Fair's Fair at Whole Foods

Whole Foods Market (Nasdaq: WFMI  ) is launching its "Whole Trade Guarantee," a label that deepens its commitment to the Fair Trade movement. It's not a surprising move, considering that the guarantee underlines the strengths and mission of Whole Foods' business.

The Whole Trade Guarantee is a buying program that emphasizes products from developing countries matching the criteria important to the socially responsible Fair Trade movement. These include fair prices for crops, higher wages and better working conditions for workers, and environmentally sound practices. Whole Foods said 1% of proceeds will go to its Whole Planet Foundation, which supports micro-loans to entrepreneurs in developing countries.

Whole Foods said that it ultimately hopes more than half of its imported products from the developing world will get the Whole Trade label within 10 years. In the long term, it hopes all such products will fall under the program, which Trans Fair USA and the Rainforest Alliance will help to certify.

The emergence of Fair Trade over the last several years has shown that many consumers are willing to pay more for products that address socially responsible ethics. Although the concept has been around for a long time -- Ten Thousand Villages is one longtime follower -- it seems to be gaining more mainstream momentum. Other companies have recently jumped on board, including Green Mountain Coffee Roasters (Nasdaq: GMCR  ) , which provides Fair Trade coffee under the Newman's Own brand to some McDonald's (NYSE: MCD  ) stores. Starbucks (Nasdaq: SBUX  ) says it's the largest purchaser of Fair Trade coffee in North America, purchasing 11.5 million pounds in 2005, and the coffee king has established its C.A.F.E. Practices buying guidelines.   

According to Fairtrade Labeling Organizations (FLO) International, worldwide Fair Trade sales jumped by 37% in 2005, to 1.1 billion euro. As more proof of the movement's growing popularity, a January report from market research firm Mintel International said that food and beverage product launches with ethical positioning doubled year over year in 2006, and there's no sign of a slowdown in such launches this year. Of course, Fair Trade has plenty of critics, too, citing everything from its alleged skewing of the fundamentals of supply and demand to the claim that middlemen get most of the premium, while producers continue to get very little.  

Although observers might be surprised that it took Whole Foods this long to establish a formal Fair Trade buying policy (though it previously provided Fair Trade goods), it also underlines the fundamental difference between Whole Foods and more recent entrants to the organic market, like Wal-Mart (NYSE: WMT  ) and Safeway (NYSE: SWY  ) .

From what I know of Whole Foods, its management is aware that the best way to fend off newfound competition is to highlight the things that are indeed different -- and authentic -- about Whole Foods and its mission, and to foster an awareness of "conscious capitalism." This new policy should help Whole Foods continue to carve out its leadership niche in what you now might call "socially responsible retailing."

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Whole Foods Market and Starbucks are Motley Fool Stock Advisor recommendations. Wal-Mart is a Motley Fool Inside Value pick. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax owns shares of Whole Foods Market and Starbucks. The Fool has a disclosure policy.


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