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Fairtrade CEO: Chocolate industry should pay double for cocoa to ensure farmer living income

By Oliver Nieburg+

21-Oct-2015
Last updated on 30-Dec-2015 at 16:04 GMT2015-12-30T16:04:13Z

Cocoa price needs to double, says Fairtrade CEO as organization gears up to revise premiums. Photo credit: Eric St-Pierre
Cocoa price needs to double, says Fairtrade CEO as organization gears up to revise premiums. Photo credit: Eric St-Pierre

Chocolate makers must pay double the market price for cocoa farmers to receive a living income, says the CEO of Fairtrade as the organization gears up to review pricing.

The non-profit organization will review the minimum price and premium for Fairtrade cocoa next year and for the first time measure rates against a living income. While no decision has been taken to up Fairtrade prices, CEO Harriet Lamb told ConfectioneryNews: “Chocolate is simply too cheap in our shops.”

Fairtrade: Double price to address deep-rooted poverty

Source: Make Chocolate Fair

The Fairtrade boss, who will stepdown next month to join peace building organization International Alert, said levels of poverty among cocoa farmers were “unacceptable” and “unsustainable for the industry”.

Her comments come after a Tulane University report found over 2 million children in hazardous work in the cocoa sector in 2013/14, up 18% from 2008/09. Hazardous work is a proxy for the worst forms of child labor that includes working with toxic chemicals, machetes, lifting heavy loads or working long hours.

Lamb said child labor was largely a consequence of poverty. She referred to research by campaign group Make Chocolate Fair that found cocoa farmers received 16% of the price of chocolate in 1980, but now gained just 6%.

Fairtrade pricing

Photo credit: Éric St-Pierre

Fairtrade International has a minimum price of $2,000 per metric ton (MT) ($2,300 per MT for organic cocoa beans) and the Fairtrade premium is consistently $200 per MT even if the New York Exchange price exceeds $2,000 per MT. Market prices for New York futures currently stand at $3,195 per MT.

‘The sector always has money for advertising’

“Farmers need a dramatic increase in prices, at the scale of a doubling of prices for cocoa at the farm gate alongside better access to credit, fairer trading conditions, support in managing risk and more investment in productivity – all so that farmers can have a living income,” she said.

 “The sector always has money for advertising and it’s a complete mismatch. It’s the more mainstream end of the chocolate ingredients market where we’ve created the illusion that you can make chocolate that cheaply,” said the CEO.

A report by Public Health England found £92m ($143m) is spent yearly on marketing chocolate bars and biscuits in the UK alone. The $80bn global chocolate industry plans to spend $500m on cocoa sustainability in the coming years, according to the industry-led World Cocoa Foundation, whose members include Hershey, Ferrero and Mars.

Fairtrade pricing review based on living income

Fairtrade will review its cocoa pricing in 2016.

“New in this 2016 review, the Fairtrade team will also conduct a farmers’ income study, based on Fairtrade’s innovative work on living wage and living income,” said Lamb.

Mars and Fairtrade

Earlier this month the first Fairtrade-certified Mars bars hit UK store shelves after Mars agreed to source all cocoa for the UK brand via the Fairtrade Sourcing Program. Maltesers became the first Fairtrade labelled Mars product in 2011. By 2016, Mars will pay over $2m in Fairtrade premiums to cocoa cooperatives in West Africa. Mars Chocolate will invest $30m annually in cocoa sustainability up to 2020.

The goal is to set help cocoa farmers receive a ‘living income’, but Lamb said it was too early to say whether the Fairtrade minimum price or Fairtrade premium would change.

She added Fairtrade must ensure it doesn’t price itself out of the market by excessively raising prices.

Chocolate companies typically have agreements to purchase Fairtrade cocoa in perpetuity and would be obliged to comply with Fairtrade’s pricing changes unless they choose to terminate the relationship.

Fairtrade considered raising its cocoa premiums in 2012, but ultimately decided against it. Lamb said a doubling of coffee premiums in 2011 led to an increase in quality.

Fairtrade says cocoa farmers spend 46% of the premium on productivity and quality improvements, according to its research.

Farmer body: 40% sold on certified terms

But some farmers have questioned the impact of certification. Sako Warren, secretary general of The International CoCoa Farmers Organization (ICCFO) told this site: “Certification is an issue with cocoa farmers.”

He said they often paid their way to be certified yet only had contracts for 40% of their output to be sold on certification terms with a premium.

He said if farmers were paid the premium it may help to alleviate poverty “but practically it is almost not there”.

Pilot projects: Fairtrade is running a child labor monitoring and remediation project with three cooperatives (Ecookim, Coopradi and Coopadef) to go beyond the certification model of auditing only select farms once a year to detect child labor. The “It takes a Village” The project relies on child labor youth leaders and improved access to education. Fairtrade is also trialing a “West Africa Cocoa Program” with 14 cooperatives in Côte d’Ivoire, which aims to improve organizational structures and increase engagement with cooperative members and female farmers.

Lamb said her organization made clear to farmers that becoming certified does not guarantee higher sales and added that certified farmers would receive more premium payments if companies were prepared to up commitments on certified cocoa.

Certified cocoa is present in 16 % of global chocolate in 2015, up from 2% in 2009, according to the latest Cocoa Barometer from civil society organizations.

Fairtrade cocoa sales grew 24% in 2014. The organization’s recently launched ‘Fairtrade Sourcing Program' – whereby companies buy a single commodity on Fairtrade terms rather than all ingredients possible for a brand - accounted for almost half of the increase. Notable confectioners engaging with Fairtrade cocoa include Mars, Mondelēz International and Ferrero.

Fairtrade after ISO/CEN

The European Committee for Standardization (CEN) and the International Organization for Standardization (ISO) will introduce a joint standard for traceable and sustainable cocoa in 2016 that can be used as a voluntary reference for company programs. Lamb said Fairtrade would still have its place if manufacturers wanted to go “the extra mile”. But she added if the ISO/CEN standard went further than Fairtrade, she would be delighted.

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