What’s the problem?
Currently, chocolate farmers are not being paid fair wages. Oxfam’s pie chart below illustrates that farmers only receive 3% of the profit from each chocolate bar.
This means that chocolate farmers can earn less than $2 per day (Oxfam 5). In Ghana and Côte d’Ivoire, for example, some cacao farming households only make $0.50 – $0.80 per day and 60-90% of their income is dependent on cacao (Martin lecture 1 slide 6; Cacao Barometer 1). This results in many illiterate and malnourished chocolate farmers who live in poverty and are without health care, to the extent where it will take farmers in Ghana and Côte d’Ivoire 341% and 1608% of their current income, respectively, to reach the poverty line, as illustrated below in Figure 1.
However, this huge percentage increase in income will still only allow such farmers to reach the poverty line. Providing farmers with fair living incomes and wages requires more than simply bringing them out of poverty. Farmers ought to be able to afford clean drinking water, sanitation, decent housing, adequate clothing and footwear, nutritious diets, social security, and basic social services (Cacao Barometer 44-45). Therefore, a lot of change and action is required since chocolate farmers are far away from escaping poverty, let alone earning a sufficient income to be able to live healthy lives.
Fairtrade is one attempt that has been made to tackle this injustice. Fairtrade aims to help farmers build sustainable businesses and improve their quality of life by selling products that are fairly priced (Fair Trade USA). After the Second World War and during the 20th century missionaries and humanitarians began North America’s oldest Fair Trade Organisations (Fair Trade Resource Network 1). Ndongo Sylla claims that since then Fair Trade has significantly impacted some regions of the world; however, the injustice towards farmers is complex and Fair Trade faces difficulties of its own (16, 63). Firstly, while Fair Trade chocolate is more expensive than regular chocolate, not much of the Fair Trade price goes back to the farmers (Martin lecture 10 slide 10). Since farmers sell their cacao beans to middle men who then sell it on, the middle men absorb the price increase. Secondly, the cost for certifications, like Fair Trade certification, is expensive and is an ongoing cost as products have to be continually re-certified (Martin lecture 10 slide 10). And farmers bear the cost of certification. Therefore the cost of certification may be greater than the profit gained from having products certified. Thus, chocolate farmers may lose money by having their products certified, which defeats the purpose of certification and Fair Trade. Furthemore, because certification is costly, Fair Trade is advantageous for wealthier farmers who can afford certification but disadvantageous for poorer farmers who cannot. Therefore Fair Trade promotes even greater inequality between chocolate farmers, which moves us away from our goal of eliminating farmer inequality. Thirdly, both consumers and farmers may lose incentive to participate in Fair Trade’s system because of quality concerns. Certified high quality cacao beans are priced the same as certified low quality cacao beans. Therefore, as explained in the video below, farmers are not rewarded for producing higher quality beans and therefore may be incentivised to sell their beans directly to a more profitable specialty market than have their beans certified with Fair Trade.
Additionally, consumers and farmers may also lose incentive to continue with Fair Trade due to ethical concerns in the media. Fair Trade are often secretive about the true value and gains that Fair Trade offers in comparison to regular chocolate. For example, from 2:23 onwards in Fair Trade Foundation’s marketing video below, Fair Trade is advertised as “a system that pays extra money and that extra profit comes back to us workers”; however, they do not explicitly state quantitative values for how much “extra money” and “extra profit” is earnt (Fair Trade Foundation).
Even on Fair Trade’s website page titled “Impact Research and Evaluation Studies” under the section “The Impact of Our Work” explicit figures are not specified. They make generic statements like: “findings illustrate the real difference that certification and sales have made to farmer organisations and living conditions” where “the real difference” is not clearly explained or supported with figures (Fair Trade Foundation). And in the video below, from 0:55 onwards, even the President and CEO of Fair Trade explicitly states that regular “farmers get 8% of export price” but generically compares that to Fair Trade farmers who “get a higher price”.
Lastly, consumers may be discouraged to buy Fair Trade products because Fair Trade is just one certification body out of many, such as UTZ certified and Rainforest Alliance, which all have different standards. And even within the Fair Trade organsation policies and methods are inconsistent. Fair Trade USA has different policies, standards, and management from Fair Trade UK. Therefore, though certifications such as Fair Trade aim to provide chocolate farmers with fairer wages, there are many flaws in the system and it is mostly definitely not a perfect solution to providing farmers the income they need and deserve.
