Hershey - How Responsible is Responsible?

Clay Gordon
02/02/12 08:26:00
1,680 posts

The "Fair" trade world is abuzz this week with an announcement by Hershey that it is expanding efforts in the area of cocoa sustainability in West Africa. Hershey is one of the last of the major international players to make such a commitment.

While skeptics are cautiously optimistic about the ultimate impact of the move, at least one, Global Exchange, points out that Hershey's choice to support Rainforest Alliance over a "real" "fair" trade certification does not bring with it "guaranteed" improvements in the quality of life for farmers:

"Fairtrade labelling standards are designed to tackle poverty and empower producers in the worlds poorest countries, giving them a guaranteed price for their products. Rather than emphasizing how products are traded, Rainforest Alliance certificationfocuses on how farms are managed."

Thus, while Hershey has announced that it will make it's Bliss product line with 100% Rainforest Alliance certified cocoa, it's unclear what this will actually mean for growers. Historically, we can suspect that it will be Hershey (and Rainforest Alliance) will benefit more than growers will.

The CocoaLink program, which is supported by the Bill and Melinda Gates Foundation, will earmark US$10 million dollars over the next five years for:

"... a first-of-its kind farmer outreach program that uses mobile voice and SMS text messages to connect cocoa farmers with important information about improving farming practices, farm safety, child labor, health, crop disease prevention, post-harvest production and crop marketing."

Additional efforts will be made to establish:

"... the Hershey Learn to Grow farm program in Ghana to provide local farmers with information on best practices in sustainable cocoa farming."

Before we go and congratulate Hershey too much, or thank Bill and Melinda G for their assistance, let's take a short moment to think about the very important topic of where the US$10 million will be spent (and ask how much of the ten million is actually Hershey money, anyway?). Not surprisingly (at least to those of us who follow such things), most of the money will not be spent on aspects of the program that directly benefit growers .

Where will the money be going then? To pay for CocoaLink's infrastructure, in part. Someone has to pay for the SMS gateway, the cost to deliver the messages (which might be paid for at least in part by growers depending on their plan), and the cost of producing the content that will go into those messages. Looking for a real-time feed of commodities exchange prices for cocoa that can be mashed up and sent by SMS to phones? It's not free. And where do the people developing the tools, content, and technology and who will be managing the program live? Mostly not in Ghana.

It's quite possible that 50% or more of the US$10 million will never the leave the US or will go to large telecom, technology service, and operations management oversight providers in West Africa and will not, in fact, benefit growers in the long run.

Furthermore, to have even a hope of succeeding, Hershey would need to make a generational (20 year, minimum) commitment to the program. 5 years is not enough, and what happens 5 years from now when the current commitment expires? Will Hershey re-up? Will it re-assess the impact of the program? If it does re-assess will it have the institutional courage to man-up and do the right thing and fix things and move forward? Or will it decide that the program failed (not their fault!) and drop it?

I would not say that I am cautiously optimistic about the success or future of this program. Call me cautiously pessimistic . I want it to work, but don't believe it has enough of the right elements to achieve meaningful results. For anyone other than Hershey.

clay - http://www.thechocolatelife.com/clay/

updated by @clay: 04/15/15 21:22:34
Jeff Stern
02/02/12 08:37:44
78 posts

Thanks for this piece, Clay. Your doubts are highly valid ones-and they closely parallel most of the issues with many aid programs, whether they support the cocoa sector or other sectors, especially the ones funded by the US government. Most USAID funds, for example, end up going to administrative costs, highly paid consultants, per diems, air fares, etc. with usually at least 50%, if not a much higher percentage, never actually being spent in the country on the people where the aid is supposedly destined for. Most of the money ends up being spent back in the US. And just like this program, many aid programs have a 5 year or 3 year time horizon, hardly enough to make any kind of lasting impact. Maintaining sustained funding is often difficult if not impossible because ofpolitical changes, changes in the Administration, changes in the political winds, etc.

Alec Landler
02/02/12 08:57:49
3 posts

Clay great catch on Hersey'sannouncement. I first heard about this on CNN and personally I am initially skeptical. CNN has been focusing on child slavery in the cocoa producing regions of Africa lately in several stories. I wonder if thisannouncementby Hershey's is a sincere call to address a serious problem or just a PR release todissipatenegative insinuation. Only time will tell I suppose. I hope it is sincere.

Clay Gordon
02/02/12 09:04:11
1,680 posts


If Hershey was sincerely serious about doing something, they'd be working in the Ivory Coast, where the documented problems are far more severe and widespread than they are in Ghana. Also, the monies involved would be in the hundreds of millions over decades.

The Gates Foundation ponied up US$750 million last month to keep a global AIDS organization from collapsing.

If the industry (and consumers) are sincere about doing something, the entire supply chain needs to be re-examined from the farm to the factory and the price the grower actually receives for his cocoa needs to accurately reflect the actual local cost of production AND the work required to make the farms self-sustaining. Thinking about self-sustaining requires a 100-year mindset, not a focus on quarterly results.

clay - http://www.thechocolatelife.com/clay/
02/02/12 15:12:00
754 posts

I think there's two salient points:

1) Hsy has a large enough momentum to affect change, and change has to begin small. There's insufficient capacity in the network to make sudden, large movements

2) Hsy doesn't really source much cocoa anymore, Barry Callebaut does it for them.

The Bliss move is simply reactionary to what Mars did with Dove (Bliss is, afterall, a 'me too' product that competes head to head). Dagoba's simply the easy one to do because it's volume is so incredibly small. it's effectively an easy gimme for Hsy. CdI is a tough place to work in now, what with all the unrest of last year and the current reorganization of the cocoa sector by the gov't at the behest of the world bank(ironic, if you know the history). Although the scale of the issue is larger there simply because the scale in general is larger, the achievable momentum is in Ghana, which is why they probably started there. That, and that's probably where BC told them they could do something. I'd give Hsy the benefit of the doubt that they're intent is good; we can argue what is the most effective way to go about it, but i think it's safe to say that they're not simply doing it for the soundbite on the nightly news. People will always argue that someone isn't moving fast enough or grandly enough. Little guys will always look at whatever the big guy does with distrust, regardless of intent or facts. At current production rates of farmers, and current global growth rates, combined with increasing quality issues and decreasing generational farmer intent to continue farming, the industry as a whole should be quite concerned about it's future, and everyone involved should be looking at ways of addressing sector rehabilitation in general. Few people get to see (fewer yet understand) the scope of the problem at hand.

Thomas Forbes
02/02/12 21:22:28
102 posts

$10 million over five years will give you a few offices and a half a dozen employees. Not much will be done.

Right now Dominican cacao farmers are getting about US $80 dollars for a 100lbs of dried, unfermented cacao beans. $95 for fermented. Last summer it was $130 and $145 respectively. In order to really reward the farmer, I would argue they should receive a minimum of $150 and $200 per 100 lbs. and quality would be greatly enhanced. USAID should stop paying the consultants and set minimum floors on pricing for the small farmer. That way the 10 to 100 acre farms can stay in business. Otherwise the production of cacao will continue to be more and more under the control of 4 major producers.

At what point in the process is the grading of the bean happen? The closer to the farm, it seems it would be better for the farmer.

Predrag Miladinovic2
02/04/12 17:10:38
10 posts

When the biggest companies tap into (or at least make it look like it) socially responsible projects, it is a good sign that there is a good share of market for it. They do not create thatawareness and market demands, on the contrary they go for the cheaper and more profitable ways, while small producers work on that front. When a critical mass of consumers is there, they jump in and make it their cause, and of course, at more affordable prices.


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