Memorandum submitted by The Sustainable
Enterprise Research Group (SERG) at Liverpool John Moores University
(Faculty of Business and Law)
WHAT HAS BEEN THE IMPACT OF DONOR FUNDING
FOR FAIR TRADE?
THE IMPACT OF THE DIVINE CHOCOLATE COMPANY
(FORMERLY THE DAY CHOCOLATE COMPANY) ON THE UK CONFECTIONERY INDUSTRY
The Sustainable Enterprise Research Group (SERG)
at Liverpool John Moores University (Faculty of Business and Law)
would like to offer the following comments on the question, posed
by the committee:
1.1 What has been the impact of donor funding
for Fairtrade?
1.1.1 In 2000 DFID guaranteed a bank loan
for £400,000 to The Day Chocolate Company (now Divine Chocolate
Ltd) as part of it 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, and November 2002). This is the
first report. The impact assessment process is ongoing, carried
out by the Sustainable Enterprise Research group (SERG) at Liverpool
John Moores University (Faculty of Business and Law). Also, 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
and Doherty, B. and Meehan, J (2006) "Market entry based
on social resources: The Case of Day Chocolate Company in the
UK confectionery sector", Journal of Strategic marketing,
Volume 14, Issue 4.
1.1.2 The Sustainable Enterprise Research
group (SERG) at Liverpool John Moores University (Faculty of Business
and Law) have been commissioned by both the Department for International
Development and Twin Trading to carry out a Monitoring and Evaluation
Study to measure the impact of Divine Chocolate Ltd (formerly
The Day Chocolate Company) on the UK Confectionery Industry. The
study will measure impact over a three-year period (2005-08).
This summary contribution here uses extracts from the first iteration
of this M&E study. This contribution should also be cross
referenced to the report submitted by Divine Chocolate Ltd.
1.1.3 This M & E study involves a range
of data collection methods involving a significant number of semi-structured
interviews with key stakeholders in the UK confectionery industry
including supermarket buyers, supermarket ethical trading managers,
key informants in other channels of distribution such as wholesalers,
independents, whole food network, Coffee shop chains and alternative
channels such as Oxfam shops etc. In addition key media experts,
senior management representatives from Divine Chocolate's competitors,
The BCCCA (Biscuit Cake Chocolate & Confectionery Association)
and key opinion formers in the Fairtrade movement. A large sample
of key informants were chosen in order to fully identify the key
avenues of impact. All interviews have been recorded and transcribed
to print. Additional fieldwork involved sourcing and analysing
stakeholder policies and documents. From content analysis of this
data a number of key themes are emerging which will be further
tested in the second iteration of this study to take place from
April 2007.
1.1.4 It is important to note the strategic
objectives of Divine Chocolate (formerly The Day Chocolate Company):
— To take a quality and affordable
range of fair trade chocolate bars into the mainstream chocolate
market.
— To raise awareness of fair trade
issues among UK retailers and consumers of all age groups.
— To be highly visible and vocal in
the chocolate sector and thereby act as a catalyst for change.
— To be the leading Fairtrade chocolate
company in the UK.
— To pay a fair trade price for all
cocoa used in the products.
1.1.5 This summary report will focus on
the first three key objectives above. It is clear from market
statistics that Divine Chocolate is the leading UK Fairtrade Chocolate
Company and only uses Fairtrade cocoa. This contribution uses
extracts from the full study.
2. KEY FINDINGS
Findings are grouped under the strategic objectives
identified above.
2.1 To take a quality and affordable range
of fair trade chocolate bars into the mainstream chocolate market
2.1.1 90% of all key informants interviewed
identified the quality of Divine Chocolate's products as a key
factor in the companies' success in the mainstream. Also 80% identified
pricing as appropriate. One leading supermarket retailer specifically
mentioned the impressive quality of Divine Dark (70% cocoa content),
"Divine Dark is one of our strongest performing plain chocolate
products, the recipe is excellent". Both Divine Chocolate's
own label customers (Starbucks UK and The Co-operative Retail
group) identified both an increase in sales performance and improved
feedback from consumers on the taste of their Fairtrade Chocolate
ranges. Two major supermarket retailers commented on the good
performance across all age groups including young people and older
consumers.
2.2 To raise awareness of fair trade issues
among UK retailers and consumers of all age groups
2.2.1 Divine Chocolate is regarded by 90%
of key informants as very successful at raising the awareness
of Fairtrade with UK retailers. Trading Director at one key multiple
retailer commented, "Divine Chocolate has really proved some
experts wrong, they have managed to develop a high quality range
of Fairtrade chocolate products and gain impressive distribution,
they have used their links back to producers to demonstrate to
us all the importance of people and relationships in supply chains.
Remember chocolate is a highly competitive market and is very
difficult for any new product to succeed".
2.2.2 It is important to note that 75% of
retailers identified the credibility of Divine Chocolate's links
back to producers as a key reason for the successful mainstreaming
of Divine's products. This is demonstrated by both Divine's own
label customers; The Co-operative Retail Group and Starbucks Coffee
Company using stories of Kuapa Kokoo Co-operative farmers on their
chocolate bar wrappers. Interestingly both the above companies
identified that Divine Chocolate had proven despite being in a
highly competitive market the viability of their unique business
model which challenges the conventions of International trade.
