To Be Acquired or Not: Maximising the Impact of Ethical Chocolate-Makers

The fair-trade movement has certainly been growing in momentum over the past two decades. Many chocolate companies have recognized the unethical practices in chocolate production that stem from historical practices, just like those in sugar production covered in [1]. Thus, they have worked to make sure their sourcing of cacao complies with fair-trade restrictions, in an attempt to make sure that cacao farmers are compensated fairly and can afford an improved quality of life. In this blog post, we will not focus on criticisms of fair-trade certification or any possible ulterior profit-driven motives behind these more “ethical” chocolate companies. Instead, the question this blog post will strive to answer is the following: if a chocolate maker is trying to maximise its positive impact on farmers, should he allow his company to be acquired by a large multinational or not? By looking at examples such as Green & Black’s and Taza chocolate, we will argue that both approaches can lead to success. The first is important for making it easy for people to choose to purchase fair-trade chocolate, whereas the second can help engage communities and promote awareness regarding the importance of ethical chocolate consumption.

Case Study 1: Green & Black’s

To start, we outline our first case study: Green & Black’s. Green & Black’s chocolate company was founded in 1991 by Craig Sams and Josephine Fairely. According to the company’s mission statement, it aims to provide high cocoa solid chocolate whose production process aligned with the environmental concerns of the founders. The colour Green symbolizes the environmentally conscious nature of the business, and black the intensity of the chocolate. The company purchases fair trade cocoa, and was the first company to receive fair trade certification in the UK. Historically, cacao was consumed in Mesoamerica by cultures like the Olmec, Mayans, and Aztecs [2]. So, in addition to ethical sourcing, Green & Black’s also recognizes this rich history with offerings like the Maya Gold bar, made from cacao produced by Mayan farmers in Belize [3].

Maya Gold Bar.png
Green & Black’s Maya Gold Bar. Taken from [9].
Green & Black’s enjoyed a lot of success in the UK, taking up 95% of the organic chocolate market and deciding that it could indeed compete with existing (non-organic) chocolate giants [4]. As a result, in 2005, the large chocolate multinational Cadbury plc acquired Green & Black’s for a sum of around 20 million GBP.  Then in 2010, Cadbury was acquired by American multinational Kraft Foods.

The decision to sell to Cadbury is a difficult one. One aim of Green & Black’s is to promote sustainable fair trade relationships with cocoa farmers. However, the extent that Green & Black’s can help these farmers is affected by demand for the chocolate. If nobody buys Green & Black’s chocolate, they won’t be able to order as much cocoa, which means that fewer farmers will benefit from the increased revenues from fair trade. Thus, being acquired by a multinational can actually help these “ethical chocolate companies” by increasing their commercial success and enabling to scale up their operations to help more and more people. Larger companies benefit from several economies of scale, more efficient processes, and existing networks, and can use these resources to aid acquired socially conscious companies. As an example, Starbucks coffee reports that 90% of their coffee is ethically sourced. Because of the scale of Starbucks, whatever good their ethical sourcing is achieving is felt by a lot of farmers. Thus, we can see that there are benefits that can be

Of course, there are also many reasons why being acquired by a large multinational may not help Green & Black’s achieve their social/environmental goals. No matter how much the multinational may state that they will respect the mission of Green & Black’s, the fact that they own the company means that they can dictate how it is run. In many cases, that is perfectly fine. Indeed, Craig Sams in an article stated that he is comfortable with being acquired by Cadbury because it wouldn’t make sense for them to acquire an “ethical brand” if all they planned to do was deviate from their socially conscious practices [5]. Sam’s view here is not unjustified, there are many examples of smaller business that managed to maintain their brand identity after being acquires such as Ben & Jerry’s (Unilever) and Burt’s Bees (Clorox) [6]. That said, after being acquired by Kraft Foods, Sams has expressed regret at allowing Green & Black’s to be acquired by Cadbury (and thus later, Kraft Foods) [7]. Judging from the article, Green & Black’s appears to have gotten lost within Kraft’s massive portfolio of brands and is losing the exposure it once had. Thus, more generally, the case study of Green & Black’s illustrates that acquisition by a large company can have a variety of different outcomes. On the one hand, it can provide a great opportunity to scale up (and possible still maintain the original brand image). But, it could also lead to a disaster where the brand is mismanaged and the original message diluted in the pursuit of maximising profit.

