Annual report 2019 Fairtrade Max Havelaar Foundation (Switzerland)

ANNUAL REPORT 2019

MAX HAVELAAR FOUNDATION (SWITZERLAND)

Because it’s Important to me

Photo: Sean Hawkey COFFEE GROWER OLGA ALVARADO’S EXTRAORDINARY STORY ATTRACTED THE INTEREST OF THE SWISS MEDIA.

FAIRTRADE MAX HAVELAAR BECOMES A TOP BRAND Fairtrade Max Havelaar’s market presence and consistent public relations work have secured the Organisation a place among the leading brands trusted by Swiss consumers.

Our campaign to raise our public profile in 2019 was built on the foundations laid with the previous year’s initiatives, which were developed further: The “Empower Station”, which provides an active way for spreading the word about how Fairtrade works, was a popular attraction with young and old alike at the public runs in Lausanne, Geneva and Lucerne. This marketing initiative reached around 200 000 people altogether.

Our poster campaign in trains, buses and trams in the autumn also attracted a large degree of interest – with a potential reach of 140 million views.

Online, we had a hidden object game, whereby users followed the route of numerous Fairtrade products, all the way from the field at a small-scale farm in the developing world to the shelf in our supermarkets, with the possibility of winning attractive prizes from our partners.

In terms of the media, it was an eventful year: Following a critical TV report on the situation in the Ivory Coast with regard to cocoa plan­tations, a variety of very positive reports on Fairtrade were pub­lished. Some of the highlights included the visit from Olga Alva­rado, a coffee grower from Honduras who, after having fled to the US, returned to her homeland and is now finally happy, with her own Fairtrade coffee plantation. Also on the media front, the five-year anniversary of Fairtrade Gold attracted a large amount of attention in October.

One of Switzerland’s top brands The positive results from all of the initiatives as a whole are also reflected in the market research: Fairtrade Max Havelaar earned a place among the most reputable NPOs in Switzerland in the well2 Communication and Marketing

respected “GfK Business Reflector” of 2020 (sixth place), while in the “Havas Brand Predictor”, the major brand review in Swit­ zerland, Fairtrade Max Havelaar ranks no. 13 among the country’s top 355 brands! And in terms of dynamism, Fairtrade Max Havelaar comes tenth in the ranking, even above brands such as Google, Apple and Ikea.

Ambassadors’ involvement Fairtrade Max Havelaar has two very committed pro bono ambassadors in the form of professional footballer Breel Embolo and actor and musician Carlos Leal. Breel Embolo is constantly stressing how important fairness is to him both on and off the pitch. And Carlos Leal puts his heart and soul into producing his own professional, innovative videos. Both of these ambassadors have a large following on social media, and they are able to educate their fans about the importance of Fairtrade.

When it comes to spreading the word about Fairtrade, towns and local councils are key players - both in terms of setting an example to the public as well as in their procurement activities.

Fairtrade Max Havelaar supports the Fair Trade Town initiative through the Swiss Fair Trade umbrella organisation. Last year, Burgdorf, Bellinzona, Gossau (SG) and Fribourg were recognised for their efforts – and so the tenth Fair Trade Town was born. At the start of 2020, Renens also joined their ranks, and a few other communities such as Aarau and Uster are ready to go for the designation in 2020.

A SLOWDOWN IN GROWTH Over 250 partners are involved in Fairtrade in Switzerland. Sales of products with the Fairtrade Max Havelaar label increased by 2.5 % in 2019.

Although turnover in the retail industry as a whole is experiencing stagnation and online trade and discount retailers have increased their market share, Fairtrade Max Havelaar has continued to expand its influence. The sales of Fairtrade products saw growth of 2.5 % rela­ tive to the previous year.

Fairtrade products with the labelling for single sourced ingredients, introduced in 2018, saw a strong and rapid increase in sales.