Direct Trade certification also aims to help chocolate farmers receive fair wages, and it addresses Fair Trade’s flaws and improves upon them (Martin lecture 10 slide 17). Unlike Fair Trade, Direct Trade rewards quality products and pays higher premiums for higher quality cacao beans. Direct Trade also limits the cost of certification, which helps prevent farmers from losing money from paying the cost of certification and it does not disadvantage the poorer farmers, in fact, Direct Trade allows for smaller farms. But Direct Trade’s most distinctive feature is that they promote direct communication and price negotiation between consumers and farmers. This is their most valuable practice because the direct communication increases the opportunity for farmers to receive fair wages and is a more effective method as it eliminates the middle men that absorb the price increase. Taza Chocolate based in Boston and Dandelion Chocolate based in San Francisco are two examples of companies that partake in Direct Trade. They are also the most transparent chocolate companies. Each year they release a transparency report explicitly detailing where their money goes, how many cacao beans they buy, and the origin of their cacao beans. Figure 2 below is an example taken from Taza Chocolate’s 2015 transparency report to show how remarkably transparent the information they provide the public with is. Such transparency is extremely rare in chocolate companies.Figure 2.
However, even the most transparent companies cannot guarantee that the farmers receive the money that chocolate companies pay for their beans. For example, Taza explicitly states that in 2015 they paid $869,000 for 223 metric tons of beans purchased; however, there is no guarantee that there are not middle men absorbing the payment as the chocolate supply chain is complex and ensuring the money goes directly to the farmer is often out of chocolate companies’ power (Taza 2). Therefore the Fair Trade and Direct Trade certification system and increased transparency is not enough to ensure that farmers are receiving fair wages.
Craft chocolate makers present a hopeful future for farmers and fair living wages. Craft chocolate makers are able to source the origin of the cacao beans they use, take raw ingredients, and complete the whole chocolate manufacturing process: roasting, winnowing, tempering etc. by themselves, and thus make chocolate from “bean-to-bar”. Since craft chocolate makers produce on small scale, are independent, and make their chocolate and their company from scratch, the origin of the beans they used are known and they can purchase those beans via direct trade relationships with the farmers. This enables the farmers to be paid much more for their cacao beans. The cacao is also grown under good labour conditions, which is a bonus as this is another one of Fair Trade’s aims and initiatives (Martin lecture 13 slide 31). Farmers are able to be paid much more for their cacao not only because of the direct relationship and direct purchase used, but also because craft chocolate is not certified. So, farmers do not bear the cost of certification. Therefore farmers that work with craft chocolate makers are hugely better off.
The high cost of a craft chocolate bar is the trade-off now that farmers are being paid higher and fairer prices for their cacao, despite their products being non-certified. Farmers are no longer the persons paying for their fairer wages through certification. Now consumers cover farmers’ labour costs by purchasing more expensive chocolate bars. Though some farmers greatly benefit from this shift, the majority of farmers continue to suffer because few consumers are willing to pay for higher priced chocolate bars. For example, craft chocolate such as Potomac Chocolate and Dick Taylor cost $8 and $9 per bar, respectively, whilst an average Hershey’s bar costs only $2. Thus, the majority of chocolate consumers would rather purchase a cheap $2 chocolate bar than an $8 or $9 craft chocolate bar. Furthermore, research has shown that regardless of a consumer’s personal financial fluctuations, they remain willing to only spend $3 or $4 per chocolate bar (Ahren). Therefore currently few farmers benefit from such ethical schemes, like craft chocolate, because there is not a large consumer audience who are willing to pay $8 and $9 for a chocolate bar.
There is a clear relationship between the fairness of a farmer’s wage and the price of a chocolate bar. An average unethical chocolate bar, such as Hershey’s chocolate, costs a mere $2 (Hershey’s). Though Fair Trade has some flaws and may not always ensure that farmers’ receive a higher wage, it is more ethical and farmer-friendly than an average chocolate bar. A Fair Trade chocolate bar such as Cadbury’s costs $4.29 for 6.5oz, which is more expensive than an average chocolate bar (Target). Then a Direct Trade chocolate bar such as Taza chcoolate, which offers farmers a better price for their cacao since they have direct communication with their farmers, costs $5 for 2.7oz, which is much greater than a Fair Trade bar (Taza). Finally, the most expensive is a craft chocolate bar such as Dick Taylor’s, which offer farmers much more for their cacao, costs $6.80 for 2oz (Dick Taylor). Therefore, because the more a chocolate bar provides farmers with fairer wages the more expensive it is, in order to help farmers receive fairer living wages, consumers must be prepared to pay more for chocolate bars.