Case Study 2: Taza Chocolate

In any case, Green & Black’s chocolate is now widely distributed across the US and UK. They have presence in Whole Foods and many other deli type food establishments. To shed some light on the alternative path, we examine Taza Chocolate: a small chocolate maker in Somerville, MA. Just like Green & Black’s, Taza acknowledges the history of chocolate/cacao by producing a lot of chocolate that is true to its Mesoamerican origins, for instance, stone ground chocolate and chocolate that is meant to be made as a beverage, as was done in Mesoamerica [2]. Taza is also considered to be an ethical chocolate company because they engage in direct trade with their producers. Direct trade is similar to free trade except that it encourages direct long-term trading relationships between the cocoa producers and manufacturers. As a result, these direct relationships allow for sufficient incentives to be put in place for quality produce, and alleviate many of the fees that farmers have to pay to engage in fair trade [11].

Taza
Products of Taza Chocolate. Taken from [10].
Taza chocolate, in spite of its humble origins, has managed to achieve considerable success in its own right. It has an array of 40 different products that can be found in more than 2,800 stores across the United States. Some of its items can even be found abroad. That being said, the distribution of Taza chocolate still cannot compare to that of Green & Black’s, which can be found in major grocery chains like Wholefoods as well as many smaller delis. Thus, the comparison between Taza and Green & Black’s illustrates the tradeoffs between being acquired by a large company versus remaining independent. By being a part of Cadbury (and Kraft Foods), Green & Black’s was able to use the resources of this large conglomerate to achieve wider distribution.

That said, Taza chocolate finds ways to advance ethical chocolate consumption beyond mere scale of operations. One way they do so is through engaging the public more with regards to the chocolate making process. Taza holds regular tours of their factory and a variety of chocolate-related events for its participants. That way, even though consumers may not necessarily go to Taza for their impulsive chocolate cravings, the will still be aware of the issues surrounding cacao production and hopefully, will remain ethical consumers.

The example of Taza illustrates that it may not be necessary to be acquired by a large multinational, or even scale one’s operations to make a significant contribution to making cacao production more just. Instead of trying to single-handedly solve the issue by having people buy more Taza chocolate and paying a growing base of farmers fairly, Taza instead empowers its consumers to make ethical choices, regardless of whether or not that choice to purchase Taza chocolate or some other ethical brand. Of course, whether this is a good decision from a profitability standpoint is up for debate, but lest assured this seems to be an effective method of encouraging ethical chocolate consumption.

Examining Trends in Fair-Trade

Of course, to verify the effectiveness of Taza’s approach, we have to evaluate whether or not their efforts are leading to changes in consumer preferences. Indeed, looking at the data, it seems like educating the chocolate consumer base is having some impact on consumer preferences. Data from the United Nation’s Food and Agriculture Organization (FAO) September 2009 study titled “The Market for Organic and Fair-Trade Cocoa” indicates this is the case [8]. For instance, it finds strong growth in the sales of fair-trade cocoa both in absolute value and as a proportion of all fair-trade sales in several major European markets such as the UK, France, and Germany. Across the Atlantic, there is also strong growth in the United States. The graph below indicates that imports of fair-trade cocoa into the United States is growing at a very promising rate.

US Imports
Imports of fair-trade certified cacao into the U.S. (lbs). Taken from [8].
In their report, the FAO attributes this increase in ethical chocolate consumption to the increase in awareness among consumers of these more ethical options and the merits of being an ethical consumer of chocolate. This provides evidence that the approach taken by Taza chocolate is effective and helping create this shift in consumer preferences in favour of more ethical sourced and produced chocolate.

The Economics of Fair-Trade

There are many counterarguments that can be raised in response to the central claim of this blog post. Firstly, one can argue that an educated public alone is not sufficient and that convenience is more important. More plainly stated, even if people are aware of these ethical issues and disagree with them, they will still purchase non-fair-trade chocolate from convenience stores because that is what is cheapest/most readily available. This argument makes sense, especially when we consider the fact that currently, a lot of chocolate is purchased on impulse. This argument is precisely why the economics of fair-trade chocolate are also incredibly important to making progress on this issue, which we explore in the paragraph below.

On the supply side, as in the chart below, comparisons of prices for fair-trade cacao and New York prices indicates that fair-trade cocoa is longer the significantly more expensive option. This indicates that fair-trade chocolate companies may be able to price more competitively, gain more market share, and place their products more aggressively in a variety of retail outlets. What this report and the example of Taza chocolate seems to indicate is that the economics of fair-trade chocolate are changing such that they can become more competitive. Thus, if the goal is to create the most good for these farmers, all that remains is to educate the public to make informed choices when selecting between brands of chocolate.

