Memorandum submitted by Divine Chocolate,
Trading Visions, Comic Relief and Kuapa Kokoo
Divine Chocolate (formerly The Day Chocolate
Company) was founded in 1998 with the mission to improve the lives
and opportunities of small-scale cocoa farmers in West Africa
by establishing a dynamic, branded Fairtrade chocolate marketing
company in the large UK chocolate market.
The company's intermediate objectives are:
— To take a quality and affordable
range of Fairtrade chocolate bars into the mainstream market.
— To raise awareness of Fairtrade issues
among UK retailers, consumers of all age groups.
— To be highly visible and vocal in
the chocolate sector and thereby act as a catalyst for change.
— To pay a Fairtrade price for all
the cocoa used in products.
Divine is a private company limited by shares.
The Divine Chocolate and partner organisations
would like to offer the following comments on the questions posed
by the committee:
What has been the impact of donor funding for
Fairtrade?
Although this was not strictly "grant"
financing, it is worth noting what we regard it as the most significant
contribution DFID has made to financing Divine Fairtrade chocolate.
In 2000 DFID guaranteed a bank loan for £400,000 to The Day
Chocolate Company as part of its poverty alleviation programme
in Ghana. This was the first time this financial instrument has
been used. It was a good example of joined up Government where
DFID worked with the DTI small business unit to assess the risk
and then signed off the Guarantee through the Ghana desk who then
monitored it though an Independent Director on the Board. An impact
assessment was also commissioned. (see L Ronchi: Monitoring
Impact of Fairtrade Initiatives, Twin, November 2002). This
is the first report. The impact assessment process is ongoing.
For example, further evidence can be seen in "New Thinking
in International Trade: A Case Study of The Day Chocolate Company,
(Tranchell and Doherty, Journal of Sustainable Development, Issue
13, 2005)".
The Guarantee, offered by DFID, has been enormously
valuable:
— It enabled Divine Chocolate to access
start-up finance at a competitive rate.
— It meant that the Farmer organisation
in Ghana could own a significant share (33%) of the company, so
that they would have board representation, a say in how the company
is run and a share of any profit.
— It made other companies and organisations
take Day seriously.
— It enabled a start up company to
develop a relationship and a track record with a conventional
commercial bank.
Of these the question of ownership is most important.
Divine chocolate delivers four different income streams to its
owners in Ghana:
1. The price for cocoa used (which is the
world price or $1,600 per ton, whichever is the greater) (2006,
1,145 tonnes used: $1,832,000).
2. The Fairtrade "social premium"
of $150 per ton (2006: $171,750).
3. Producer support and development spend
which is used to ensure the integrity of the cocoa supply chain,
and (2006: £125,000).
Over time the last of these will be the most
important and the biggest. We regard our greatest achievement
as being the creation of a company which it was possible for farmers
to own although they did not have the capital to launch it. Using
the funds guaranteed by DFID, we created a company which was one-third
owned by cocoa farmers in Ghana. Today the Kuapa Kokoo Farmers
Union owns 47%. In the year to 30 September 2006, Divine chocolate
had turnover of £9 million and pre-tax profits of £611,000.
That 47% is now worth a considerable amount.
It is worth noting that the guarantee did not
cost DFID anything. Had the project failed, DFID may have carried
the bill for £400,000. In the event we succeeded. The guarantee
has now lapsed; DFID has no further liability and the company
is thriving. It is worth noting also that HM Treasury is the single
greatest beneficiary of Divine's success. In the year to 30 September
2006 we paid net VAT of nearly £1.3 million and our tax bill
for the year is £158,000.
As well as a financial success, we believe the
guarantee to have been of considerable political importance, and
we are pleased that the Prime Minister, the Chancellor and other
government ministers continue to take a keen interest in our success.
How best can donors help to develop Fairtrade
consumer markets in both developed and developing countries?
DFID makes an incredibly valuable contribution
to developing Fairtrade consumer markets. In the UK, DFID's Development
Awareness Fund supports vital initiatives, which challenge public
perceptions of poverty and the developing world, and help people
understand how Fairtrade offers an effective and dignified solution.
The partners, (Divine Chocolate, Comic Relief, Trading Visions
and Kuapa Kokoo), applying successfully as a consortium, have
received two rounds of Development Awareness Funding since 1999.