Thanks to new additions to the available range, sales rose by 39 % on the previous year. The label now has a presence in six categories – chocolate, roses, quinoa, cashews, vanilla and pineapples – and accounts for 16 % of total turnover. Confectionery products form the lion’s share of this, benefiting from further additions to the baked goods, biscuits and chocolate ranges.

developing countries where they have to.

The effect of these market trends is a slight decline in turnover in many product cate­go­ ries. The categories most affected by this situation are roses and fruits. Coffee saw a slight decrease in turnover due to retailers changing their product ranges, and due to a switch from labelled to non-labelled coffee. However, the retail market share has grown again. Bananas, confectionery, baked goods, biscuits and sugar saw an increase in turnover. Particularly worthy of note is chocolate, which expanded its market share from 7 % to 12 % thanks to product switching.

Turnover: CHF 814 million Growth: 2.5 % Per capita: CHF 94

The largest range of Fairtrade products worldwide Around 3 000 products carrying the Fairtrade label are available in Switzerland. There is no other country in the world with such a large range. This level of variety has helped to ensure that turnover continued to increase, albeit at a slower pace than in the previous year. Two trends are contributing to a lower level of growth: • With discounters gaining market share, the supermarkets are increasingly promoting budget products, or placing these more prominently at the point of sale. Fairtrade is under-repre­sented among both the discount retailers as well as the budget prod­ ucts in the supermarkets.

• Regional products are coming to the fore. Retailers are favour­ ing local and European products, and are only buying from 3 Market report

Brands, discount retailers and wholesalers are drivers of growth Producers of branded goods as well as discount retailers are increasingly insisting on Fairtrade and are making a significant contribution to the growth. Product innovations and improved distribution are ensuring that the trend in turnover continues to be positive. The two retailers Coop and Migros continue to account for the lion’s share of turnover.

Although turnover in the gastronomy sector has shrunk by 6 %, its share of total turnover remains stable at 10 %. The main prod­ uct categories to suffer a decline have been glacé fruits and beverages. On the other hand, the wholesale business has seen significant growth.

The newest category, gold, experienced a very healthy increase in turnover of 23 %, mainly thanks to the small investment bars offered by banks.

EXPENDITURE BY AREA 2019 Business Development

Administration and Infrastructure

9 % Communication and Marketing

Direct project support

15 %

19 %

7 %

3 %

16 % 18 %

Supply Chain Management

Contribution to the umbrella association Fairtrade International

13 %

Project and producers network support

Total: 9.0 million francs

International cooperation

91 % for foundation goals

9 % for administration

ANNUAL REPORT AND BALANCE SHEET 2019 The Max Havelaar Foundation (Switzerland) continued to grow in 2019. However, this PLEASING result could not have been achieved without certain extraordinary effects.

Revenue from licences increased by 0.6 million francs (+8 %) to a total of 8.6 million francs, although growth in retail trade turnover did not exceed 2.5 %. That was due, in part, to the 0.4 million francs in licence revenues attributable to the 2018 financial year.

Other operating revenues decreased by 26 000 francs. This is primarily due to the fact that Fairtrade Max Havelaar received less in contributions from other national Fairtrade organisations for the development of product categories.

Operating costs saw very little change (+1%) compared to the pre­vious year, although the following deviations are to be noted: • Mandatory contributions to the international Fairtrade system increased by 335 000 francs (+13 %) to a sum of three million francs. This was related in equal measure to a rise in li­cence revenues and to the increase in membership fees. The in­crease in membership fees is used solely for the purpose of sup­port­ ing producers in the developing world.

• Fairtrade Max Havelaar invested 215 000 francs for the benefit of producers in emerging economies. The funds were used in projects and programmes for purposes that included improv­ ing quality, adapting to climate change, facilitating market ac­ cess and enhancing working conditions.

• Personnel costs and other costs rose by 172 000 francs, as the average annual workforce increased by 0.5 full-time-equivalent positions. Staff development and recruitment costs also saw some one-off costs.

