Annual Report 2018 Max Havelaar Foundation (Switzerland)

Fairtrade

IN EVERY CASE BETTER

ANNUAL REPORT 2018

MAX HAVELAAR FOUNDATION (SWITZERLAND)

Photo: Serge Hoeltschi

Photo: Dean Jaggi Fair trade is an absolute must for them: Ambassadors Breel Embolo and Carlos Leal.

FAIRTRADE WITH BREEL AND CARLOS One of the key aspects of the work of the Max Havelaar Foundation is to let the Swiss public know what fair trade actually means. To this end we introduced a wide range of different measures in 2018.

At Fairtrade Max Havelaar we aim to utilise our marketing initia­tives for several years running, so as to make our campaigns as cost effective as possible. That’s why in 2018 we built on the success­ful marketing activities that we had developed in 2017 for our 25-year anniversary. Our “Empower Station” attracted a great deal of interest at public runs in Lausanne, Uster, Geneva and Lucerne. Our stand had various fun ways for adults and chil­dren alike to get to know a bit more about the world of Fairtrade.

This marketing method reached around 200 000 people alto­gether. Once again, Max Havelaar embarked on a widespread poster campaign this autumn, on trains, buses and trams in cities around Switzerland, with some 130 million potential views.

A new departure was a short promotional film in cinemas which we developed in con­junction with Fairtrade Germany and Austria.

This helped to raise awareness of fair trade among over 680 000 cinema-goers. Our online game “Fairtrade Tinder” was a huge success, allowing viewers to learn about the wide range of Fairtrade products avail­ able and also win attractive prizes from our partners. Cover­age in the media was also encouraging: Throughout the year, main­ stream as well as regional media reported on a variety of aspects of Fairtrade. The height of the coverage was a 30-minute report in the TV programme “NZZ Format” about the function and impact of Fairtrade.

Prominent ambassadors One special highlight of the past year was the fact that we secured two famous voluntary ambassadors for Fairtrade in the form of professional footballer Breel Embolo and actor and musician Carlos Leal. Because of his African heritage, Breel Embolo identifies very 2 Communication and Marketing

strongly with Fairtrade values. During the football World Cup in June/July 2018, he gave a perfect demonstration on social media of how football and Fairtrade products go hand-in-hand. To Carlos Leal, fair trade is an absolute must. He shared this message— along with a beautiful Fairtrade rose or sweet Fairtrade fruit—with passers by at an event at Bern railway station.

The Swiss know and trust Max Havelaar A number of market research studies indicate how successful these marketing initiatives have been: The Swiss population are very aware of Max Havelaar, and have a high level of trust in the label. What is more, they regularly buy Fairtrade products. Includ­ ed for the first time in the GfK Business Reflector, Switzerland’s leading reputation study, Max Havelaar achieved fourth place among the most reputable non-profit organisations! In addition, the Foundation was awarded “Newcomer of the Year”.

According to market research, brand awareness currently stands at 89 %, trust at 82 %, and customer loyalty at 88 % (Globescan study in 2019).

Towns and communities play a significant role in fair trade. For one thing, they set an example to the local population, and for another, they have a great deal of purchasing power with the public purse. That’s why Max Havelaar is actively engaged in the Fair Trade Town initiative via the umbrella organisation, Swiss Fair Trade. Last year, Carouge and Capriasca in Romandie and Ticino respectively were the first towns in these regions to be awarded the title. Thanks to Burgdorf, Bellinzona and Gossau SG, we are well on our way to achieving a total of ten Fair Trade Towns during the course of 2019.

NEW LABEL GETS US OFF TO A GOOD START A highlight of 2018 was the introduction of a label for single ingredients. However, the strong growth of 13.4 % was also due in part to the core business with the black product label.

Over 250 partners of Max Havelaar are involved in Fairtrade in Switzerland, including 12 new partners during the course of the year.

