The American food company Kraft Foods announced in June that it is launching a fair-trade Dairy Milk chocolate bar on the South African market, bearing the Fairtrade mark. The product has been available since 2009 in the UK and Ireland, spreading to Australia, New Zealand and Canada. This is the fair-trade product’s first appearance on the African continent, where around 1.4 million bars of Cadbury’s Dairy Milk are sold each year.
With this certification by Fairtrade International, cocoa producers are guaranteed a minimum price of US$2,000 per tonne of cocoa beans, or the world market price if higher. The producers also receive a premium of US$200/t which they are required to invest in social, environmental or economic projects benefiting their communities. FLO-CERT, the certification organisation, which is independent of Fairtrade International, monitors and checks the supply chain against Fairtrade’s standards at the international level.
The Kraft Foods chocolate bar also boasts a completely Africa-based supply chain: the cocoa beans are bought in Ghana and the chocolate bars made in the Kraft Foods factory at Port Elizabeth. Ghana’s sales of fairly traded cocoa beans have risen fourfold, up from 5,000 to 20,000 tonnes, and farmers supplying the certified beans have already received £2.7 million in premiums ‘to be spent on farming equipment and mobile health clinics’.
The product will be distributed on the African market and is not for export. Boudewijn Goossens of Fairtrade Label South Africa commented: “Congratulations to Kraft Foods South Africa for taking the lead in being the first big company in South Africa, and the first in an emerging market, to recognise that there is an appetite for fair-trade products among the local consumers. With Cadbury’s Dairy Milk available in all the big supermarkets, grocery stores and service stations across the country, fair-trade products will become available to all South Africans. This is very important, as we all need to be able to contribute to a more sustainable world.’
Sales of fair-trade products in South Africa reached 18.4 million rand in 2010, up from 5.7 million rand.
On the cocoa market, sales of fairly trade cocoa beans are in fact very low, and it remains a niche market. According to the International Cocoa Organization (ICCO), they represent only 0.1% of the market. However the demand for fairly-traded cocoa is growing and, according to Alex Assanvo, global product manager for the Fairtrade Labelling Organisation, could reach 200,000 tonnes a year by 2020, compared to around 35,000 at present.
This demand comes about through consumer pressure for products produced according to environmental, social and economic factors. Consumers, particularly in developed countries, have become more aware of the impact of their consumption on the environment, but also on the farmers that produce basic commodities. Nevertheless, the industry still needs to carry out substantial change.
The fact that the two biggest manufacturers of chocolate, Kraft Foods and Mars (with net sales in 2010 of US$16.83 million and US$15 million respectively, according to ICCO) – but also Archer Daniels Midland, Nestlé, Barry Callebaut and even Cargill – are positioning themselves on the fair-trade market is a sign of planned future development.
Kraft Foods’ initiative also illustrates how multinationals are aiming to diversify their outlets from the European and American markets, which have almost reached saturation and are becoming harder to penetrate. This also shows a certain maturity in the emerging country markets and the increasing interest of the multinationals in South–South trade.
For ACP countries, the direct impact of these initiatives is that cocoa producers are assured of a stable remuneration (with a minimum price guaranteed), with a premium enabling them to invest in their community and their own farming. And the Kraft Foods Cadbury’s Dairy Milk chocolate bar is a response to the aim of African countries to take stronger control of the processing chain and create greater value-added locally, and to prioritise local and regional markets before exporting beyond the continent. This aim was reaffirmed in the lead-up to the meeting of G20 agriculture ministers that took place in Paris on 22 and 23 June 2011.