Though Ahren’s research has shown that chocolate consumers are only willing to pay $3 or $4 for a chocolate bar, there is hope that people will be willing to spend more and that chocolate farmers can have fair wages. Craft chocolate is a relatively new concept and trend. During the 1980s and 1990s there was an increase trend in single origin chocolate and the purity of tracing the origin of cacao beans (Martin lecture 13 slide 20). During the 2000s there was a birth of new craft chocolate producers, and over the past six year, during the 2010s, there have been over 150 bean-to-bar craft chocolate makers (Martin lecture 13 slide 20). Therefore, there is a growing movement and increase in consumer demand for craft chocolate, since this increase in supply could not occur without it. However, fair farmer wages is not the only reason why craft chocolate makers pay farmers much higher cacao prices. Craft chocolate makers pay more because they are purchasing higher quality beans. The concern is that the current consumer demand growth for single origin chocolate may be due to consumers’ desire for higher quality chocolate and not consumer consciousness. If consumers’ willingness to pay extra for chocolate is solely due to their desire for high quality chocolate, it is unlikely that many more farmers will be able to benefit from fair chocolate products such as craft chocolate bars. The number of chocolate consumers who desire high quality chocolate will plateau as the majority of chocolate consumers simply view chocolate as an easy delicious snack and do not care for its quality. Hence big leading chocolate companies today like Hershey’s are able to sell poor quality chocolate for just $2. Therefore it is promising that there is a trend and increase in chocolate consumers who are willing to pay for more expensive chocolate bars; however, in order for more farmers to benefit from fairer wages, consumers must be willing to purchase expensive chocolate due to consumer consciousness and not simply for higher quality chocolate.
Furthermore, craft chocolate is not the perfect solution to chocolate farmers being underpaid. Craft chocolate makers often neglect West African cacao, where farmers’ wages are the lowest. Therefore it should not be advocated for all chocolate consumers to switch to craft chocolate bars. Rather, chocolate consumers should use craft chocolate as a scenario where the products are expensive but the makers pay their farmers much more for their cacao. Thus, craft chocolate is an example that should encourage chocolate consumers to be willing to pay more for chocolate so that chocolate farmers can receive fairer wages and a better quality of life.
Non-hyperlinked Figure Sources
Figure 1. “Equality for Women Starts with Chocolate.” Oxfam. Retrieved from: https://www.oxfam.org/sites/www.oxfam.org/files/equality-for-women-starts-with-chocolate-mb-260213.pdf May 4, 2016
Figure 2. “Annual Cacao Sourcing Transparency Report.” Taza. Sept 2015. Retrieved from: https://cdn.shopify.com/s/files/1/0974/7668/files/Taza_Transparency_Report_2015_v10_spreads__1.pdf?7651569415208703683 May 4, 2016
Ahren, Dan. “Investing in Vice.” 2004. St. Martin’s Press, New York. Print
“Annual Cacao Sourcing Transparency Report”. Taza Chocolate. September 2015. Retrieved from: https://cdn.shopify.com/s/files/1/0974/7668/files/Taza_Transparency_Report_2015_v10_spreads__1.pdf?7651569415208703683 May 4, 2016
“Brief History of Fair Trade.” Fair Trade Resource Network. Retrieved from: http://www.fairtraderesource.org/uploads/2007/09/History-of-Fair-Trade.pdf May 4, 2016
“Cocoa Barometer 2015.” 2015. Retrieved from: http://www.cocoabarometer.org/Download_files/Cocoa%20Barometer%202015%20Print%20Friendly%20Version.pdf May 4, 2016
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“Impact Research and Evaluation Studies.” Fair Trade Foundation. Retrieved from: http://www.fairtrade.org.uk/en/what-is-fairtrade/the-impact-of-our-work/impact-research-and-evaluation-studies May 4, 2016
Martin, Carla. “Chocolate, Culture, and the Politics of Food Lecture Slides 2016.” 2016. Retrieved from: https://drive.google.com/folderview?id=0B_kGt6Sj1X5bYUY0UWg0Y1h2TTA&usp=sharing May 4, 2016
— “Lecture 1: Introduction to Chocolate, Culture, and the Politics of Food.” 2016.
— “Lecture 10: Alternative Trade and Virtuous Localization/Globalization.” 2016.
Oxfam Media Briefing. “Equality for women starts with chocolate”. Oxfam. 2013. Retrieved from: https://www.oxfam.org/sites/www.oxfam.org/files/equality-for-women-starts-with-chocolate-mb-260213.pdf May 4, 2016
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Sylla, Samba Ndongo. “The Fair Trade Scandal.” Ohio University Press. 2014.
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“What is Fair Trade?” 2016. Fair Trade USA. Retrieved from: http://fairtradeusa.org/what-is-fair-trade# May 4, 2016