31
HANDCRAFT VALUE CHAIN ANALYSIS Paul Chandler

HandicraftsVCA-PaulChandler.ppt

Embed Size (px)

Citation preview

Page 1: HandicraftsVCA-PaulChandler.ppt

HANDCRAFT VALUE CHAIN ANALYSIS

Paul Chandler

Page 2: HandicraftsVCA-PaulChandler.ppt

Terms of reference

“To develop an analysis of supply chain for handcrafts … to improve the standards and procedures of FT so that producers’ added value and market access are significantly increased … make recommendations to inform setting of quality standards and system”

Page 3: HandicraftsVCA-PaulChandler.ppt

Terms of reference

• Focus on baskets and jewellery • Traidcraft Market Access Centre• Interviews with

– 13 Southern FTOs– 7 Northern FTOs– 4 UK mainstream buyers– 2 consultants and steering group

Page 4: HandicraftsVCA-PaulChandler.ppt

Presentation structure

• EU crafts market potential• Value Chain Analysis• Producer impact• Recommendations• Discussion

Page 5: HandicraftsVCA-PaulChandler.ppt

EU Crafts market: size

• Gifts and decorative articles: • €12.7 billion (2003); 38% imports• Germany, UK, Italy, France =75%• China dominant source of imports• Sales through independent shops,

department stores and mail order

Page 6: HandicraftsVCA-PaulChandler.ppt

EU Crafts market: formal barriers

• Few tariff barriers for handcrafts• Increasingly strict H&S

regulation:– Hazardous substances (esp if food

contact); infestation; skin allergies; recyclable packaging; labelling requirements etc.

Page 7: HandicraftsVCA-PaulChandler.ppt

EU Crafts market: consumer demand

• Growing interest in interior decoration; homes more central to well-being and self image; one-off items, to personalise homes

• But: functional rather than purely decorative

• Concern for environment/ethics • Downward price pressure

Page 8: HandicraftsVCA-PaulChandler.ppt

EU Crafts market: commercial buyers’ concerns• Cheap products; high volumes• Consistent (good) quality;

standardisation• New designs; design-led product

development• Short lead times; on-time delivery;

agile customer service

Page 9: HandicraftsVCA-PaulChandler.ppt

EU Crafts market: Fair Trade handcrafts

• Handmade products can be unique selling point

• But: will struggle to compete with cheaper machine-made products unless quality and design superior

• EU FT market €100 million (0.75% of total) – static, ethical consumer only

Page 10: HandicraftsVCA-PaulChandler.ppt

EU Crafts market: Conclusions

• A sizeable potential market• Mainstream opportunities in more

up-market niche areas• But price/quality and service levels

will be crucial – and need to improve

Page 11: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain

• Short; straightforward; mainstream and fair trade similar

• Mainstream may use agents to link importer and exporter (3-15% commission, never own product)

Importer/ wholesaler

Retailer

Consumer

Producers

Producer Group/ SME

Exporter

Page 12: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: NFTOs

• Fair Trade additional services:– FT advocacy; advance payments;

capacity building; market information; capital investment; forgiving and loyal customers

• But: not growing/innovating; some lack professionalism; loyal to existing suppliers only

Page 13: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: mainstream

• Are also values-led mainstream actors: many deal with SFTOs

• But care: values-led players are not typical of the mainstream:– tough price negotiations; inflexible;

slow payers; not regular orders; frequent staff changes; don’t try to understand producers’ situations

Page 14: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: key issues - sourcing

• Raw material sourcing – environmental and ethical sourcing of growing concern

• Pricing issues between SFTOs/producers: – how is labour valued?; local living wage? – overheads and “free” raw materials?

– opportunity cost / contribution?

Page 15: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: key issues - pricing

• Northern buyers not aware of what producers get from SFTOs: likely to become more important

• SFTO gross margins vary greatly• FT prices received by SFTOs are

generally better than mainstream; though some good mainstream payers too

Page 16: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: key issues - pricing

• Mainstream mark-ups from 500% to 3,000% (highly branded)

• FT mark-ups are often lower at 300-500% (but does this devalue perceived value?)