The partners played an important part in ensuring that turnover with Fairtrade products experienced another year of strong growth in 2018, increasing by 13.4 % on the previous year, to 794 million Swiss francs. In 2018, the consumer spend in Switzerland on Fairtrade products was 93 francs per person. This consumption of Fairtrade products in Switzerland resulted in over 11 million dollars in Fair­trade Premiums for small-scale farmers and work­ ers in the developing world. The double-digit growth underlines the increasing importance of Fairtrade in the Swiss retail sector, which, as a whole is currently experi­encing stagnation.

dried fruit, nuts and bakery products. Importantly, coffee roasters have added Fairtrade-label coffee to their range of coffee capsules.

The growing assortment of Fairtrade fresh produce available— mangos, grapes, ginger, limes and passion fruit—is also gaining popularity. Various Fairtrade fruits and vegetables such as pine­ apple, lychees, baby corn and asparagus can now be bought in increasing numbers in the form of convenience products in tins or glass jars. In the case of bakery products and biscuits, the range expanded to include pain au chocolat, hazelnut finger biscuits and various other cookies.

Turnover: CHF 794 million Growth: 13.4 % Per capita: CHF 93 Premium: $ 11 Million

Mother’s Day saw the introduction to the mar­ket of products which carry the label for Fairtrade sourced ingredients. Fairtrade roses, for example, were identified by this label when they were used in mixed bou­quets. Since then, the new Fairtrade label has been increasing in importance, and accounts for more than 10 % of turnover, primarily thanks to its use in chocolate. Over the coming months, more and more composite products bearing the new label will be seen on the supermarket shelves. Sales of cut flowers continued to be slow – partly because of the hot summer.

Altogether, the turnover for products carrying the black Fairtrade product label increased by 11 %.

Fruit and coffee as drivers of growth The main drivers of the strong growth are coffee, fresh produce, 3 Market report

A total of 2 800 products carrying the Fairtrade label can now be purchased throughout Swit­ zerland. Bananas, pineapples, rice, quinoa, sugar and fruit juices are the biggest sellers, each with a market share of over 30 %, bring­ing Fairtrade firmly out of the “niche” cate­go­ry. Coffee and choco­ late now have market shares of 10 % and 7 % respectively, repre­ senting a growth of 33 % and 14 %. Gold, our newest category, shone, attracting new partners and an expanded range of jewel­ lery, and more banks introduced Fairtrade gold. This is not reflect­ ed in the turnover fig­ures, however, as the price of gold dropped.

Retail share above-average growth The proportion of total turnover of Fairtrade products in the gas­tron­omy sector is stable at 11 %. Retail on the other hand expe­ rienced above-average growth of 14.4 %. Gastronomy increased by 6 %, mainly thanks to coffee, iced tea, ice cream and bananas.

EXPENDITURE BY AREA 2018 Administration and Infrastructure

Business Development

10 %

Communication and Marketing

14 % 6 %

20 %

16 % Direct project support

8 % 14 %

Contribution to the umbrella association Fairtrade International

12 %

Project and producers network support

Total: 8.8 million francs

Supply Chain Management

International cooperation

90 % for foundation goals

10 % for administration

ANNUAL ACCOUNT AND FINANCIAL STATEMENT 2018 Max Havelaar Foundation (Switzerland) experienced growth once again in 2018. Those who benefited in particular from this growth were the producers in the developing world.

Turnover with Fairtrade products showed a strong growth of 13.4 %. Nevertheless license fee income only increased by 2 % to 7.9 million Swiss francs. In 2018, partners with increasing Fairtrade turnover once again benefited from lower licence fees.

Other income rose by around 90 000 Swiss francs, to 403 000 francs.

This increase was due to various national Fairtrade organisations sharing the costs of further developing certain categories (such as flowers, fruit juices and gold) that are part of Max Havelaar’s global activity.

Operating expenses increased by a total of 1.2 million francs, which was primarily due to two factors in international cooperation: •

The mandatory contributions to the international Fairtrade system increased by 526 000 francs. This was equally caused by the growth in licence fee income, the increase in membership fees by two percent, and the increase in the average exchange rate by 0.07 Swiss cents per euro. In addition to these factors there was an unexpected bill for mandatory contributions related to 2017.