• Administration costs rose by 167 000 francs. Services in the 4 Annual report and balance sheet 2019

areas of product licences and IT were outsourced for the first time in 2019 over the entire year. Added to this, there were also the consultancy fees for the development of new services that were paid to our partners.

• Marketing and communication expenses saw a 150 000-franc decrease compared to the previous year. The campaign launched with success in 2018, together with various other pro­jects from that year, were continued in 2019, meaning that project startup costs were avoided.

The profit/loss for the period, before organisational capital adjust­ ment, was 230 000 francs. This profit enabled the organi­sa­tion to build reserves of 500 000 francs in fixed organisational capital.

These reserves will serve as a foundation for developing projects in developing countries, as well as developing product categories and new areas of activity. With a loss for the period of -104 000 francs, the free capital of the Foundation was reduced to 5.1 mil­ lion francs (-2 %).

The balance sheet total of 8 million francs remained unchanged.

The reduction in accounts receivable is due to the fact that the licence revenues in the fourth trimester of 2019 will not be included in the accounts until 2020. Accruals shown in the assets increased proportionally. In terms of fixed assets, the security deposit on the commercial premises in Zurich is now reported as a financial investment on the balance sheet.

BALANCE SHEET

PROFIT AND LOSS ACCOUNT

Assets CHF

Notes1

Notes1

31.12.2019 31.12.2018

Current assets

2019

2018

8 591 170

7 970 711

7 052

(1 631)

8 598 221

7 969 080

Income from earmarked donations

433

584

Income from donations

433

584

377 387

403 625

8 976 041

8 373 289

(3 827 781)

(3 656 183)

License income from third parties

Cash and cash equivalents

4.1

5 349 210

5 195 274

Losses from receivables Trade/services income

Accounts receivable

4.2

1 083 685

2 534 887

Accrued income

4.3

1 476 100

65 723

7 908 955

7 795 883

Other operating income Total operating income

Non-current assets Property, plant and equipment

4.4

Financial assets

Total assets

43 807

97 445

90 053

90 049

133 861

187 494

Administration expenses

(923 339)

(756 241)

8 042 856

7 983 378

International cooperation

(3 218 903)

(3 386 920)

(727 171)

(877 282)

(78 877)

(87 952)

Personnel expenses

Marketing/communication expenses Liabilities and equity CHF

31.12.2019 31.12.2018

Current liabilities

4.4

Operating expenses

Trade/services liabilities

5.1

871 995

1 094 971

5.2

187 950

223 966

5.3

116 278

92 711

5.4

918 757

854 578

2 094 981

2 266 227

3 768

3 335

3 768

3 335

2 098 749

2 269 562

190 002

190 002

384 676

88 402

Other current liabilities Short-term provisions

Depreciation of property, plant and equipment

Deferred income

Long-term liabilities Appropriated reserve from donations

Liabilities

(8 776 070) (8 764 577)

Operating result

199 971

(391 288)

98 315

93 435

(67 562)

(64 506)

30 753

28 930

230 724

(362 359)

Deposits in appropriated reserve

(433)

(584)

Fund result of appropriated reserve

(433)

(584)

230 291

(362 942)

(501 020)

(162 255)

166 330

541 226

Fund result of organisational capital

(334 690)

378 971

Profit/loss for the period

(104 399)

16 029

Financial income Financial expenses Financial result

7

Result before adjustment to fund capital

Organisational capital Paid-up foundation capital Earmarked capital Category development (coffee) Earmarked capital Innovation business development

6

Allocation to earmarked capital 105 008

90 094

Earmarked capital Category development (gold)

21 421

19 885

Earmarked capital Development product categories

96 965

75 000

Generated unrestricted capital

5 250 433

5 234 405

Profit/loss for the period

(104 399)

16 029

5 944 107

5 713 816

8 042 856

7 983 378

Total liabilities and equity

Result before change to organisational capital

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 2019

Withdrawal from earmarked capital

ACCOUNTING IN ACCORDANCE WITH SWISS GAAP FER This annual account was comprehensively reviewed in a regular audit by BDO Zurich and was found to be correct.

