Friday 31 October 2008

Even Walmart's doing it!

Corporate Social Responsibility ("CSR") is one of the buzz terms of the new wider consensus on the need to act ethically in business. Over at the Ethical Corporation blog I detect some concern about the effect that the recession will have on corporate behaviour. Will corners be cut and blind eyes turned when it comes to keeping up standards?

Well not at WalMart apparently. Through the EC blog I found this article at the Financial Times where it seems Walmart's intentions are to push its supplier's harder on their CSR standards. I particularly liked the quote from Lee Scott, Wal-Mart's chief executive, told a meeting of more than 1,000 suppliers in Beijing, many no doubt in the clothing industry.

"Meeting social and environmental standards is not optional. A company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts - will ultimately cheat on the quality of its products."

I trust that Mr Scott had checked out that WalMart's tax position was squeaky clean before lecturing his suppliers!

Anyway, it's a good message and heartening to hear it put forcibly in China by what may be Chinese industry's biggest customer.

Friday 24 October 2008

Fair Trade Cotton demand soaring

With all the news about commodity prices taking off and then some, notably oil, declining, I wondered what might be happening in the cotton markets. Thanks to the internet such information is close to hand.

It would appear that cotton about 35% more expensive now than it was 18 months ago but, surprisingly, costs no more than it did at this time in 2003, its previous peak.

My source is Looking at other products I like, over 5 years aribica coffee has increased in price to 250% of it's October 2003 value, bananas 250%, salmon 170% and sugar 240%.

And we see these upward price movements reflected in our shopping bills, although with the producer inevitably getting precious little of what we actually pay, the prices that we see have not moved that greatly. And yes, clothing prices in the High Street have been coming down reflecting the relative stability in the price of cotton.

What made me look at these numbers? It was a little report that I picked up in Images, the trade journal for our promotional clothing industry. According to Images, reports that "the worldwide demand for fair trade cotton has doubled over the past 12 months".

Despite the obvious growth in the fair trade market, this statistic surprised me so I checked out the original report on the fairtrade site. Indeed, it's true - "Fairtrade cotton farmers have... seen demand for their produce more than double in just one year. During 2007, the sales of items made out of Fairtrade certified cotton, ranging from cotton wool to jeans and towels, surpassed 14 million individual items"

And that's just cotton carrying the Fairtrade label, as opposed to carrying other equally worthy certifications such as WRAP (which clothing supplied by our main supplier Starworld carries).

With all this increase in demand, why have our prices have been relatively stable, always a help in times like these? My conclusion is that more and more suppliers are signing up to the fair trade ethos (a good thing) so that supply is to some extent keeping up with demand. And if the prices have been fair in the past, why should they rise anyway?

In the world of commodities today fairness is not exactly an economic concept which is at the forefront of the mind of a commodity trader short selling, but in the fair trade markets where suppliers (like Starworld) buy locally, and then deal directly with buyers (like us), things are perhaps a little different.

Wednesday 22 October 2008

Get Ethical!

The Christmas shopping season is upon us - it seems it was already there in some shops a couple of months ago - but it is around now when most people start thinking about arrangements for Christmas. I know that my shopping will start on or about 22nd December - but then I am a man!

Pier 32 is a member of Ethical Junction, the UK's premier directory of ethical suppliers. In a new collaboration with Get Ethical,, the long established online originally started in 2001 by The Big Issue as an impartial portal to the world of online ethical merchandise, all suppliers on Get Ethical are now members of Ethical Junction who help monitor the credentials of the suppliers. So why not start you Christmas shopping experience by exploring what is on offer here?

We don't sell on the site because it's geared up to supplying off the shelf products. But as a fast reliable route to a one off Christmas present it's going to be difficult to beat.

Friday 17 October 2008

A time for courage in marketing.....

Times are tough, we are talking ourselves into a recession. As we will hear often, it will be survival of the fittest. But what makes you fit to survive?

The latest Bellwether survey (just published by the IPA, the Institute of Practioners in Advertising) makes for depressing reading - "in Q3 annual marketing budgets were revised down to the greatest extent ever recorded in the survey’s nine year history". Moray MacLennan, IPA President, said “I doubt these gloomy results will come as a surprise to anyone. In light of current headlines the biggest surprise may well be that 12% of companies’ budgets were revised upwards"

People will go on buying, after all the GDP will probably only fall a percent or two before we claw back again. But that percent or two will shake out some under-performers and there is a lot of evidence to suggest that a major contribution to failure is a lack of courage in maintaining marketing spend. In fact, when competition to get a new customer increases, can it make more sense to increase marketing spend?

So returning to the 12% spending more, what evidence is there to suggest that increasing their marketing budget is a good thing? I've done a bit of digging:

The Smeal College of Business conducted a survey in 2005 called "Turning Adversity Into Advantage: Does Proactive Marketing During a Recession Pay Off?" The survey interviewed more than 150 senior marketing executives from a variety of industries about the effect of the last US recession in 2003. It found "firms entering a recession with a pre-established strategic emphasis on marketing; an entrepreneurial culture; and a sufficient reserve of under-utilized workers, cash, and spare production capacity are best positioned to approach recessions as opportunities to strengthen their competitive advantage". Dr. Gary Lilien, one of the authors of the study is interviewed at the BNET Intercom blog. It seems that spending more will not work for everyone but if the existing culture is to value marketing, the nerve is there and you have the capital to give you the confidence to do it, then the outcome from the last recession suggests that increased marketing in a recession substantially strengthens the relative competitive position when coming out of it.

A well written piece by Millward Brown entitled "Marketing During Recession: To spend or not to spend" highlights anecdotal and survey evidence that cutting back on marketing is often a bad idea. He highlights an IPA analysis that suggests that "While companies that cut marketing spend enjoyed superior Return on Capital Employed during the recession, they achieved inferior results after the recession ended. During the recovery, the “spenders” achieved significantly higher return on capital employed and gained an additional 1.3 percentage points of market share." What's going on? Well, among other factors, cutting costs almost inevitably increases profitability in the short term, but if you keep marketing the brand during the recession then the relative profile of your brand increases. You can gain a brand advantage and then when there is more money available more of it is spent in your direction.

And here's some commentary on a report by media and communications group Carat: "the main point ... .. is that maintaining a marketing presence during economic downturns pays big dividends when better times return".

The message being repeated is that bold but wise spending on marketing becomes an investment in market share, that pulls in custom now but comes into its own when we emerge from recession. Much of the expenditure of the companies that showed post recession gains must have been on confidently marketing their brands. A longer term strategy winning out over the temptation to go short term cost cutting.

Tuesday 14 October 2008

Pick your cotton carefully!

It's good to see a conference being organised to highlight issues in the supply of cotton for clothing. We've already featured the use of child labour in Kazakhstan in this blog - follow the 'cotton industry' label below for more articles - and this conference seeks to pick up this issue and others such as the use of pesticide and fair trade.

To present the issues, speakers will include representatives from Pesticide Action Network UK, Action Aid, Traidcraft and the International Fair Trade Association.

The conference is at Southampton Solent University on Saturday 25 October - click here for a .pdf with full details or view the Southampton Fair Trade Group website.

Aside from the discussions, there will be a Cotton fair displaying organic fairly traded garments and displays illustrating the history of the cotton industry and working displays of spinning and hand-loom weaving.