The Co-operative Retail Group in 2002 (3,000 shops in the UK)
converted all its own labelled chocolate to Fairtrade sourced
from Divine Chocolate. This move by the Co-op led to a documentary
screened in November 2002 on BBC News 24 about Fairtrade Chocolate,
the CRG produced a campaign document in 2002 called "The
Chocolate Report" which discusses in depth the inequalities
in the world trading system and how both FT consumption and lobbying
the large multinationals to convert to FT can make a difference.
The Chocolate report was distributed to consumers, Co-op Membership,
food industry experts and academics. From this M &E study
two other UK retailers identified the position taken by the Co-op
has influential in their own decisions to stock Fairtrade products.
It is also worth noting here that with a number of major retailers
Divine Chocolate has been involved in staff training with both
head office and store staff.
2.2.3 Divine Chocolate's success in mainstreaming
has also resulted in greater consumer awareness of Fairtrade.
Bruce Crowther[79]
commented; "Being able to tell young people and adults that
Divine and Dubble Fairtrade Chocolate were available in the local
supermarkets was a huge advantage in ensuring our Fairtrade campaign
was practical and credible". There is also evidence from
retailers that Divine's work in raising the awareness of Fairtrade
has resulted in a very loyal customer base. Head Chocolate Buyer
at a leading UK retailer explained "Divine chocolate has
a very high ranking score for performance, which takes into account
both rate of sale and loyalty of the people who buy the product.
Divine has a very loyal customer base".
2.3 To be highly visible and vocal in the
chocolate sector and thereby act as a catalyst for change
2.3.1 From this M&E study research it
is evident that Divine has influenced the strategies and policies
of other companies in the UK Confectionery industry, one leading
retailer commented, "Working with Divine Chocolate has been
a real learning process for us, it has assisted in helping us
look at our other supply chains and raise our ethical standards".
One of the UK's leading coffee chains commented that "Working
with Divine on Fairtrade chocolate has provided us with access
to the `Fairtrade Community' which is a diverse group of individuals,
NGO's, companies and opinion formers. Being a part of this broad
group is healthy and provides us with the opportunity to understand
and contribute to the debate". Both The Co-operative Retail
and Waitrose specifically mentioned the positive influence of
Divine Chocolate on second tier manufacturers such as Ashbury's.
The Co-op highlighted the increased dialogue about Fairtrade from
such second tier manufacturers due to the work of Divine. One
retailer commented on the acquisition of Green & Blacks by
Cadbury Schweppes as an indicator of Divine's impact.
2.3.2 Another avenue of impact identified
is the work of Divine Chocolate with young consumers. A major
branded multi-national manufacturer of chocolate explained that
"Divine's work in schools has had an impact; every week we
receive letters from school pupils asking us to develop Fairtrade
chocolate products". It is important to note here that Divine
in partnership with Comic Relief launched a Fairtrade Education
pack into 15,000 schools in 2001. The same branded manufacturer
also commented "Divine, Café direct and the Fairtrade
Foundation have raised the consumers' awareness of both developmental
issues and where products come from this has influenced our own
debates internally about our own supply chains".
2.3.3 There is also more evidence that Divine's
impact going beyond confectionery, The Co-operative Retail Group
explained "Divine's impact on our business strategy is significant,
we would not have developed our own label Fairtrade Coffee range
if it was not for our success on Fairtrade Chocolate, which provided
the business case. Our sales of Fairtrade chocolate show a 35%
growth above sales of our previous own label range".
2.3.4 There is also some evidence of Divine
having some influence in the way smaller suppliers work with larger
retailers. One retailer explains "The relationship is a real
partnership with Divine. We both have a shared vision and a shared
ownership perspective of key issues. Discussions are easier and
there is a greater degree of flexibility in the relationship in
comparison to the major players, which actually means the relationship
between us, and Divine is stronger. For example the relationship
with the major players is based on the need to make more money.
With Divine it is a different level of relationship, of course
there is a need to make money but what we are doing together is
much broader than just making money". This aspect of building
relationships will be investigated further in the second iteration.
2.4 Conclusion so Far from Monitoring and
Evaluation Study: So what has been the impact of DfID's loan guarantee
facility for Divine Chocolate Limited?
2.4.1 In summary, the success of Divine
Chocolate in the mainstream shows that an alternative business
model that challenges the conventional international trading system
can work. Both its links with producers via farmer ownership and
excellent product quality have been essential to its success in
the mainstream. The wider distribution created by mainstreaming
enables Divine Chocolate to speak to a greater number of people
and organisations, gaining their attention because of their mainstream
presence. This strategy has enabled Divine Chocolate to strengthen
the original ethical interest of the FT venture by bringing a
positive influence to other stakeholders including consumers,
retailers, wholesalers and competitors. These aspects will be
explored further in the second iteration of this study.
Bob Doherty
February 2007
79 Bruce Crowther is a Fairtrade Campaigner from
Garstang Lancashire, previously Head of Oxfam campaigns in Garstang
and now Fairtrade Foundation's Fairtrade Towns Co-ordinator. Back
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