A Sam’s Club purchase provokes some thoughts on a new wine movement.

The Economics of Ethical Consumption

Fair Trade products attempt to use globalization to offset some of the negative potential effects of globalization.  Global market forces can sometimes lead to the exploitation of natural resources and unskilled labor, for example. The “sympathy” that Adam Smith thought would condition market relations breaks down when producer and consumer are separated by thousands of miles and multiple commodity chain links.

Fair Trade products and other ethical consumption goods seek to create a global market for products that provide more benefits to those at the first stages of the global product chain.  Some consumers are willing to pay a bit more for such products once they are aware of the problem and even a small slice of a global market can have real economic clout.  Global markets for ethical good thus have the potential to offset somewhat any “race to the bottom” forces and to educate consumers in the bargain. You have almost certainly seen Fair Trade coffee and I think Fair Trade chocolates are pretty widely available, too. Look for Fair Trade roses on Valentine’s Day.

Enter Wal-Mart

Sam’s Club, the membership warehouse store arm of Wal-Mart, is currently selling a Fair Trade wine called Neu Direction.  It is a 2005 Malbec from Argentina and I think it illustrates the potential of Fair Trade.  It is a very nice wine, much more interesting than its $9.99 price tag would lead you to believe.  It was judged the best Fair Trade certified red wine at a competition organized by The Independent of London in February 2008. Sam’s Club is the exclusive U.S. distributor.

According to their website,

Neu Direction Malbec benefits the local farmers of Viña de la Solidaridad (Vine of Solidarity), an association based on preserving the rich, cultural heritage of the contratista-landowner relationship.  Ten small vineyard owners and nine contratistas make up the association.  The contratistas lives on the land with their families and are paid a percentage of the grape harvest by the vineyard owners.  The association currently owns 200 acres of vineyards with about a third certified organic, with plans to convert more over the coming years.

The association members receive a guaranteed minimum payment for their grapes and revenues are also channeled to community development projects such as schools.  2008 was the first year of the U.S. Fair Trade wine certification program, which is administered by a NGO called TransFair.

Neu Direction makes the positive case for Fair Trade wine very well.  It is, first of all, an excellent wine at a good price and so can attract buyers on these merits alone.  It is distributed in about 450 Sam’s Clubs across the U.S.  and benefits from the built-in market that Sam’s Club members represent.  Sam’s Club (and Wal-Mart) gains in some small way through its association with “ethical” productions (Fair Trade, sustainable and organic products) and so has a reason to promote them.

Leigh Barrick, one of my students who has studied both Fair Trade coffee and Fair Trade wine, argues that wine may be well suited to Fair Trade markets because consumers are often better informed and more interested in the origins of and production conditions associated with wine than for most other consumer goods.  Wine enthusiasts are thirsty for information about where wines come from, who made them and how.  Fair Trade provides this information in a way that informs, educates and potentially produces social and economic change.  A good fit, Leigh says, and I agree.

A Case of Trade-offs

But Fair Trade wines aren’t automatically going to be winners.  First, not every Fair Trade wine is likely to be as good or as inexpensive as Neu Direction – or to have the Wal-Mart distribution system behind it.  More important, however, the Fair Trade system itself is full of trade-offs.

Fair Trade certification is necessary, it seems, to prevent the designation from being exploited or debased. But certification is often expensive and time consuming (this problem applies to organic or biodynamic certification processes, too) so many small producers may be unable to bear the cost. The benefits of Fair Trade wine are therefore likely to be unevenly distributed and may required financial sacrifice in the short run to achieve gain in the long run.

That’s not to say that Fair Trade isn’ta positive force,  just that it is not a panacea. It is just one new direction — a progressive one– among many in the world of wine today.

Photo by Michael Morrell, my chief inexpensive wine research assistant.We’d like to thank Michael and Nancy for their hospitality during our stay with them in Tucson.