•

In 2018, Fairtrade Max Havelaar invested 781 000 francs in projects initiated by our producers in the developing world in the areas of quality improvement, adaptation to climate change and improved market access, among others. This was an increase of 338 000 francs (+76 %) on the previous year.

Expenditure on this scale was made possible by drawing from the organisational capital fund.

4 Annual account and financial statement 2018

Staff costs increased by around 77 000 francs, as the costs for an external employee were no longer assigned to administration costs.

2018 saw an increase in administration costs by 67 000 francs.

Half way through the year, work relating to product licensing and IT support were contracted out to external service providers. This move was made as part of Max Havelaar’s express intention to improve the quality of its services to partners.

The 200 000-franc increase in marketing and communication expenses was expected, and brings the figure in line with pre­ vious years. In 2017, a conscious decision to invest more re­ sources in international projects meant that inland expenditure on communication and marketing was reduced. In 2018, however, we refocused our emphasis on public awareness—with the development, in particular, of a promotional cinema film and a widespread public transport poster campaign in the main Swiss cities.

At a loss of 363 000 francs, the ordinary result reflects the large increase in investments in the Fairtrade system.

Fairtrade Max Havelaar had previously earmarked funds within the organisational capital for projects in the developing world.

Many of these investments were actioned in 2018, resulting in a reduction of the funds. The investments included projects by producers of coffee (384 000 francs), gold (100 000 francs) and cocoa (50 000 francs). In 2018, Fairtrade Max Havelaar re­served 162 000 francs for forthcoming projects.

A year-end result of 16 000 francs was thus achieved as planned.

BALANCE SHEET

PROFIT AND LOSS ACCOUNT

Assets CHF

Notes1

Current assets Cash and cash equivalents

4.1

5 195 274

4.2

2 534 887

1 830 144

Other current receivables Accrued income

4.3

2018

2017

License income from third parties

7 970 711

7 815 892

Trade/services income

7 970 711

7 815 892

Income from earmarked donations

584

583

Income from donations

584

583

4 868 294

Accounts receivable

Anhang1

31.12.2018 31.12.2017

90 049

90 190

Other operating income

403 625

314 063

65 723

97 221

Losses from receivables

(1 631)

(7 363)

7 885 933

6 885 849

8 373 289

8 123 175

(3 656 183)

(3 579 045)

Non-current assets

Total operating income Personnel expenses

Property

4.4

Total assets

97 445

168 377

Administration expenses

(756 241)

(689 349)

97 445

168 377

International cooperation

(3 386 920)

(2 539 047)

7 983 378

7 054 226

(877 282)

(677 711)

(87 952)

(97 805)

Marketing/communication expenses Depreciation of property

Liabilities and equity CHF

31.12.2018 31.12.2017

4.4

Operating expenses

(8 764 577) (7 582 957)

Current liabilities Operating result

Trade/services liabilities

5.1

1 094 971

540 218

93 435

24 775

(64 506)

(50 417)

7

28 930

(25 642)

Withdrawals from appropriated reserve

-

-

Deposits in appropriated reserve

(584)

(583)

Fund result of appropriated reserve

(584)

(583)

416 222 Financial income

Other current liabilities Short term provisions

(391 288)

5.2

223 966

214 745

Financial expenses

5.3

92 711

132 230

Financial result

5.4

854 578

211 519

2 266 227

974 716

Deferred income

Long-term liabilities Appropriated reserve from donations

Liabilities

3 335

2 751

3 335

2 751

2 269 562

977 467

Ordinary result

(362 942)

513 993

190 002

190 002

Result before change to organisational capital

(362 942)

513 993

88 402

422 352 Allocation to earmarked capital

(162 255)

(416 613)

Withdrawal from earmarked capital

541 226

172 095

Fund result of organisational capital

378 971

(244 518)

16 029

269 475

Organisational capital Paid-up foundation capital Earmarked capital Category Development (coffee)