• Levels of mark-up in Europe not seen as concern by most SFTOs.

Page 17: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: key issues - governance

• FT pro-poor bias means lower supplier competence; theory suggests this will lead to more intervention from buyers.

• Pressures to be market-led.• High dependency on NFTOs;

insufficient diversification; few examples of FT supplier “graduation”.

Page 18: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: key issues - governance

• FT price negotiations fairly standard and well-managed

• Some SFTOs want more market information from NFTOs

• Lack of critical feedback from NTOs impedes development

Page 19: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: key issues - environment

• Inefficiencies in infrastructures • NFTOs/SFTOs insufficiently

specialised?• Lack of investment and

technological innovation in FT – (fears it will reduce labour inputs?; small is beautiful focus?)

• Exchange rate vulnerability – dollar fluctuations

Page 20: HandicraftsVCA-PaulChandler.ppt

Crafts Value Chain: key issues–failure to mainstream

• NFTO lack of vision/skills?• NFTO lack of capital?• Lack of FT label (but

costs/benefits, standards?)• SFTO/producers lack of

technological investment• SFTO lack of scale/productivity;

quality; design; lead times

Page 21: HandicraftsVCA-PaulChandler.ppt

Producer livelihood impact

Sustainable livelihoods model

Financial Physical Human Social Natural

S

P F

N

H

Page 22: HandicraftsVCA-PaulChandler.ppt

Producer livelihood impact

FINANCIAL: • level of income increases;• regularity and security of income; • SFTO savings schemes for

producers BUT: contract workers/seasonal

labour issues

Page 23: HandicraftsVCA-PaulChandler.ppt

Producer livelihood impact

PHYSICAL: • Income used to acquire assets• Better access to infrastructure e.g.

electricity, education, health (via premiums)

BUT: Limited capital investment in productive capacity

Page 24: HandicraftsVCA-PaulChandler.ppt

Producer livelihood impact

HUMAN: • Training programmes• Empowerment• Confidence BUT: heath and safety of

processes; social/family tensions; more education to be done

Page 25: HandicraftsVCA-PaulChandler.ppt

Producer livelihood impact

SOCIAL: • Formation of producer groups• Reduced isolation BUT: also creates new obligations

Page 26: HandicraftsVCA-PaulChandler.ppt

Producer livelihood impact

NATURAL: • Environmental issues considered

in fair trade chains BUT: in reality this is relatively

low on the movement’s agenda

Page 27: HandicraftsVCA-PaulChandler.ppt

Producer livelihood impact

• A generally positive picture – but based on SFTO/NFTO inputs, not direct producer research

• Many FT producers still near poverty line

• Diverse experience across products and countries

Page 28: HandicraftsVCA-PaulChandler.ppt

Recommendations: market access

• Improve sales and marketing of existing work• Develop strategy to mainstream handcrafts;

establish a success story in handcrafts • Establish and invest in market led supply

chains • Ensure the right product is created for

producers• Ensure FT verifiable supply chains top to

bottom • Promotion FT and ethical purchasing• Develop FT standards and (possibly) label• Review and scale up

Page 29: HandicraftsVCA-PaulChandler.ppt

Recommendations: social quality

• SFTOs need to improve producer capacity and understanding of FT

• Reduce dependency - local markets; small businesses as well as manufacture

• Develop stronger groups and networks• Address risk: regular employment, currency

protection• Southern advocacy for SME friendly

environment and individual access to affordable services

Page 30: HandicraftsVCA-PaulChandler.ppt

Discussion

• Do findings/descriptions ring true?• Relationships SFTOs/producers;

costing and pricing models• Reaction to recommendations:

– Specialisation– Investment needed to mainstream– Issues in enabling environment

Page 31: HandicraftsVCA-PaulChandler.ppt

TRAIDCRAFT

fighting poverty through trade