Fairtrade food and drink companies could soon be changing hands at premium prices as bigger operators vie for a share of the ethical consumer market.

Philip Nuttall, partner at Clearwater Corporate Finance, said this year could bring major consolidation in the sector as more Fairtrade companies are put on the market and competitive auctions produce valuations as high as eight to ten times annual earnings.

Cadbury Schweppes' purchase of Green & Black's and L'Oréal's acquisition of The Body Shop could herald a growing trend as others seek to improve their image and boost profits.

"Ethical awareness among consumers is becoming a major factor affecting merger and acquisition activity as bigger players seek to gain a foothold in the fast-growing ethical market," said Nuttall.

"In return they can offer Fairtrade businesses the chance to increase their brand's leverage, raise cash and use existing distribution channels to boost sales.

"The Fairtrade sector is largely made up of smaller independents, but we expect this year will bring consolidation. Competition among buyers could push valuations to double or treble what you might expect for companies without Fairtrade status."

However, many companies had work to do before they became serious bid targets, he said. "Some products in the sector are good, but maybe they're not quite there yet in terms of things like packaging.

"They'll be around the £5m-£6m turnover mark, but will need to get to about £10m before bigger companies take an interest."

Deals were likely to be struck by medium-sized UK trade buyers rather than private equity houses or very large trade buyers, said Nuttall. His company was in talks with Fairtrade suppliers with a view to helping them sell in the next two to three years, he said.

Sales of Fairtrade products soared 46% in 2006 to £290m, according to Mintel, and will be worth an estimated £547m by 2011.