At stake is a 2019 arrangement called the living income differential, or LID, under which multinationals pay a premium of $400 above market price for each tonne of cacao, the raw material for chocolate.
In a letter addressed to Hershey and seen by several media outlets, the Ivorian and Ghanaian cocoa regulators accuse Hershey of sourcing unusually large volumes of physical cocoa on the ICE futures exchange in order to avoid the premium.
The letter, which also accuses Fuji Oil Holdings’ Blommer subsidiary of aiding Hershey, was verified as authentic by spokespeople for the regulators.
The two West African nations, which account for close to 70% of the world’s cocoa output, say the actions of Hershey and Mars clearly indicate intentions to avoid paying the living income differential.
These arrangements certify that the chocolate is ethically produced, which lets the firms to embellish their image with consumers. Production must avoid deforestation and be free of child labor.
Hershey’s said it was “unfortunate” that the countries had decided to “distribute a misleading statement… and jeopardize such critical programs that directly benefit cocoa farmers”.
Mars also denied the charges and has tried to distance itself from its rivals.
“We remain extremely concerned by these false accusations which, while may be true for other players in the industry, are in no way reflective of Mars,” Michelle O’Neill, global vice president of corporate affairs for cocoa at Mars, said in a Dec. 1 letter, requesting to discuss the matter with the cocoa regulators’ leadership “at your earliest convenience.”
Mars was one of the first chocolate companies to publicly support the premium, announcing more than a year ago that it had started purchases for the 2020-21 season. The company said the recent cocoa butter it bought was part of regular, repeat purchases consistent with its supplies and cocoa-bean origins it used in the past three years, according to the letter.
“We were the first chocolate company to publicly support the LID, and are disappointed that others in the industry have recently chosen different purchasing routes,” Mars said in a separate statement. “For cocoa farmers to thrive, all chocolate manufacturers and suppliers should be following our lead by supporting the LID, investing in sustainability programs to protect children and forests and purchasing responsible and sustainable cocoa.”
Analysts said the joint public attack from Ghana and Cote D’Ivoire was remarkable.
Until now, the CCC and Cocobod have been virtually invisible to the general public, and their allegations about trades have shed light on a cocoa market that is notoriously opaque.
To add to the pressure, cocoa farmers are going to stage simultaneous protest marches in both African countries on Thursday.
“The strategy… is based on public relations, and that’s new,” a cocoa trader said.
“They are going to make a noise, the press is going to get involved, and the balance of power may swing in their favor because ethical questions have become important for western consumers” of chocolate.
The world’s chocolate market is estimated to be worth more than $100 billion, concentrated in a small number of multinational corporations.