SPECIAL REPORT: Calls for Increased Chocolate Prices Intensify on Child Labor Concerns

29 Aug 2016 --- The debate around whether big confectionery companies are committing enough support to cocoa farmers in Africa was reignited earlier this month when Cacao for Change, a group committed to social change, wrote to US president Barack Obama and United Nations secretary Ban Ki-moon calling for cocoa prices to increase three-fold.

Cacao for Change's proposal is for retailers to charge an extra $0.10 for every cup of chocolate, tea or coffee, with the money being funnelled back to impoverished African cocoa farmers through associations and cooperatives.

The debate as to whether African cocoa farmers are getting adequately paid- industry figures suggest farmer incomes need to double at least for the industry to be sustainable- sits alongside the wider debate as to whether the likes of Nestlé, Mondelez, Olam and Hershey are doing enough to support farmers in West Africa.

Earlier this year, Barry Callebaut and Tony’s Chocolonely, the Amsterdam-based chocolate company committed to bringing an end to slavery in the chocolate industry, announced their strategic partnership agreement to produce chocolate from fully traceable sustainable cocoa. Barry Callebaut installed a dedicated cocoa butter tank in its factory in Wieze/Belgium to produce cocoa butter from traceable beans sourced from Tony’s Chocolonely’s partner cooperatives in Ivory Coast.

With the cocoa liquor already being produced from beans from their partner cooperatives in Côte d’Ivoire and Ghana, all cocoa products in Tony’s Chocolonely’s chocolate will be traceable.

Eva Gouwens, First Lady of Chocolate of Tony’s Chocolonely said: “It is our mission to make 100% slave free chocolate the norm in the industry."

This part of the world is crucial to the $100m chocolate market with more than 70 percent of the world's cocoa- chocolate’s most important ingredient- grown in the region, particularly in the Ivory Coast and Ghana which produce around 60 percent of the global total output.

The debate has raged for years: on the one hand, corporates are increasingly expanding their efforts at improving the livelihoods of African farmers by expanding sustainability programs; but critics say their efforts are failing and they are losing the battle to tackle key issues such as child labor.

Critics point to a report by Tulane University which found that 2.1m children had been engaged in forms of child labor in Ghana and Ivory Coast between in the 2013/14 season, a 21 percent increase from five years early, despite promises from corporates to tackle the issue.

Speaking to FoodIngredientsFirst, Simon Brayn-Smith (pictured), global head of cocoa sustainability at Olam, believes that huge efforts have been made by industry stakeholders to tackle the issue of child labor, though admits it is still a problem.

He said: "There have been issues of child labor in cocoa. And I don't think anyone would say there are not still instances of child labour. I think what is clear is that a huge amount of work has been done [to combat child labor] in this area over the past five years and people understand a lot more about the processes and potential models to put in place to find solutions.”

Jean-Philippe Ake, senior director of responsible sourcing, Hershey, said, the company was helping the welfare of hundreds of African children by building primary schools and medical clinics.

Olam, one of the world's biggest cocoa processors, launched its flagship sustainability initiative, the Olam Livelihood Charter, in 2010, an initiative which Brayn-Smith describes having a "holistic vision of sustainability", encompassing eight core principles, from improving farmer yields, financing, labor practices and traceability.

As an example of its success, Brayn-Smith points to the fact that it trained 86,000 farmers in good cocoa farming practices last year.

Likewise, Hershey is focusing its efforts on the Hershey Learn to Grow Program, a scheme committed to training thousands of farmers in sustainable, modern cocoa farming practices and building educational facilities.

Ake said: "Learn to Grow also seeks to empower the next generation of cocoa farmers by providing training to women and young cocoa farmers and by encouraging them to take leadership roles in farmer organizations. Because cocoa trees’ yields diminish over time, we also provide farmers with young trees to replace aging stock."

As part of its efforts to improve its standing as an ethical business, Hershey is committed to sourcing 100 percent of its cocoa from certified sustainable sources by 2020, a certification which it is argued will help weed out child labor amid criticism over its links to the practice.

