Fair trade – a new business model
Divine Chocolate is a fair trade business that is 45% owned by a cocoa farmer's co-operative in Ghana. It is instrumental in providing sustainable livelihoods and raising living standards among farmers in Ghana and their dependents and communities. Its aim is to move farmers up the value chain; as well as their equity ownership, the producers have two seats on the board. In recognition of its innovative company structure, Divine was awarded Millennium Product status.
The UK chocolate market is worth €4bn a year – 16kg per person – and is 86% under the control of three multinationals – Cadbury's, Mars and Nestlé. Divine has 0.3% of the market and sells under its own name as well as supplying all the chocolate for Co-operative Group and Starbucks own-brand bars. In 2007 it turned over €12m a year on which it made a profit of €0.6m. It set up a US subsidiary in 2007 which turns over $2m a year. Turnover in 2009 is quoted at $20m.
Divine was set up in 1998, by the farmers' co-operative Kuapa Kokoo (established in 1993 with 2,000 members), Twin Trading (which had previously set up the pioneering fair trade firm Café Direct) and the Body Shop. It was supported by Christian Aid and Comic Relief with the UK's Department for International Development (DFID) putting up a €0.5m loan guarantee. In 2006 the Body Shop donated its shares to Kuapa Kokoo.
Kuapa Kokoo means 'good cocoa growers' and aims to empower women (nearly 30% of members are women) and promote environmentally sound practices. It now has some 47,000 members in 1,300 village societies. It sells 32,000 tonnes annually of which 5,000 are on fair trade terms. It has four income streams: fair trade price ($1,600/T), the fair trade premium ($150/T), a 2% levy on turnover and share dividend: in 2007 Divine declared its first dividend, of €60m. The fair trade premium goes to the Kuapa Kokoo Farmer's Trust, which supports community projects, while the Kuapa Kokoo Credit Union provides loan finance.
Source: speech at Social Enterprise World Forum, Edinburgh, 3 Sep 08
In 2009 Divine bought the first container of fairtrade cocoa exported by Kpeya co-op in Sierra Leone. The extra income means that the village of Batiama now has a primary school teacher, and every villager owns a pair of shoes.
Observer/Guardian Weekly article 26 Oct 10: http://www.guardian.co.uk/environment/2010/sep/19/sierra-leone-fair-trade-chocolate
Sustainable ownership structure
- "Divine Chocolate Limited is a private company limited by shares. When the company was first established in 1998, its 99 ordinary shares were owned by three parties; 52% by the Fairtrade NGO Twin Trading, 33% by Kuapa Kokoo farmers’ co-operative, and 14% by the international retailer Body Shop International.
- "In July 2006, in the true spirit of social entrepreneurship, Body Shop made the decision to donate its shares in Divine Chocolate to Kuapa Kokoo. In the same year international development finance institute Oikocredit bought 12% of the shares, giving Kuapa Kokoo a 45% stake in the company. In addition the international NGO Christian Aid own preference shares and the leading UK charity Comic Relief enthusiastically support the company and are also partners in the Dubble Fairtrade bar created specially for young people.
- "The board of directors includes two people from Kuapa Kokoo (the Managing Director of Kuapa Kokoo Ltd, and the President of the Kuapa Kokoo FarmersnUnion), two people from Twin and one person from Oikocredit, Christian Aid and Comic Relief.
- "The governance structure is unique in both the UK Fairtrade and confectionery markets, and in 1999 was awarded “Millennium Product” award status from the Design Council for its innovative organisational model. The company has since won a number of awards acclaiming its outstanding social enterprise status."
- from company website http://www.divinechocolate.com/uk/about-us/inside-divine
Following the sale of Green and Black to Cadbury’s, there have been concerns that fair trade companies are vulnerable to take-over by conventional companies who may then exploit the consumer goodwill of the brand while diluting the principles upon which it is based. However Divine avoids this threat though its sustainable ownership structure. Even if it were sold to a major chocolate company, the 45% ownership share of Kuapa Kokoo will ensure that a large part of the benefit will return to the producers.
Interview with Sophi Tranchell
Sophi Tranchell, Managing Director of Divine Chocolate, praises chocolate giant Cadbury for converting their Dairy Milk brand to Fairtrade, but says there is more that can be done in the latest edition of ‘An Interview With…’ the monthly podcast series by The Social Investment Business.
Whilst Tranchell speaks highly of Kraft’s promise to honour Cadbury’s move to Fairtrade since its takeover in 2010, she describes Cadbury’s and Divine’s approaches to Fairtrade as different, and advocates building long term relationships which empower cocoa farmers.
Tranchell says that the majority ownership of Divine by the Kuapa Kokoo farmers has been ‘absolutely essential’ to the brand’s success in transforming the chocolate industry. She says involving the farmers at this level of the organisation has enabled them to connect with others around the world and see the impact of their work through creative use of social media, as well as enable some of them to travel the world, informing and educating others of their work. Tranchell also credits key partnerships formed with The Body Shop, The Co-op and Christian Aid, for helping Divine to break into the £3.6bn UK chocolate market which is heavily dominated by the top three brands.
How to scale up
Tranchell also provides some key advice to social enterprises on how they can scale up to a similar level as Divine when competing in large, mature markets: namely working in partnerships, a great product and a strong team. She also revealed a preference for dark chocolate over milk chocolate in the quick fire quiz.
‘An Interview With...’ is a monthly podcast series from The Social Investment Business featuring short interviews with leading figures in social enterprise and civil society.
Listen to ‘An Interview With... Jonathan Lewis' and read the full transcript here: http://www.thesocialinvestmentbusiness.org/aninterviewwith/
Source: Nic Jones, Social Enterprise Live, 9 Feb 11: http://www.socialenterpriselive.com/your-news/interview-withsophi-tranchell
Divine Chocolate Ltd
4 Gainsford Street
London SE1 2NE
Tel: + 44 20 7378 6550
Fax: + 44 20 7378 1550
Social Enterprise Ambassador homepage: http://socialenterpriseambassadors.org/content/view/154/73/
Interview in Social Enterprise magazine: http://www.socialenterprisemag.co.uk/sem/features/detail/index.asp?id=248