That said, we do acknowledge that these economic conditions we observe today may not always hold true. Even though Professor Martin outlines many reasons why fair-trade cacao may be more expensive now, but may not be later on [11], it is not obvious that the two should end up costing the same. Nevertheless, this blog post is about the individual strategies that companies can undertake to maximise their impact on cacao farmers. In particular, its argument is that operating at a relatively small scale, choosing not to sacrifice on their ideals, and educating the public can be an effective, but not necessarily self-sufficient method of combating unethical practices in cacao production.

Prices.png
Comparison of fair-trade and New York prices for Cocoa from 1994-2009. Taken from [8].
In conclusion, from the examples of Green & Black’s chocolate and Taza chocolate, we learn a lot about the kinds of strategic decisions companies can make in order to maximise their positive impact on their producers, regardless of whether or not it was their true intention to do so. Green & Black’s who were acquired by large multinationals in 2005 and 2012, now attain a very large presence in stores worldwide and give consumers easy access to fair-trade chocolate, even though the power of the company’s story may be diluted by the presence of Kraft Foods. On the other hand, Taza chocolate maintains its strong identity as an ethical chocolate maker, educating the community and promoting awareness on a local level. Both types of companies are necessary for worldwide customers to become more ethical, and for chocolate to be product we can be proud to consume as well as enjoy.

References:

[1] Mintz, Sidney W. Sweetness and Power: The Place of Sugar in Modern History. New York, NY: Viking, 1985. Print.

[2] Coe, Sophie D., and Michael D. Coe. The True History of Chocolate. New York: Thames and Hudson, 2000. Print.

[3] “Booker Tate Award For Small Businesses.” Worldaware Business Awards 1994 –. N.p., n.d. Web. 02 May 2016. <http://www.worldaware.org.uk/awards/awards1994/green.html&gt;.

[4] “Marketing Green & Black’s: Organic plus Luxury Adds up to the Taste of Success.” The Independent. Independent Digital News and Media, 16 Apr. 2006. Web. 02 May 2016. <http://www.independent.co.uk/news/media/marketing-green-blacks-organic-plus-luxury-adds-up-to-the-taste-of-success-358129.html&gt;.

[5] Sams, Craig. “Why Kraft Must Keep Organic Cacao Farmers Sweet | Craig Sams.” The Guardian. Guardian News and Media, 20 Jan. 2010. Web. 02 May 2016. <http://www.theguardian.com/environment/2010/jan/20/kraft-green-black-cadbury-ethical&gt;.

[6] Laya, Kim Bhasin and Patricia. “13 Small Eco Brands That Are Actually Owned By Giant Corporations.” Business Insider. Business Insider, Inc, 01 Oct. 2011. Web. 02 May 2016. <http://www.businessinsider.com/13-ethical-mom-and-pop-brands-that-are-actually-owned-by-giant-corporations-2011-10&gt;.

[7] Milmo, Cahal. “Cadbury Deal Turns Sour for Green & Black’s.” The Independent. Independent Digital News and Media, 17 Jan. 2011. Web. 02 May 2016. <http://www.independent.co.uk/news/business/analysis-and-features/cadbury-deal-turns-sour-for-green-amp-blacks-2187044.html&gt;.

[8] United Nations Food and Agriculture Organisation (FAO). “The Market for Organic and Fair-Trade Cocoa.” THE MARKET FOR ORGANIC AND FAIR-TRADE COCOA Study Prepared in the Framework of FAO Project GCP/RAF/404/GER “Increasing Incomes and Food Security of Small Farmers in West and Central Africa through Exports of Organic and Fair-trade Tropical Products” September 2009The Designations Employed and the Presentation of Material in This (n.d.): n. pag. Web. 02 May 2016.

[9] “MAYA GOLD 100G BAR.” Maya Gold 100g Bar. N.p., n.d. Web. 02 May 2016. <http://www.greenandblacksdirect.com/p/9/maya-gold-100g-bar&gt;.

[10] “- A Unique Wine and Cheese Shop in Nashua, NH.” WineNot Boutique. N.p., n.d. Web. 02 May 2016. <https://winenotboutique.com/&gt;.

[11] Martin, Carla. “Alternative Trade and Virtuous Localization/globalization.” African American Studies 199x: Chocolate, Culture, and the Politics of Food. MA, Cambridge. 6 Apr. 2016. Lecture.

 

 

 

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