Annual Report 2017 Max Havelaar Foundation (Switzerland)

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ANNUAL REPORT 2017

MAX HAVELAAR FOUNDATION (SWITZERLAND)

Foto: Andreas von Gunten The Swiss partner conference in Köniz near Bern.

FRUITFUL COMMITMENT IN SWITZERLAND Awareness helps to enable producers in the developing world to sell more of their goods under Fairtrade terms. OUR 25 YEAR anniversary presented an ideal opportunity to do this.

Fairtrade Max Havelaar has set its sights on fair trade becoming a fact of everyday life. There is still a long way to go, even 25 years after Max Havelaar was founded – but the progress that has been made so far is impressive nonetheless!

A show of strength An array of activities were organised to celebrate our anniver­ sary: Our interactive “Empower Station” attracted large numbers of people in Lausanne, Biel, Uster and Geneva, supplying plenty of fun as well as learning opportunities. Using their own muscle power, adults and children alike conveyed a Fairtrade product in the form of a small ball from the small-scale farm in the developing world all the way to the Swiss super­market shelf. This initiative allowed Max Havelaar to reach over 200 000 people and educate them about the importance of fair trade.

The anniversary competition was also met with huge enthusiasm on our website and on social media, with attractive prices from our Fairtrade partners to be won. In addition, Max Havelaar embarked on a widespread poster campaign in autumn, on trains, buses and trams in cities around Switzerland.

Very high level of recognition and confidence Media coverage of the “25 years of Max Havelaar” celebrations was also extremely encouraging: Many of the mainstream media outlets reported on the history of the Max Havelaar Foundation and on the growth of Fairtrade. Highlights of the coverage included news reports on German and French language Swiss television networks. Simply through active communication, we were able to achieve an audience reach that would have 2 Communication and Marketing

equated to over one million Swiss francs’ worth of advertising.

These far-reaching social mobilisation initiatives of the Foundation are having an impact: Max Havelaar now enjoys an extremely good reputation among the Swiss population. Brand awareness currently stands at 89 %, trust at 88 %, and customer loyalty at 82 % (according to a Globescan study in 2017).

One particular highlight of the anniversary year was our second ever partner conference, the first having been held in 2015. The event attracted 130 leading partners from industry, politics and civil society, who met in the Gutshof Köniz near Bern. Topics discussed at the conference included the success factors of the past, on as well as the current challenges and future opportunities for fair trade.

Five Fair Trade Towns Towns and communities have significant responsibility when it comes to fair trade – on the one hand in terms of setting an example, and on the other in terms of the very practical matter of public procurement. Max Havelaar is actively engaged in the Fair Trade Town initiative via the umbrella organisation, Swiss Fair Trade. Starting with Glarus Nord and Zweisimmen in 2016, the initiative gained momentum with Bern and Frutigen coming on board in 2017, and Carouge in early 2018, the first town in Western Switzerland to join. And so, the internationally successful Fair Trade Town movement is clearly well underway in Switzer­ land too.

PER-CAPITA CONSUMPTION CLIMBS TO 83 FRANCS Hundreds of partners are getting involved in Fairtrade. They contributed to the rise of Fairtrade products by 11.6 %.

In 2017, consumers in Switzerland spent a whopping 701 million Swiss francs on Fairtrade products — an increase of 11.6 % on the previous year. Per capita consumption increased to 83 Swiss francs. So, as well as being able to sell their goods at a fair price, Fairtrade producers in Latin America, Africa and Asia also received around 10.5 million dollars in Fairtrade Premiums.

There are now 2 800 products sporting the Fairtrade label that are available across Switzerland – from retailers, gastronomy businesses, florists, goldsmiths and various other partners. The level of commitment is particularly visible in the retail sector, which saw an increase in turnover of Fairtrade products of more than 12 % on the previous year, and in the gastronomy sector, with an increase of over 11 %.

With their own-brand goods, the retailers are by far the largest source of Fairtrade products on the market. Manufacturers of branded goods saw an impressive, above-average increase of 21 % in Fairtrade products last year.

