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Global Chocolate fight begins as Hershey’s and Mars face trouble from African producers

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The deliberations and distress between America’s largest chocolate companies and the world’s largest cocoa producers are now getting worse.

Hershey’s and Mars have been accused by two of the world’s largest cocoa producers. The producers have accused them of having cancelled sustainability schemes run by the confectionery Giants and avoiding paying a bonus which intends to help give extra benefits to the incomes of poor farmers. Ghana and Ivory Coast, two West African nations, are responsible for as much as two-thirds of global cocoa production. But lately, they have been involved in long-running tensions with authorities of the Multinational companies in the United States. The major concern over the table is pricing.

On Monday, the Ghana cocoa board (Cocobod) and the coffee cocoa council (CCC) accuse two of the world’s top chocolate sellers of not making payments for the so-called living income differential or LID.

What is living income differential or LID?

The living income differential supplements the income of the poor Cocoa producing farmers By giving them a bonus of dollar 400 per tonne of cocoa Along with the market price. The main aim of this practice is to better remunerate Cocoa farmers many of whom are struck badly by poverty.

When the idea was put on the table most traders and chocolate makers extended their full support to the Living Income Differential scheme.

From where did the allegations arise?

A joint letter by the Cocobod and the CCC  read that a reported large cocoa purchase made by Hershey’s on the US futures market recently clearly indicated their intention of not paying or avoiding to pay the living differential income Because of which the producers have been left with no other alternative but to suspend all sustainability programs with which the company is involved.

 these stainability schemes certified the ethical production of the chocolate which in turn enabled the firms to sell them at higher prices.  when we say ethical production we mean that the production avoids deforestation and is free of child Labour.

Another separate statement by the CCC and Cocobod he was issued accusing Mars of avoiding paying the LID by modifying its cocoa butter procurement process.

With the onset of the current cocoa season in October, Ghana and Ivory Coast started charging heavy premiums for their beans while the novel coronavirus pandemic that locked down cities from Los Angeles to Paris forced all the companies and businesses to cut down on their costs.

In a statement issued on Monday, Yves Kone, managing director of Le Conseil du Cafe-Cacao, and Joseph Boahen Aidoo, chief executive of the Ghana Cocoa Board, said that a few chocolatiers and trade houses have adopted and implemented covert and unethical strategies to extract benefits from the farmer income improvement mechanism that may ultimately lead to a collapse of the entire system. They also stated clearly that they will do whatever is controllable and comes in their power to protect more than 3 million farmers from impoverishment.

What has happened till now?

These accusations have come as a deep hit to the reputations and goodwill of these two chocolate makers. The companies have now come under an all-time increasing pressure from concerned authorities and from the public in general as well for their role in child labour, deforestation, and poverty while they also underscore the uneasy and volatile relationship between cocoa beans (used as a raw material) producing poorer nations and American multinational companies that earn enormous profits by selling the finished product to wealthier customers.

Both the organizations denounced Mars’ and Hershey’s breach of confidence in context with the schemes designed to help millions of struggling African farmers.

Hershey’s also wrote a statement to the AFP stating that it was unfortunate that the countries had decided to distribute misleading statement and jeopardize critical programs such as the sustainability program that directly fall in the benefit of the African cocoa farmers while Mars Wrigley denied avoiding paying the LID, and said it had long supported the initiative.

Judy Ganes, president of J. Ganes Consulting, has followed the chocolate markets for over 30 years and has also previously worked for Merrill Lynch. He is of the point of view that it is really disheartening to see all parties involved becoming so fractious instead of collaborating and setting examples, especially when all them actually want the same end results of lifting farmers standard of living.

How did Mars Inc react?

The American chocolate icon Mars Inc distanced itself from the rivals. The maker of M&Ms, Twix. and Snickers wrote a letter to cocoa regulators in Ivory Coast and Ghana stating that it categorically disagrees with all the alleged statements. Michelle O’Neill, Global vice president of corporate affairs for cocoa at Mars, said that the company remains extremely concerned by these acquisitions which are in no way reflective of Mars even if they are true for other players in the industry. He also requested the cocoa regulators to he discuss this matter immediately he in a letter dated December 1.

According to the letter, Mars he was one of the first chocolate companies to extend their support to the premium regime publicly by mentioning that it had started purchases for the year 2022 21 more than a year ago.  the company also said that the purchased butter was part of regular and repeated purchases in line with the supply of cocoa beans origins it has been using from the past three years.    

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