Through this funding we have been able to create
and develop new markets for Fairtrade by delivering powerful education
and awareness raising initiatives. These DAF funded activities
have been especially focused on young people, enabling us to bring
to market the first youth targeted Fairtrade product in the UK
and educating young people to affect long term change in the consumer
market for Fairtrade. Furthermore, we have consistently worked
with Kuapa Kokoo to source content from Ghana, ensuring that our
materials and resources are focused on the impact of Fairtrade
on real people and communities. This forges a powerful link between
producers and consumers, and offers a unique incentive for consumers
to continuously support Fairtrade.
DFID's support has enabled the project partners
to develop a totally unique proposition on Fairtrade, inspiring
people across the UK through the amazing true story of a farmer-owned
Fairtrade chocolate company. Together, we have delivered pioneering
Fairtrade education resources and campaigns targeting in-school
and at-home learning and action. In brief, we have:
— created the first and only Fairtrade
product for (and designed by) young people: the Dubble Fairtrade
chocolate bar, now available in supermarkets and stores across
the UK;
— developed award-winning Fairtrade
teaching resources, used in over 17,000 schools, and undertaken
other activities reaching thousands more young people and teachers;
and
— created www.dubble.co.uk and Dubble
Agents: the first online Fairtrade activist hub for young people
with over 50,000 members and ongoing content sourced from Ghana,
showing the impact of Fairtrade through stories of real people
and their communities.
With DFID's invaluable support, the partners
have worked together to ensure that, not only is there a Fairtrade
product available for young people, but that Fairtrade and the
development context for Fairtrade products is prominent in the
minds of young people, teachers and others across the UK. Dubble,
Dubble Agents and the Pa Pa Paa Fairtrade teaching resources are
established as uniquely accessible points of engagement with Fairtrade
for children, young people and teachers across the UK.
The work of the partners in this area is ongoing
and exciting developments continue. For example, Comic Relief's
Red Nose for Red Nose Day 2007 carries the Fairtrade Mark as it
contains a "ChocPix" chocolate square, made with cocoa
from Kuapa Kokoo. This will bring Fairtrade and the inspiring
story of Kuapa Kokoo to the attention of the eight million people
who will buy a Red Nose across the UK. Numerous awareness raising
and education initiatives focused on Fairtrade are underway for
Red Nose Day. For example, an edition of the hugely popular "Charlie
and Lola" children's books, all about the story of Fairtrade
chocolate, will be available. Such initiatives will have an incredibly
broad reach across a wide spectrum of media, contributing significantly
to the growth of new consumer markets for Fairtrade.
DFID's continued support is vital to initiatives
such as ours, which make development issues accessible, and allow
people to identify where they can affect long lasting social change
through the tangible step of choosing Fairtrade products. Fairtrade
can also be the gateway to further learning and understanding
about the developing world and the role we can all play as global
citizens.
Is there a role for donors in helping to develop
the interests of producer communities in developing countries
(for example, the Ethiopian coffee trademark dispute)?
Fairtrade producer organisations often have
to do business in incredibly challenging circumstances, coping
with a lack of adequate and affordable infrastructure in vital
areas such as communications, transport and access to affordable
appropriate finance. Donors have a very valuable role to play
supporting developing country governments and stakeholders to
develop more conducive environments and infrastructures. Crucially,
donors have the opportunity to pioneer innovative solutions, best
developed to meet the needs of Fairtrade enterprises, seeking
to use trade to sustainably alleviate poverty in their communities.
Kuapa Kokoo in Ghana offers an example of where
donors could play such a role. Three of the biggest challenges
for Kuapa in managing and growing their business are communications,
transport and finance. From a head office in Kumasi, Ghana's second
city, Kuapa Kokoo work across 28 area offices and many more depots.
The co-operative has a membership of over 20,000 farmers in 1,200
village societies, spread across an enormous geographical area.
Communications on this scale are incredibly
challenging without adequate infrastructure. For example, a lack
of affordable and reliable broadband internet providers in Ghana
has made finding a cost effective internet solution, suitable
for an organisation of this scale very difficult. This hugely
impacts the way Kuapa's business has to function on a daily basis.
For example, some vital reporting processes from the area offices
into head office are undertaken manually, with high staff travel
time attached. Similarly, very poor road conditions across much
of the country make traveling and transporting cocoa around the
country slow and, at times, dangerous.