The impetus of the sourcing Programme One of the major driving forces behind the growth in volume and turnover of products is the Fairtrade Sourcing Programme, and particularly in the case of cocoa, for which turnover increased by 88 %, accounting for 10 % of the total turnover. The growth in turnover is primarily the result of new chocolate products on the market, and the expansion of the range into new composite product categories such as biscuits, baked goods and milk-based drinks.

The range of Fairtrade drinks on the market is also seeing rapid expansion, particularly with fruit juices and iced teas. Fruit juices 3 Market report

continued to gain market share in Switzerland thanks to the commitment of retailers and brand manufacturers, rising to 30 % in 2017. This means that almost one in three litres of juice comes from a fairly traded source.

Fairtrade coffee is also seeing a positive trend: the 14 % increase in turnover is primarily due to new options in coffee capsules, as well as the developments in retail gastronomy and convenience foods.

Sales of roses have levelled out in the retail sector, and the potential for growth lies primarily with the florists, only a few of whom have so far shown an interest in Fairtrade. Sales of tea and cotton decreased in 2017 as a result of discontinued items in the retail sector. The turnover of Fairtrade quinoa saw a slight drop, although it has a market share of 95 %.

Successes for fruits and dairy products Fairtrade exotic fruits such as mango and avocado are experi­ encing an above-average upward trend, and retailers have continued to expand their ranges of Fairtrade-certified fruits.

Bananas had a record year in terms of further increases in turnover and sales volumes, and a high market share of 54 %.

Switzerland is also benefiting from a widening range of dairy products from fairly-traded sources. Fairtrade-certified yoghurts, for example, have already achieved a market share of 10 %.

EXPENDITURE BY AREA 2017 Administration and Infrastructure

Business Development

12 %

Communication and Marketing

20 %

19 %

Direct project support

3 %

Supply Chain Management

15 %

Contribution to the umbrella association Fairtrade International

5 % 13 %

13 %

Project and producers network support

Total: 7.6 million francs

International cooperation

88 % for foundation goals

12 % for administration

ANNUAL ACCOUNT AND FINANCIAL STATEMENT 2017 The Max Havelaar Foundation (Switzerland) once again achieved significant growth in 2017, making it possible to invest more funds in projects in the developing world.

Income from license fees has undergone a pleasing develop­ ment, rising to 7.8 million Swiss francs – an increase of 4.4 %.

Our partners can benefit from a lower license fee scale based on increasing their turnover, which means that Max Havelaar is providing incentives to become involved, while the partners benefit from economies of scale.

Other income fell by around 90 000 Swiss francs, to 314 000 francs.

As in the previous year, this mainly consisted of recharged ser­ vices to the international Fairtrade system in order to cover costs.

The decrease was due to the term of office coming to an end of a key post that had been held temporarily within the Max Havelaar Foundation.

This also had an impact on the personnel expenses, which were reduced by 203 000 francs to around CHF 3.6 million francs. In addition, there was a significant reduction in recruitment costs in comparison to the previous year.

Other operating expenses rose by around 10 % on the previous year, to around 4 million francs. There were two main reasons for this: • Costs associated with international cooperation increased by CHF 453 000: the income-dependent compulsory contribu tions to the international Fairtrade system had been reduced by 200 000 francs in 2016 due to the one-off effect of the release of too high a provision; in 2017, Max Havelaar increased its direct support of producers in the developing world by two thirds, investing 384 000 francs in their projects. An even higher level of funding for such projects had originally been planned, but this could not be fully realised in 2017.

4 Annual account and financial statement 2017

•

Administration expenses were significantly higher than the previous year. This was partly attributable to two IT projects, which accounted for 56 000 francs of the 88 000-franc increase; in addition, Max Havelaar bought in services, in cooperation with other Fairtrade organisations, for the purposes of developing the market for cotton and flowers and for product approval (amounting to 48 000 francs).