Ake said: “We are absolutely on track. In 2015, we achieved our 2016 goal of sourcing 50 percent certified and sustainable cocoa. We are on track to hit the 75 percent milestone by 2017 on our way to 100 percent by 2020.”

While the big confectionery companies are applauded for pouring millions to help farmers, some argue their efforts are not filtering down and providing a sufficient financial lift to the cocoa farmers, who are still poor.

“Even with the highest premium paid for certified cocoa, farmers are way deep in poverty,” said Judy Gearhart, executive director of the International Labor Rights Forum.

While it must be stressed the prices of cocoa are set by the respective cocoa bodies in Ghana and the Ivory Coast, if farmer incomes aren’t rising, there's a real risk that the next generation of farmers will give up on the business which will be a concern for the confectionery industry.

Brayn-Smith is acutely aware of this.

He said: “The average age of a cocoa farmer is between 55 and 60. Anecdotally, their children do not want to go into cocoa. We need to find a way of encouraging the next generation of cocoa farmers."

However, Brayn-Smith said that fewer farmers managing bigger farms would “probably not be a bad thing” in terms of boosting the welfare of African famers, who are mired in poverty partly because they currently manage miniscule cocoa farms which are between just two and four hectares in size.

Despite the welter of challenges (whether it be educating farmers, variations in climate, child labor or low yields) corporates are likely to continue to invest millions into initiatives to help the welfare of farmers in Africa as cocoa is fundamental to their businesses.

An example of this is CocoaAction, an initiative which bought together 10 of the biggest chocolate companies in a multimillion pound collaboration to share resources and help fund farmers in Ivory Coast and Ghana and boost productivity.

An acute concern for Olam, Hershey and other stakeholders is that current cocoa output in Africa is being driven down by around a fifth of the levels of last year, a shortfall which is likely to continue as the cocoa season draws to end in September.

The cause of the shortfall can be attributed to combination of fungi outbreaks and adverse weather conditions, leading to higher prices for cocoa.

The price of cocoa could be in line for further volatility as the Ivory Coast is to vote in an election later this year.

According to the latest quarterly results from Swiss chocolate maker Barry Callebaut, overall demand for chocolate has been weak.

While the company itself posted strong sales for its third fiscal quarter, it published data showing demand for chocolate was down 2 per cent for the nine months to May compared with the previous year.

For the consumer, particularly chocolate lovers, this means they are likely to pay out the highest prices for their favourite chocolate bars in the past four decades, experts say.

While cocoa output is being driven down, demand for cocoa is soaring through the roof and according to industry figures has increased 80 percent since 2008.

One consequence of this increased demand impacting the end consumer is that some manufactures have shrunk the size of chocolate bars.

Examples of this in recent times in the UK include Yorkie bars, Wagon Wheels and Mars Bars.

For example, a recent study found that Mars bars are 28 percent lighter now than they were in the 1990s.

According to Appliance City, which carried out research into shrinking chocolate bars, the rising demand for cocoa is a key factor behind the sizes of chocolate bars being reduced, along with manufactures wanting to tap into the health agenda by reducing the amount of chocolate they offer in chocolate bars.

Mirlah Richardson, marketing coordinator at Appliance City, said that chocolate manufactures are simply trying to eke out the supplies they are able to get hold of, so they can keep selling the same volumes.

Richardson said: “Perhaps the reason most often stated as the cause, but also the most cynical, is it's simply down to company profits.”

“If the manufacturer can sell less of a product for the same price they will make more money on it. In the majority of cases the chocolate producers don't seem to have reduced prices in line with chocolate shrinkages, so this may be a factor.”

As the demand for chocolate shows no signs of waning, the debate will continue as to whether manufacturers are taking consumers for a ride by shrinking chocolate bar sizes.

Likewise, as reports continue to emanate about child labor and the impoverished working conditions of cocoa famers in Africa, the debate will continue as to whether corporations are doing enough to combat the problem.

The supply chain from cocoa farmers in West Africa though to the finished product of the enticing looking chocolate bar on supermarket shelves is a tricky one for chocolate firms to manage, as they are liable for criticism along the way.

But most agreed that their efforts in pouring millions into sustainability schemes should be welcomed, if not applauded.

by John Reynolds

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