It provides a true and fair view of the assets, financial situa­ tion and income position in accordance with the Swiss GAAP FER and complies with Swiss law and the Deed of Foundation.

Photo: Remo Nägeli A WORKER AT THE PANDA FARM IN KENYA IS SORTING ROSES.

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

2019: 38 543 tonnes +4 % The first banana plantations in South America to fall prey to the TR4 fungus caused some consternation among small-scale farm­ ers and plantation owners alike in developing countries, as well as among consumers in the developed world. Although the spread was curbed, the risk is still very much present, including for Fairtrade bananas.

In 2019, sales of Fairtrade bananas alone in Switzerland generated 1.9 million Swiss francs in Fairtrade Premiums for the producers.

The increase in sales of Fairtrade bananas in Switzerland is due to the temporary, but complete, switch by Lidl to these products. In addition, Volg made the decision to offer only Fairtrade bananas from January 2020 in its more than 580 stores across the country.

FLOWERS

2019: 53.5 Million stems -21 % For many women on African flower farms, poor pay, discrimination and sexual harassment are sadly a normal part of daily life. The Fairtrade standards protect these workers. As of 2019, the Fairtrade standards also contain a new gender strategy: Fairtradecertified farms must come up with a plan within a set period of time to provide all workers with equal opportunities and to prevent discrimination of every kind. We are already seeing a significant improvement in awareness and reporting, as well as in the way 6 The major commodities

cases are handled. Some 97 % of all the Fairtrade cut flowers sold in Swit­zer­land are of East African origin. The decline of Fairtrade flowers in the Swiss market is primarily due to retailers switching partially to roses that are not of Fairtrade origin.

FRUIT JUICES

2019: 22.1 Million litres -14 % Overall demand for orange juice saw a further drop in Switzerland, which also had an impact on Fairtrade juices. Fairtrade Max Havelaar is focussing on supporting small-scale farming families, expanding their opportunities to find alternative sources of in­ come and helping them to diversify in terms of the fruits they grow. It is important for small-scale family farms to be able to sell their fruit produce on Fairtrade terms. One impact study clearly demonstrates that this has a positive effect on their income.

Nevertheless, the benefits are still not trickling down sufficiently to the workers employed by these small-scale family farms, which is why Fairtrade Max Havelaar will be placing greater emphasis in the future on this group.

COFFEE

2019: 7 604 tonnes of raw coffee -6 % The global market price continues to hover at around one dollar per pound of Arabica coffee beans. At such low prices, most small-scale family farms are not able to cover their production

Photo: James A. Rodríguez FAUSTO UMANA FROM THE AGRONORTE COOPERATIVE IN COSTA RICA CHECKS THE CONDITION OF HIS PINEAPPLE PLANTS.

costs, and this is where the Fairtrade minimum price of 1.40 dol­ lars per pound and 20-cent Premium comes into its own.

A duty of care in terms of the protection of human rights and, in particular, child protection is also a major issue when it comes to Fairtrade coffee. The producer networks are working in this regard to provide information and raise awareness. In Guatemala, for example, the Fairtrade cooperative Manos Campesinos has introduced an extensive programme to protect and strengthen children’s rights.

COCOA

2019: 6 077 tonnes +36 % This year has been an eventful one for the cocoa sector. On the one hand, Fairtrade took a stand for fair prices and raised the minimum price and the Premium by 20 %. On the other hand, the Ivory Coast and Ghana both announced that they were intro­ ducing an additional levy of 400 dollars per tonne of cocoa beans.

Both of these measures underline the importance of our work to secure incomes that are sufficient to live on. This is not only essential for the economic development and self-determination of cocoa growers and their families, but rather is also a fundamental human right. Fairtrade is therefore committed to its responsibility to protect the rights of people around the globe and to stand up for the right to a dignified existence.

people. The concept is based on an integrative approach that actively involves not only the authorities, cooperatives and farming families, but rather also those children and young people whose lives are directly affected.