On the other hand, as planned, expenditure on marketing and communication dropped considerably in comparison to 2016, totalling 678 000 francs. This was due to a conscious decision on the part of Fairtrade Max Havelaar to optimise the resource needs in this area both temporally and substantively in order to free up the budgets for international cooperation.

At 514 000 francs, the ordinary result is slightly higher than that of the previous year, and well above the budgeted break-even.

This result will allow Fairtrade Max Havelaar to increase the funds in the organisational capital by 417 000 francs to pursue development projects for coffee (267 000 francs), gold (100 000 francs) and cocoa (50 000 francs). As planned, Max Havelaar withdrew 172 000 francs for a coffee project from the funds that had been provisioned in the previous year.

The year-end result of 270 000 francs shores up the reserves of the Max Havelaar Foundation and will ensure its continued positive development in the future.

BALANCE SHEET Assets CHF

PROFIT AND LOSS ACCOUNT Notes1

Current assets Cash and cash equivalents Accounts receivable

4.1 4.2

Other current receivables Accrued income

4.3

4 868 294

1 830 144

3 844 758

2 104 132

90 190

90 181

97 221

510 088

6 885 849

6 549 159

Non-current assets Property

4.4

Total assets

Notes1

31.12.2017 31.12.2016

2017

2016

License income from third parties

7 815 892

7 487 784

Trade/services income

7 815 892

7 487 784

Income from earmarked donations

583

333

Income from donations

583

333

Other operating income

314 063

404 538

Losses from receivables

(7 363)

(1 685)

8 123 175

7 890 970

(3 579 045)

(3 782 479)

Administration expenses

(689 349)

(601 533)

(2 539 047)

(2 085 630)

(677 711)

(849 173)

(97 805)

(102 009)

-

-

Total operating income Personnel expenses

168 377

261 302

International cooperation

168 377

261 302

Marketing/communication expenses

7 054 226

6 810 461

Depreciation of property

4.4

Other operating expenses Liabilities and equity CHF

31.12.2017 31.12.2016

Operating expenses

(7 582 957) (7 420 824)

Current liabilities Trade/services liabilities

Operating result 5.1

416 222

540 218

470 146

24 775

51 672

(50 417)

(33 920)

7

(25 642)

17 752

Withdrawals from appropriated reserve

-

24 888

Deposits in appropriated reserve

(583)

(333)

Fund result of appropriated reserve

(583)

24 555

513 993

512 453

Extraordinary income

-

34 502

Extraordinary expenses

-

(5 965)

Extraordinary result

-

28 537

513 993

540 990

(416 613)

(407 833)

172 095

-

(244 518)

(407 833)

269 475

133 157

421 817 Financial income

Other current liabilities

5.2

214 745

230 337

Financial expenses

Short term provisions

5.3

132 230

243 045

Financial result

Deferred income

5.4

211 519

350 330

974 716

1 245 529

Long-term liabilities Appropriated reserve from donations

Liabilities

2 751

2 168

2 751

2 168

977 467

1 247 697

190 002

190 002

422 352

327 833

80 000

80 000

100 000

-

50 000

-

4 964 930

4 831 772

269 475

133 157

6 076 759

5 562 764

7 054 226

6 810 461

Ordinary result

Organisational capital Paid-up foundation capital Earmarked capital Category Development (coffee) Earmarked capital innovation business development Earmarked capital Category Development (gold) Earmarked capital Alliance for Action Generated unrestricted capital Profit/loss for the period

Total liabilities and equity

6

Result before change to organisational capital Allocation to earmarked capital Withdrawal from earmarked capital Fund result of organisational capital

Profit/loss for the period

ACCOUNTING IN ACCORDANCE WITH SWISS GAAP FER This annual account was comprehensively reviewed in an ordinary audit by PriceWaterhouseCoopers, Basel, and found correct. It provides a true and fair view of the assets, financial and income position in accordance with the Swiss GAAP FER and complies with Swiss law and the Deed of Foundation.

