West African nations Ghana and Ivory Coast accuse Hershey’s of not paying premiums that are given to the cocoa farmers in order to boost farmer’s incomes.
Who doesn’t love chocolates? With no doubt, chocolates are enjoyed by millions of people around the globe and its demand continues to grow with time. With such great demands, comes great conflicts. There is a global chocolate war going around. The world’s top cocoa producers and America’s largest chocolate makers are indulged in a great fight now. Two of the world’s largest cocoa producers have accused Hershey’s and Mars of avoiding paying a premium that helps boost poor farmer’s incomes in the countries of West Africa.
West African nations Ghana and Ivory Coast account for around two-thirds of the global cocoa production, but there have been long-running tensions with US multinationals over-pricing. Ivory Coast and Ghana, where most of the world’s cocoa is actually grown, is often viewed as a lifeline for farmers in the two countries. The entire economies of these West African countries are held hostage to the vagaries of the world commodities markets.
The Coffee Cocoa Council (CCC) and the Ghana Cocoa Board (Cocobod) on Monday accused Mars and Hershey’s – two of the world’s top chocolate sellers, of not paying the so-called living income differential (LID). The LID is a kind of a bonus of $400 per tonne of cocoa that is given to the cocoa farmers in addition to the market price.
As a result of this, the West African countries cancelled all of the sustainability programs that Hershey’s is directly or indirectly involved in, and it has also been declared that the companies running programs on behalf of the Pennsylvania chocolate maker will also be barred from operating further operations.
Breach of Confidence:
Many cocoa growers in West Africa live below the poverty line and are mostly dependent on the production of cocoa for their livelihood. These cocoa farmers in the West African countries mostly in Ghana and Ivory Coast survive by growing beans in only one or two hectares of their land.
According to the reports, Chocolate makers and cocoa processors had agreed to pay the West African nations a “living income differential” of $400 a ton, but after the pandemic slashed the demand, companies needed to cut costs to weather the second wave of lockdowns orders.
The CCC and Cocobod denounced Hershey’s and Mars’ “breach of confidence” in the scheme which was designed to help millions of African farmers. The countries then retaliated by cancelling all of the sustainability programs in which Hershey’s is involved.
The regulators also took aim at Mars Inc., saying the maker of Twix had migrated the bulk of its cocoa butter purchases from its traditional processors, instead of buying from JB Cocoa and Guan Chong Berhad, just to order to avoid paying the premium. The company later released a statement in which it ‘categorically disagreed’ with the allegations and highlighted that it was the first major manufacturer to support the LID.
The accusations further hit the reputations of the companies:
The governments of Ivory Coast and Ghana have not only accused Hershey Co. and Mars Inc., of trying to skirt around the $400-a-ton premium that was aimed at boosting incomes for hard-pressed cocoa farmers, but the government of these West African countries hit the reputations of the chocolate makers by pointing out their role in deforestation, child labour, and poverty.
Hershey’s in November took the unusual step of directly sourcing its cocoa via the exchange, as the premium charged by Ghana and Ivory Coast made cocoa inventories that back futures contracts in New York more attractive.
The government of the two West African countries also wrote a letter to Hershey’s in which they accused the company of “conspiracy and machinations,” saying the use of the exchange was a clear indication of Hershey’s intention to avoid paying the living income differential.
Hershey’s bought cocoa futures last month:
Tensions between major chocolate manufacturers and West African cocoa producers increased when of Ivory Coast and Ghana imposed premiums charged on the beans. Usually, buyers for the key chocolate ingredient are used to purchase the commodity from the traders. But when Ivory Coast and Ghana imposed premiums on the purchase of cocoa beans, the buyers started to look for cheaper prices elsewhere.
Hershey then resorted to the weird tactic of shopping for cocoa on the futures market as tensions construct between chocolate firms and west African producers over premiums charged on the beans.