(hey, type here for great stuff)

access to tools for the beginning of infinity

The money is in the chocolate

As a small company selling chocolate according to its own ethical standards, Divine Chocolate doesn’t just buy fair trade cocoa from the African cooperative Kuapa Kokoo, but the producers are also the main stockholders.

The small cocoa producers of West Africa produce 70% of the world’s supply of the crop. Until now, African cocoa cooperatives were far from the commercialization of chocolate, a product derived almost entirely from this tropical fruit.

Chocolate is a very mature product in the international markets, controlled by multinationals like Nestlé, Cadbury or Mars. Estimated worldwide sales of chocolate, whether of high quality or the affordable type found in supermarkets, are 75 billion dollars per year.

The price earned by the companies, both big and small, that sell the chocolate, is in another league from that paid in the international markets for the raw material. Cocoa producers earn just 4 billion dollars annually, almost 19 times less than those who are finishing off the product.

Despite the modest profits derived from the production and export of cocoa, this crop is one of the major resources of several countries in the Gulf of Guinea. Cacao is 20% of the exports of Côte d’Ivoire, the main worldwide producer.

Cocoa Producers and chocolatiers

Academics and development agencies have evaluated small producers and their cooperatives and determined that in the current market for cocoa, they will have difficulty receiving a higher price for their product. Unlike coffee producers who can cultivate beans of higher quality or with special characteristics, this isn’t a viable option for cocoa growers.

If the money is in the commercialization of chocolate, the next step for thousands of African producers has been to try to become a part of this market. The majority of the cocoa producers of tropical Africa, paradoxically, don’t even know chocolate and its virtues. Many of them, according to the The Economist (Article “Chocolate: thinking out of the box” from April 7, 2007), don’t know the final product of their labor.

Historically, the cocoa producers have remained at the margin of the commercial exploitation of chocolate. Even though things could be changing, thanks to the initiative of some businesses that, in Europe and North America mainly, produce and commercialize chocolate through societies whose participants include producers from the Côte d’Ivoire and Ghana, among others.

This is the case of Divine Chocolate. Founded in the U.K. in 1998, its cocoa producers are largest group of stockholders. They are members of the cooperative Kuapa Kokoo, founded in 1993 and the largest in Ghana, with 45,000 members that are owners of 45% of Divine Chocolate and two of its representatives have seats on the board of directors of this British company.

Divine manufactures its chocolate in Germany and sells it in Europe through several brands, none of which have chosen to differentiate themselves through a higher than average price or other commercial techniques seeking exclusivity. And it seems to work: in 2006 sales were 9 million pounds (18 million dollars).

This year, Divine Chocolate has launched a U.S. subsidiary. A third of the options of the U.S. group will be in the hands of Kuapa Kokoo.

Erica Kyere, head of research for the Ghanaian cooperative, emphasizes that their participation in the production of European fair trade chocolate is a source of pride for the farmers of Kuapa Kokoo. Many of them, according to the statements of Kyere in The Economist, “And they are very proud that they employ some white people—that makes them laugh.”

The success of the Divine fair trade brand
“Could this step into the consumer market expose growers to unanticipated risk?”- asks the magazine- “Not so far. Divine bought 1,200 tonnes of cocoa from Kuapa Kokoo last year, all of it on Fairtrade terms. But 98% of the co-op’s production is sold at commodity prices to Ghana’s state-run marketing board.”

The Kuapa co-op’s cocoa production is sold not just under the Divine label, but can be found on supermarket shelves under many other brand names.

Sophi Tranchell, Divine’s president, assures that the company’s structure- the cocoa producers as owners- has become its main virtue: something that distinguishes the firm from its competitors and mobilizes activists to explain the concept to the distributors and supermarkets.

Divine has also benefited from non-traditional finance methods, such as from charity organizations and help from development lenders and aid agencies, which have helped them gain traction in an industry with high barriers to entry. Without the participation of Kuapa Kokoo, assures Tranchell, “it would have been implausible to set up a chocolate company in this very competitive, very mature market with so little money.”

Other companies are pursuing similar strategies to those initiated by Divine Chocolate- which will soon demonstrate its success with the payment of its first dividend to its shareholders in the middle of 2007. Some of these others include:

  • Agrofair: a tropical fruit distributor based in Holland. Half of the company is owned by its producers. Agrofair operates in most of Europe and offers several types of tropical fruit and organically-certified crops to supermarkets, independent fruit stores and restaurants. Their main products are bananas, mangos, pineapples and citrus.
  • Pachamama: a cooperative formed by South American coffee producers who now have a year’s experience as roasters and sellers in the U.S. of a quality coffee from Nicaragua, Mexico, Guatemala and Peru. The cooperative- made up of more than 13,000 small coffee producers- hasn’t needed help from outside investors and operates independently.
  • Coffee Pacifica: they successfully import coffee from New Guinea to the U.S. and Europe. A third of the company is owned by the Coffee Producing Federation of New Guinea, which represents 120,000 farmers in the South Pacific. In 2006, the company’s sales doubled in North America and Europe, reaching 3 million dollars.

Divine Chocolate, Agrofair, Pachamama y Coffee Pacifica represent a new way of understanding mercantile societies involved in fair trade: instead of limiting the producers of the raw materials to produce and sell their crops at a fair price, they can also participate in the markets charged with selling the manufactured products.

The Internet can serve as a platform for these new companies, as well as a source of inspiration for the creation of new businesses.