1

The full auditors’ report and the annual accounts together with the performance report and all notes can be found at www.maxhavelaar.ch/jahresbericht

Foto: Maurice Ressel Orange pickers from the cooperative Coopersanta in Brazil at work.

DEVELOPMENT OF PRODUCTION A brief analysis highlights the challenges faced by producers of the six major Fairtrade products, and the progress made in these areas.

BANANAS

2017: 36 739 tonnes +2 % Huge price pressures continue to exist in the banana trade. These have their social and ecological consequences, which are keenly felt by small-scale farming families and plantation workers. The use of harmful pesticides is widespread, and this has serious effects on the environment and on the health of the workers and those living in the vicinity.

A ban on harmful pesticides has long been in place with the Fairtrade system, and in 2017, the list of banned substances was further increased. These came into force in January 2018 following a transition period. Moreover, the Fairtrade standards emphasise environmentally-friendly methods of cultivation as well as comprehensive requirements in terms of work safety. The criteria encompass the storage and disposal of pesticides, required protective clothing, training and development and integrated plant protection methods. In addition, Fairtrade promotes organic cultivation through a supplementary Organic Premium.

FLOWERS

2017: 70 Million stems -2 % Wages were the predominant issue in 2017 in the intensive work environment of flower cultivation. The Fairtrade standards set out clear steps towards achieving a living wage. The implementation of these steps is no mean feat, as the farms are facing extreme price 6 The major commodities

pressures. Revised in 2017, the standards stipulate a minimum wage of 1.9 US dollars per day. These come into force in April 2018.

This minimum wage stipulation is particularly important in countries where there is no national minimum wage, or where the national minimum wage is lower. Fairtrade also enforces strict rules in the areas of sexual harassment, gender equality and the efficient use of water resources.

FRUIT JUICES

2017: 29 million litres +8 % While consumption of fruit juices is falling globally, and the market as a whole is shrinking, the turnover of Fairtrade fruit juices is happily still on the rise! This indicates that the issue of sustainability is gaining in importance when it comes to fruit juice. Meanwhile, the dominance of three multinational companies in global orange production is presenting small-scale farming families with a significant problem. The small producers simply cannot lower their production costs sufficiently to compete with the big producers. Thanks to Fairtrade, however, they can obtain better and more stable prices for their products, as well as receiving the Fairtrade Premium.

COFFEE

2017: 6 451 tonnes Raw coffee +7 % In the past year, the global market price for Arabica coffee beans was below the Fairtrade minimum price. This demonstrates how

Foto: Eric St-Pierre Cocoa harvest in the cooperative Ecojad in the Ivory Coast.

important this safety net is for providing the producers and their families with a stable income and giving them the security they need in order to plan ahead. One of the problems they face is climate change, which has led to serious harvest losses. Thanks to the Fairtrade Premium, coffee cooperatives are investing in numerous projects dealing with issues such as adaptation to the consequences of climate change. Fairtrade coffee growers are currently, on average, able to sell only around 30 % of their yield under Fairtrade terms. However, the signs are encouraging in Switzerland, particularly in the retail gastronomy sector.

countries and emerging economies live and work in precarious conditions. Fairtrade sugar cooperatives are democratically organised and have many advantages over their non-Fairtrade counterparts, including greater bargaining power, easier access to finance, and opportunities to learn from one another. Fairtrade organisations such as those in Belize, for example, are working to promote best practice in relation to the widespread child and forced labour situation. Meanwhile, in Costa Rica, Fairtrade organi­sations are investing in environmental protec­tion measures, which have reduced water consumption by 70 %.

COCOA

ALLOCATION OF PREMIUMS

BY SMALL PRODUCER ORGANISATIONS

2017: 4 056 tonnes +31 % For the first time in years, the global market price for cocoa fell below the Fairtrade minimum price in 2017.

Under these circumstances, the minimum price is particularly significant for the cocoa farming sector, where poverty is rife.