ALLOCATION OF PREMIUMS

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

50 %

CANE SUGAR

7 The major commodities

41 %

5 %

2019: 8 738 tonnes +1 % Fairtrade sugar experienced growth for the third year running.

With a market share of 95 %, Fairtrade raw sugar also has ex­ treme­ly high market penetration. However, the conditions, es­pe­ cial­ly for the small-scale farmers and their families, remain chal­ lenging. For this reason, Fairtrade is supporting them with, among other things, a programme that protects children and young

Investment in producer organisations (structure, administration and human resources)

Services to community infrastructure (education, social and health services, infrastructure) Total: 164.7 million euros

4 %

Other

COMMODITY & MARKET DEVELOPMENT 2019 Sales volumes of the most important commodities

BANANAS 38 543 tonnes +4 % on prev. year

FLOWERS 53 548 107 stems -21 % on prev. year

SALES PER PRODUCT CATEGORY

FRUIT JUICES 22 102 148 litres -14 % on prev. year

Change comp. to 2018

Confectionery products 141 737 496 - Chocolate 117 736 265 - Cookies and others 24 037 614 Bananas 112 964 805 Beverages 97 523 040 - Juices 73 590 795 - Fruit juices including ice tea 23 314 501 - Alcoholic beverages 617 744 Coffee 88 246 860 Exotic fruits 77 088 517 - Other fresh exotic fruits 3 42 112 457 - Exotic convenience/tinned products 29 135 724 - Pineapples 5 840 336 Dairy products 57 467 981 - Yoghurt 44 222 036 - Milkshakes 7 899 993 - Miscellaneous items 5 345 953 Flowers and plants 56 633 520 Ice creams 35 897 576 Bakery products 64 142 414 Dried fruits/nuts 32 266 826 Rice 12 367 041 Cane sugar 9 479 213 Spices 4 887 253 Quinoa 5 122 433 Cotton products 2 786 791 Spreads 4 417 962 - Honey 3 818 655 - Other 599 307 Composite products 4 097 392 Tea 3 704 044 Gold 3 279 013 Sport balls 128 074

22.6 % 19.2 % 39.4 % 2.3 % -1.6 % -3.2 % 1.8 % 183.5 % -3.2 % -11.0 % -16.8 % 0.2 % -16.1 % -3.2 % -2.0 % -3.9 % -10.9 % -1.8 % -24.5 % 44.6 % 6.1 % -1.8 % 2.5 % -17.1 % -1.7 % -39.5 % 9.8 % -0.7 % 240.6 % 0.7 % 15.5 % 22.9 % -36.1 %

Total

814 274 635

COFFEE 2 7 604 tonnes -6 % on prev. year

COCOA 6 077 tonnes +36 % on prev. year

MARKET SHARE

3

Sales (CHF)

Product

1

2.5 %

CANE SUGAR 8 738 tonnes +1 % on prev. year

5

Cane sugar

94 %

Bananas

52 %

Fruit juices

33 %

Pineapples

32 %

Asian rice

25 %

Coffee

12 %

Chocolate

12 %

Honey

8 %

Tea

6 % 0

ORGANIC SHARE

10

20

30

40

50

60

70

80

90

100

6

Cotton

94 %

Tea

76 %

Dried fruits/nuts

67 %

Bananas

55 %

Asian rice

55 %

Coffee

30 %

Beverages

26 %

Cane sugar

16 %

Chocolate

11 % 0

10

20

30

1

40

50

60

70

80

90

Also contains use of commodity in composites products In the previous year, 3 193 tonnes of non-labelled Fairtrade coffee were not shown. So as to indicate the effective growth, non-labelled Fairtrade coffee is now included in the calculation.

3 The assignment of products to this category has been revised.

The change relates to the adjusted value from the previous year.

4 Among others, avocados, coconuts, limes, mangos, oranges 5 Estimated retail market share based on sales volumes.

Source : AC Nielsen 6 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

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