLO, 2009b).

    There are several sets of standards that the producers and traders must fulfil in order for their products to qualify for the fair trade label. The generic standards include the producer standards and the trader standards. The producer standards position the hired

    labor as the beneficiaries. The standards are set to ensure the plantation workers at least a minimum payment for their labor and proper working conditions. The trader

    standards are set to ensure that the producers get at least a minimum price for their products from the traders. Furthermore, the traders must pay a price premium generated in order for the producers to invest in development. The trader must pay up front and sign contracts binding them to long-term relationships with the producers (FLO, 2009c). Another set of standards is the products standards, which are split into two separate sets

    of standards. The first is the product standards for small farmers’ organizations and for

    traders of their products. The standards cover the cooperatives of farmers, and vary

    across the product range. For coffee the standards are that the sourcing must cover each harvest, and the sourcing plans must be renewed at least three months before they expire. Furthermore, the trader must on the producer’s request pay up to 60 % of the contract’s value up front. The second set of standards under the Product Standards is the product

    standards for hired labor situations and for traders of their products. These standards

    cover the producers who rely on hired work in order to keep their production running, for example the plantations and factories. Again the standards vary across the product range, but generally these standards deal with the payment of the produce and products, the pre-financing, and criteria to create sustainable trade (FLO, 2009d).

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