The additional Fairtrade Premium makes it possible for growers to invest in sustainable cocoa cultivation as well as in community projects. In West Africa, a team of 13 Fairtrade Africa employees are providing training to cocoa producer organisations in order to professionalise the management of the cooperatives, improve services for members and increase quality and productivity on the farms. Max Havelaar Switzerland is supporting coffee growers in Ghana through its multi-stakeholder programme, “Alliance for Action”, which allows the growers to diversify and increase their income by cultivating products that can be marketed locally.

Services to members (Salary improvement, tools, education)

Investment in the producer orga­ nisation (structure, administration and human resources)

48 %

42 %

6 % 4 %

CANE SUGAR

2017: 7 089 tonnes +9 % Sugar is one of the most important trading products worldwide, and sugar cane accounts for 80 % of the total sugar market. But the small-scale farming families that grow sugar cane in devel­oping 7 The major commodities

Services to community infrastructure (education, social and health services, infrastructure)

Other

COMMODITY & MARKET DEVELOPMENT 2017 Sales volumes of the most important commodities

BANANAS1 36 739 tonnes +2 % on prev. year

FLOWERS 70 006 643 stems -2 % on prev. year

FRUIT JUICES1 29 482 347 litres +8 % on prev. year

SALES PER PRODUCT CATEGORY

COFFEE1 6 451 tonnes +7 % on prev. year

COCOA1 4 056 tonnes +31 % on prev. year

MARKET SHARE

Product

Sales (CHF)

Change comp. to 2016

Bananas Confectionery products - Chocolate - Cookies and others Drinks - Juices - Soft drinks including ice tea - Alcoholic beverages Coffee Flowers and plants Exotics - Pineapples - Other fresh exotics 2 - Exotic convenience/tinned products Dairy products - Yogurt - Milkshakes - Miscellaneous items Ice creams Bakery products Dried fruits/nuts Rice Cane sugar Quinoa Spices Sandwich spreads - Honey - Remaining Composite products 3 Cotton products Tee Gold Sportballs

110 126 018 97 105 097 86 622 108 10 482 988 90 638 406 73 732 732 16 654 674 251 001 68 395 293 68 125 773 66 547 085 7 187 196 33 522 304 25 837 585 53 015 457 36 928 604 9 578 187 6 508 666 42 704 231 35 152 767 22 851 475 11 538 000 7 363 815 5 755 535 4 427 192 4 261 638 3 917 630 344 008 3 255 704 3 132 367 2 986 805 2 789 711 331 612

0.7 % 16.4 % 15.4 % 25.5 % 8.3 % 7.1 % 14.0 % -7.1 % 13.5 % -1.7 % 16.3 % -9.2 % 20.3 % 20.5 % 6.5 % 6.5 % 12.8 % -1.4 % 13.4 % 95.6 % 59.5 % 10.5 % 5.2 % -5.8 % 29.7 % -2.1 % -0.1 % -20.7 % 49.8 % -27.9 % -13.4 % -12.5 % 6.7 %

Total

700 503 980

11.6 %

CANE SUGAR1 7 089 tonnes +9 % on prev. year

4

Cane sugar

95 %

Bananas

54 %

Pineapples

35 %

Asian rice

31 %

Fruit juices

30 %

Coffee

10 %

Honey

7 %

Chocolate

6 %

Tea

5 % 0

10

20

ORGANIC PERCENTAGE

30

40

50

60

70

80

90

100

5

Cotton

72 %

Tea

71 %

Bananas

58 %

Asian rice

52 %

Coffee

27 %

Cane sugar

18 %

Chocolate

17 %

Pineapples

3 %

Honey

1 % 0

1

3

4

5

2

10

20

30

40

50

60

70

80

90

100

contains also use of commodity in composites products amongst others avocados, coconuts, limes, mangos, oranges not comparable with the values of the previous year because many products run separately estimated retail market share based on sales volumes.

Source : AC Nielsen Organic percentage based on sales volume

Max Havelaar Foundation (Switzerland) I Limmatstrasse 107 I 8005 Zurich +41 44 278 99 00 I info@maxhavelaar.ch I www.maxhavelaar.ch