6

Earmarked capital innovation business development

90 094

80 000

Earmarked capital Category Development (gold)

19 885

100 000

-

50 000

75 000

-

5 234 405

4 964 930

16 029

269 475

5 713 816

6 076 759

7 983 378

7 054 226

Earmarked capital Alliance for Action Earmarked capital Development product categories Generated unrestricted capital Profit/loss for the period

Total liabilities and equity

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

5 Balance sheet and profit and loss account 2018

Profit/loss for the period

ACCOUNTING IN ACCORDANCE WITH SWISS GAAP FER This annual account was comprehensively reviewed in a regular 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.

Photo: Erika Santelices Remonde Dirogene at the packing station of the banana plantation Banafem in the Dominican Republic.

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

BANANAS

2018: 37 142 tonnes +1 % Some producer organisations have been delivering bananas bearing the Fairtrade Max Havelaar label on a weekly basis for over 20 years. In 2018, a new production country came on board: Nicaragua—a country with a long history of fair trade, stretching back to the original women banana women of the 1980s and their “Nica” bananas.

In Switzerland, Fairtrade bananas continue to enjoy increasing popularity, and it is two providers in particular that have been in­ strumental here, having made the decision to sell only fairly traded bananas. The Fairtrade system is working towards securing a living wage for workers on banana plantations. An initial project designed to benefit plantation workers in the Dominican Republic has already been introduced with this aim in mind.

FLOWERS

2018: 67.9 Million stems -3 % Fairtrade has introduced a global minimum wage for flower farms, known as the “floor wage”, which has meant that workers on Fairtrade flower farms have enjoyed wage increases of up to 78 %.

Now the task is to further improve wages in collaboration with busi­nesses all the way along the supply chain. Special training given by the local Fairtrade producers support teams in the areas of Premium and project management results in Premium projects being 6 The major commodities

managed in a more professional manner, and ensures that infor­ mation about the ongoing projects reaches Switzerland more quickly.

Cut flowers experienced a decline in sales in Switzerland, primarily due to the hot summer weather. It is still the case that only a few florists insist on their roses coming from Fairtrade sources. Sales of Fairtrade poinsettia were launched in 2018 following successful market testing in 2017.

FRUIT JUICES

2018: 31.49 million litres +7 % Although consumer demand for juice from orange concentrate continues to decline in general, Fairtrade has seen an increase for the past several years. This shows how important the topic of sustainability has become in the eyes of the public. Thanks to the increasing demand, the areas under cultivation have been expanded, and Fairtrade cooperatives have gained new members.

Very little attention has been given in the past to securing a living wage and income for those in the fruit juice sector. However, the Juice CSR Platform, of which Fairtrade is a member alongside other major market players, has now taken up the cause.

COFFEE

2018: 4 892 tonnes Raw coffee +8 % The world market price for Arabica coffee beans has fallen twice below the critical threshold of one dollar per pound. At such low

Photo: James A. Rodríguez Elian Vargas Arias from the Coopecañera cooperative in Costa Rica bringing in the freshly cut sugar cane.

prices, most small-scale farmers are not able to cover their pro­ duction costs, and this is where the importance of the Fairtrade minimum price of 1.40 dollar per pound comes into its own.

Fairtrade wants to go one step further, and has initiated a pilot project in seven countries—Peru, Colombia, Nicaragua, Guate­mala, Mexico, Uganda and Indonesia. A holistic model has been developed with the aim of ensuring that small-scale farmers re­ ceive a living income on a sustainable basis.

In Switzerland, sales of Fairtrade-labelled coffee saw further in­ creas­es (+8 %). However, Fairtrade coffee farmers are still only able to sell one third of their harvest on Fairtrade terms.

