Companies Fail to Pay Prices that Assure Farmers of Living Income

A new report by VOICE has pointed to harmful business behaviour as the root cause of persistent social and environmental problems within the cocoa industry and proposes radical reforms to buying practices.

This is the conclusion of a new report published today by VOICE, a network of organisations working in cocoa to end problems such as poverty, child labour, and deforestation in the chocolate industry.

Released in December 2023, the report claimed large chocolate and cocoa companies, including multinationals like Mars, Ferrero, Mondelēz, Hershey, and Nestlé, as well as traders like Barry Callebaut and Cargill, are not paying cocoa prices that guarantee cocoa farmers a living income.

Cocoa farmers still poor 

With the festive period fast approaching, chocolate and cocoa companies will see their sales and profits gain a seasonal boost, as they do every year.

But, according to a news release copied to Cocoa Post, VOICE said evidence suggests that cocoa farmers in Ivory Coast and Ghana will not benefit equally from this.

“Research by Oxfam has shown that cocoa farmers in Ghana saw their net incomes decrease by over 16% between the 2019/2020 and 2021/2022 harvesting seasons,” it cited.

VOICE added, “In that same period, the world’s four largest public chocolate corporations, Hershey, Lindt, Mondelēz, and Nestlé, have together made nearly $15 billion in profits from their confectionary divisions alone, up by an average 16 percent.”

Dr Julian Oram, Senior Director at Mighty Earth, said: “During a visit to Ghana in March, I spoke to cocoa farmers who expressed hope that cocoa prices would rise in 2023 compared to last year. But even if this happened, they believed it would likely not be enough to cover their costs of production.

This dilemma entrenches poverty, as well as the social and environmental problems that come with it, and is a clear illustration of why cocoa traders and chocolate companies must now commit to paying a price that provides farmers with a living income.”  

Current corporate approaches not effective

According to the group, current approaches by chocolate and cocoa companies to raise farmer income have had “marginal impact at best.”

This is because most programmes aimed at improving livelihoods are focused on higher yields, farmer training, and income diversification rather than reforming companies’ own purchasing practices, the report explained.

The report said a notable exception to this is Tony Chocolonely’s Open Chain approach. But other than that, no large chocolate or cocoa companies are paying higher prices at farmgate level.

The VOICE network insisted that the report “demonstrates that this needs to change.”

Changing corporate purchasing practices is key

“Companies have made numerous commitments to improve producers’ incomes, but the data keeps coming back, and everywhere, it’s the same, implacable observation. Most companies are still stuck in purchasing practices from another era. It’s time for the market to adopt fairer practices,” commented Bakary Traoré of IDEF Ivory Coast.

The group is of the view that after twenty years of limited progress on cocoa, companies need to start addressing their core business, which is the buying and selling of cocoa products.

“The core of any good purchasing practice is a farmgate living income reference price (LIRP). Next to that, transparency and long-term contracts are needed to reduce the risk to farmers,” opined VOICE

Companies need to act

The Director of VOICE Network, Antonie Fountain, said, “The core business of companies is the buying and selling of their products, not running sustainability programs.

Companies are only sustainable if their core business is. And their core business is only sustainable if their purchasing practices are. This means to pay a fair price, take a fair share of the risk, and be accountable about it.”