Chocolate makers face ethical branding dilemma

Ghana and Ivory Coast, the producers of 60% of the world’s cocoa are threatening to stop the cocoa’s industry ethical branding scheme.

According to the West African countries, the schemes will be reviewed, because chocolate makers have been slow in paying a “living income” premium for their beans.

The halt of the ethical branding scheme will be a huge risk to chocolate makers producing in Western markets, because the consumer demand for sustainable products is on the rise.

In a bid to ease pervasive farmer poverty, Ivory Coast and Ghana introduced a $400 a tonne living income differential (LID) in July on cocoa sales for the 2020/21 season. The move was a major overhaul in how global cocoa is priced.

They have since sold around 150,000 tonnes of 2020/21 cocoa, trade and government sources said, versus about 450,000 tonnes this time last year. There are still some 2.35 million tonnes left to sell, but while the current marketing campaign is still in its early stages, Ivory Coast and Ghana need faster, large-volume sales to chocolate makers for the LID to work.

"The two countries have resolved to make the (LID) work whatever it takes," said a source at Cocobod, Ghana's cocoa regulator. He said this included halting sustainability schemes, used for ethical branding, within the next few weeks if chocolate makers don't comply.

The programs, which include audits from certifiers such as Fair Trade, are key to chocolate makers' branding, which could be hit if they are seen as hesitant to part with cash ear-marked to alleviate poverty.

Ivory Coast and Ghana plan to use the LID income to guarantee farmers 70% of a $2,600 a tonne target price. If global prices rise above $2,900, LID proceeds will be placed in a fund that would guarantee farmers the target price when market prices fall.

"This (LID) could work if Ivory Coast and Ghana had the money to stockpile (excess supply) but they (don't) so most of us think the plan will have to be adapted or maybe withdrawn," said a cocoa industry source.

The source added that halting sustainability schemes would hurt farmers, not just chocolate makers.
About 500,000 tonnes of Ivory Coast and Ghana cocoa are certified per year, according to industry sources. The cocoa can fetch farmers a premium of up to $200 per tonne.

The cocoa industry's efforts to source sustainably  have been around for nearly two decades, though little has changed on the ground for farmers, with poverty widespread and West African forest cover all but decimated.

Reuters.