Despite a 26.6% increase in turnover last year, ethical Dutch chocolate brand Tony’s Chocolonely has announced it made 0% net profit. For any other multinational brand, the news, presented to ‘shareholders’ last night in Amsterdam, would at best lead to an existential crisis and wholescale cost-cutting, at worst a boardroom coup.
But Tony’s Chocoloney thinks differently and acts differently. Its goal is not to make a profit, because in business everyone knows that when someone makes a profit, someone else has to make a loss – and in the chocolate industry that is usually the cocoa farmers, most of whom already struggle to make a living income.
This company’s goal, since it was established by Dutch journalists 15 years ago, is to create ‘100% impact’ and ‘raise the bar’ and make ‘slave-free chocolate’ the norm worldwide.
In those 15 years, Tony’s Chocolonely has created a movement to try and force change and raise awareness of the injustices in the chocolate industry, and that movement is growing, if last night’s ‘Annual Fair’ report to a packed arena-size crowd in Amsterdam’s trendy Westergafabriek was anything to go by.
‘Make some noise’
Devotees, supporters, chocolate lovers and fans came from all over the Netherlands and beyond, paying €14 each to celebrate Tony’s Chocolonely’s achievements and to ‘make some noise’.
Led not by a CEO, but ‘Chief Chocolate Officer’ Henk Jan Beltman, who certainly knows how to work a crowd, profit margins were brushed aside when he announced that, instead of cash in the bank, Tony’s Chocolonely had spent its money “going for 100% impact” in what was a transitional year as it scaled up its operations and invested in new markets, including the UK.
He said that, during the past 12 months, Tony’s, together with Fairtrade, had made an impact by paying a ‘normal price’ to its 6,624 cocoa farmers. It paid them a per kilo price of $2.10 in Ghana and $2.20 in Cote d’Ivoire, where the industry ‘standard’ is roughly $1.52 and $1.37, respectively.
This is part of its ‘Higher Price’ initiative and a Tony’s premium to farmers makes up the price they receive for their beans and a living income they should be able to earn.
The company says that, in 2018-19, the total premium (including the Fairtrade Premium) it paid was $520 a ton in Cote d’Ivoire and $460 a ton in Ghana. Last year it bought 5,465 tons of traceable beans, just below its target of 5,500 tons and its farmers benefited from $2.6m in premiums.
These are the only figures that matter to Tony’s. Beltman told the crowd there had been negative reports in some areas of the media about the company slipping into the red, which he brazenly brushed aside. He said he can be a hard-nosed businessman if he wants to be, and he welcomes competition, indeed seeks it, as he wants the company to be a success both financially and with its sustainability impact.
He said revenue in the previous fiscal year was up 26.5% and its gross margin stood at 40%, but its net profit landed at 0% in its reporting period. “This was well below what we counted on. Our revenue rose from €55.1m ($60.95m) to €69m ($76.33m). That’s not bad, but our original target was €73.5m ($81.3m) as we made a lot more investments over the year than planned. Our gross margin fell by 1.2% from 4.1% to 40.4%.”
Beltman said Tony’s revenue growth target was 33.5% and he had expected to achieve a gross margin of at least 40% and a net profit of 4%.
One of the successes of the previous year was the setting up of Tony’s Chocolonely in the UK. Ben Greensmith, UK manager, said it had already achieved revenue of £3m ($3.86m) on sales of £6m ($7.73m), despite entering the market in January.
Beltman confirmed there are plans in the next financial year to open offices in Germany and push deeper into the United States.
Paul Schoenmakers, Tony’s head of impact, said he is very proud of the report as “once again it integrates Tony’s Chocolonely’s roadmaps on sustainability” and confirmed that accountants PWC also gave assurance on its non-financial KPIs.
“Some of these are quite challenge,” he said, “and it’s hard to believe we can verify some KPIs, for example 100% traceable cocoa beans. PWC has checked and we know that with every single bar of chocolate we sold, we know exactly where the cocoa came from.”
Schoenmakers said he is also proud of the results from its Child Labor Monitoring and Remidation System. “It’s the second year we report on those results and we have uncovered 259 additional cases of child labor – I’m not proud of that, of course, that’s 10 classes of kids in child labor, but I am proud of the fact that we found them – we worked together with the cooperatives and they used the system as a measuring tool to tackle it. When you find a case, you can work with the family or a teacher to remediate. It’s a lot of work, it takes time and it takes at least six months to see if the child in question is out of child labor.”
He said 56 cases have been confirmed as remediated and another 315 are in the process of remediation.
Schoenmakers said he was comfortable with the financial figures in what has been a transformation year, and the company has invested more on growth and new markets.
“For us, money is a means to an end, most companies think of money as a goal … the net result for us is the result of our actions and not financial goals.”
Over the past year, Tony’s has connected with two new cooperatives in Ghana and Côte d’Ivoire, recruited Delicata of Albert Heijn to its Open Chain and supported the Child Labour Due Diligence Act in the Netherlands in order to try and change the industry. But the cacao industry is still not 100% slave-free, it says – and the reason why it has launched a petition at its annual gathering with the aim of making 100% corporate responsibility obligatory in the worldwide chocolate industry.
Beltman said that, by 2020, it hopes to have one million signatures to change the law and, judging by the response from the Fair, it is already well on its way to meeting that target.
Wrapping up his presentation, Beltman confessed to be not entirely truthful with his financials and let slip that Tony’s Chocolonely had actually made €2,600 last year – however, he expected that to be spent by the end of the evening on ‘Making Some Noise’.
The crowd duly obliged.