Tate & Lyle Sugar to Be Fair-Trade - Case Study Example

Business Introduction Tate & Lyle plc is a £3.6 billion turnover company which supplies maize and sugar products to both industrial and consumer markets. Although for many years this company was best known for producing sugar, this product in 2009 only accounted for about one-fifth of the companys profits. From 2008 all of their sugar sold in the UK shops became Fair-trade accredited without any increase in price. To achieve this Tate and Lyle had to pay a premium price to cane sugar farmers, which cost the company £2 million in the first year alone. Granulated white sugar was the first product to get Fair-trade certification and this product then moved into the growth stage of its product life cycle. This paper briefly analyses the possible consequences for Tate & Lyle having a major product like Granulated white sugar in the growth stage of its product life cycle and the case for and against Tate & Lyle deciding to sell its sugar under the Fair-trade label. Possible consequences for Tate & Lyle having a major product like Granulated white sugar in the growth stage of its product life cycle During the growth stages of a product, the product manufacturers should focus more on devising specific strategies for maintaining the growth. During this stage; “more competitors will enter the market, companies increase the number of product offerings in order to differentiate themselves from competitors, the prices may begin to fall and the emphasis may shift from moderate to heavy advertising and promotion activities”(Planning: Middle Growth Stage, 2010). Tate & Lyle’s product Granulated white sugar is in the growth stage of its product life cycle and hence it may severe completion from the market as more and more competitors may enter the market for reaping the profit. It is difficult for Tate & Lyle to sell their product for a higher price even though the sales volume and public awareness may increase. Tate & Lyle needs to elaborate their distribution or logistics channels in order to reach more remote customers during the growth stage of their product, Granulated white sugar. Moreover, the expenditure for promotional activities and advertising should be increased in order to tackle the efforts of competitors. Even though the sales of Granulated white sugar may increase during the growth stage, the expenditure for maintaining the growth phase would be more than any other stages of the entire life cycle of the product. Case for and against Tate & Lyle deciding to sell its sugar under the Fair-trade label Fair Trade is an internationally-recognised approach to trading which aims to ensure that producers in poor countries get a fair deal. A fair deal includes a fair price for goods and services, decent working conditions, and a commitment from buyers so that there is reasonable security for the producers (What is fair-trade?, 2010). Even though globalization, liberalization and free trade policies brought many changes in the world, these policies negatively impacted the farmers in many countries. Many farmers have the complaint that agriculture is no longer a profitable activity as their produced goods failed to bring any substantial profits to them because of the severe competition they are facing from products of other countries. For example, in countries like India, China etc, the labour cost is very small and hence they are able to sell their products for cheaper prices in international market. For example, the cost of sugar in UK is comparatively high because of the higher labour cost and other costs of production. But in UK, other countries are able to sell sugar for cheaper prices and hence it is difficult for the UK farmers to sustain their farming activities. The concept of fair-trade gained popularity in UK because of the conscious effort of the UK public to lift or save their agricultural sector from total destruction. Whenever a fair-trade product purchased by a customer, the farmers of UK are benefitted from the extra amount paid by the customers. Moreover, whenever, a consumer purchases a locally produced or fair-trade product, he is contributing to the environmental protection. Transportation of goods from one country to another may result in heavy amount of carbon emission which affects the environment severely. The sale of fair trade products are growing every year in UK. Compared to the sale of £493 million in 2007, the sale of fair-trade products increased around 12% and became worth of to £800 million in 2009. The fair-trade logo is recognized by over 57% of UK customers in 2009 which means the fair-trade products are slowly establishing its place in the UK market. In short, the decision of Tate & Lyle to sell their sugar under the Fair-trade label was definitely a smart one considering the popularity of fair-trade products in UK at present. It was thought that this decision would give Tate & Lyle a unique selling point and help it to compete against major rivals such as British Sugar plc who have a slightly larger share of the retail sugar market. The commitment to ethical business practices is revealed by Tate & Lyle through this business strategy of selling the sugar under the fair-trade label. Corporate social responsibility is a much talked term nowadays and Tate & Lyle was able to uphold their social commitments through this business strategy. At the same time, the selling of sugar under fair-trade label brought many disadvantages also to the Tate & Lyle Company. “To earn a Fairtrade label, firms must pay local producers a fair price, and invest further to improve working conditions and local sustainability”(BBC News, 23 February, 2008). Even though fair-trade is beneficial to the farmers, it is not so for the company which sells the fair-trade products because of the fewer profit margins and increased spending while selling fair-trade products. It is not necessary that the majority of the consumers pay extra and purchase fair-trade products when cheaper options are available especially bin this recession period. References 1. BBC News, (23 February, 2008), Tate & Lyle sugar to be Fair-trade [Online], Available at: http://news.bbc.co.uk/2/hi/uk_news/7260211.stm [Accessed on 07 November 2010] 2. Planning: Middle Growth Stage, (2010), [Online], Available at: http://www.knowthis.com/principles-of-marketing-tutorials/planning-with-the-product-life-cycle/planning-middle-growth-stage/ [Accessed on 07 November 2010] 3. What is fair-trade?, (2010), [Online], Available at: http://www.tribes.co.uk/responsible_travel/what_is_fair_trade [Accessed on 07 November 2010] Read More