COCOA

2018: 4 480 tonnes +10 % The global market price for cocoa recovered somewhat in 2018 to above the Fairtrade minimum price. Nevertheless, conditions remain challenging for cocoa farmers. Fairtrade has responded to this situation with its strategy for securing a living income, raising the minimum price and the Premium by 20%. This should ensure that the financial security of farmers is improved. In Ghana, we are working together with our partners to support cocoa farmers in diversifying their crops in order to increase both their income as well as the local biodiversity. Highlight: In the Republic of Côte d'Ivoire, 19 women have successfully completed the Women’s School of Leadership. The programme, which was launched in 2017, provides business training for women and promotes their independence.

Fairtrade terms. Thanks to Fairtrade they also receive a Premium in addition to the market price, which they invest in business man­ agement training, for example, or in joint purchases of har­vest­ing machinery.

Sugar growers are facing an increasingly difficult market, not least because of the liberalisation of the sugar market in the EU in 2017.

Fairtrade has responded to this situation by opening up new busi­ ness opportunities such as the manufacture and sale of brown speciality sugars, which have a degree of niche-market potential.

ALLOCATION OF PREMIUMS

BY SMALL PRODUCER ORGANISATIONS Services to members (wage improvement, tools, education)

50 %

Fairtrade sugar once again experienced increases in sales. Farm­ ers in Mauritius, the country of origin of a significant proportion of the raw sugar that is imported into Switzerland, benefited from 7 The major commodities

40 %

6 %

SUGAR

2018: 8 669 tonnes +22 %

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

Services to community infrastructure (education, social and health services, infrastructure) Total: 157 million euros

4 %

Other

COMMODITY & MARKET DEVELOPMENT 2018 Sales volumes of the most important commodities

BANANAS1 37 142 tonnes +1 % on prev. year

FLOWERS 67 900 084 stems -3 % on prev. year

FRUIT JUICES1 31 492 064 litres +7 % on prev. year

SALES PER PRODUCT CATEGORY

COFFEE 1 2 4 892 tonnes +8 % on prev. year

COCOA1 4 480 tonnes +10 % on prev. year

MARKET SHARE

Product

Sales (CHF)

Change comp. to 2017

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

116 811 834 98 662 046 18 149 789 110 448 594 99 222 453 77 434 029 21 572 631 215 792 91 105 711 86 262 044 48 401 052 30 901 980 6 959 011 61 234 824 41 658 259 11 507 539 8 069 027 57 806 515 46 992 065 43 008 927 30 437 442 12 491 620 8 697 004 5 914 382 5 319 955 4 633 353 4 028 622 3 811 850 216 772 3 985 338 3 206 605 2 668 657 209 098

20.3 % 13.9 % 73.1 % 0.3 % 9.5 % 5.0 % 29.5 % -14.0 % 33.2 % 29.6 % 44.4 % 19.6 % -3.2 % 15.5 % 12.8 % 20.1 % 24.0 % -15.1 % 10.0 % 22.3 % 33.2 % 8.3 % 18.1 % 33.6 % -7.6 % 47.9 % -5.5 % -2.7 % -37.0 % 22.4 % 7.4 % -4.3 % -36.9 %

Total

794 485 043

13.4 %

CANE SUGAR1 8 669 tonnes +22 % on prev. year

4

Cane sugar

95 %

Bananas

53 %

Pineapples

34 %

Fruit juices

31 %

Asian rice

26 %

Coffee

11 %

Chocolate

7 %

Honey

6 %

Tea

6 % 0

10

20

ORGANIC PERCENTAGE

30

40

50

60

70

80

90

100

5

Cotton

82 %

Tea

72 %

Bananas

58 %

Asian rice

53 %

Coffee

39 %

Cane sugar

17 %

Chocolate

16 %

Pineapples

3 %

Honey

2 % 0

10

20

30

1

40

50

60

70

80

90

100

contains also use of commodity in composites products In order to ensure comparability with the previous year, the values for 2017 to unlabeled coffee that couldn't be assigned to a country, were adjusted (growth normalized).

3 amongst others avocados, coconuts, limes, mangos, oranges 4 estimated retail market share based on sales volumes.

Source : AC Nielsen 5 Organic percentage based on sales volume 2

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