It is in the interests of Fairtrade producer
organisations and their communities for donors to work in partnership
with them and tackle these very basic and vital issues of infrastructure,
in order that their businesses may succeed and deliver on their
mission to improve the livelihoods of farmers.
Do existing government guidelines on procurement
of ethical and Fairtrade products provide an enabling environment
for the development of this market and the opportunities for producers?
The support for Fairtrade shown by Government
departments is extremely positive. By implementing procurement
policies supporting Fairtrade they set an excellent example, encouraging
other organizations, local government and businesses to do the
same, creating pull through of Fairtrade products.
The impact of the recent DfES guidelines on
food in schools on Fairtrade should be considered. Prohibiting
chocolate and other Fairtrade products in schools limits a significant
route to market for Fairtrade brands such as Dubble and Divine,
a market which, as outlined above, we have spent several years
creating and developing through educational and awareness raising
initiatives. Opportunities for Fairtrade and enterprise education,
and the impact of these activities for the young people participating,
will be affected, as they will be less able to take the tangible
step of buying or selling Fairtrade goods.
What is the role of supermarkets, retailers and
businesses in supporting ethical and Fairtrade production?
Supermarkets, retailers and businesses are increasing
embracing Fairtrade, stocking a wider range of goods and developing
own-label Fairtrade products. This is a welcome development, if
it leads to the development of new consumer markets and new markets
for Fairtrade producers. The danger is that existing markets are
cannibalised.
Supermarkets, retailers and businesses could
work to create and develop new markets in the following ways:
— Making explicit long term commitments
to dignified trading relationships with producers.
— Growing the market for Fairtrade
producer organisations, for example by supporting producers to
become Fairtrade certified.
— Commit to ensuring the commercial
success of new Fairtrade products that they bring to market, even
where short term challenges occur.
— Making a long term commitment to
educating their customers about Fairtrade.
— Embracing the Fairtrade Mark as an
independently accredited and trusted guarantee of Fairtrade, making
it easier for the consumers to make satisfied, informed choices
about what to buy, in an environment where there are several claims
to "Fairtrade" to decipher between.
— Allocating resources to promote Fairtrade
products at the point of purchase, which is so vital in influencing
consumer choice and ongoing behaviour. Many supermarkets and retailers
do commit resources to do this and promote Fairtrade in store,
especially during Fairtrade Fortnight. However, the vast majority
of investment in this activity comes from Fairtrade product suppliers
themselves, who pay for promotional space and subsidise consumer
offers.
In an increasingly crowded ethical marketplace
how can consumers be supported to distinguish between different
Fairtrade brands, labels and codes?
The Fairtrade Mark offers an independently certified
guarantee to the consumer that producers have received a fair
deal. In an increasingly crowded ethical market place, this independent
guarantee offered by the Fairtrade Mark has a critical role to
play, allowing customers to be satisfied that the Fairtrade claims
on the product have been independently checked according to a
clear, consistent and transparent set of criteria.
In addition to being satisfied that Fairtrade
standards are independently verified, consumers need to be educated
and supported to make informed choices and change their long term
bevaviour. We have made this part of our mission, undertaking
a large amount of ongoing education and awareness raising work,
as outlined above. Through and increased understanding of the
powerful impact of Fairtrade on farmers and their communities,
consumers will be encouraged to chose Fairtrade consistently.
They will also be encouraged to analyse other areas of their behaviour
and consumption and the role they can play as global citizens.
Finally, in a crowded marketplace, new models
of ownership offer a significant point of difference for fairly
or ethically traded goods, and signify an even better deal for
producer organisations. Divine chocolate have pioneered a model
of farmer ownership and embedded this into our brand and communications.
Our message is that the farmers of Kuapa Kokoo not only get a
fair deal for the cocoa, through the Fairtrade system, but that
they share in the profits of the business and have participate
in determining how the company is run.
The Fairtrade Mark is going from strength to
strength and consumers are becoming increasingly aware of the
challenges facing small scale commodity farmers. The Fairtrade
Mark offers an independently certified guarantee for consumers
in a crowded market place. As consumer understanding of the context
for Fairtrade improves we hope consumers will push businesses
to offer even better and more equitable partnerships with producers.
Farmer ownership offers an incredibly powerful way to do this.
February 2007
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