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UNDERSTANDING THE DEEPER IMPACT OF NESTLÉ’S DECISION

UNDERSTANDING THE DEEPER IMPACT OF NESTLÉ’S DECISION
24 June 2020

I am sure that many of us echoed Michael Gidney’s thoughts on Nestlé’s announcement that as of October, KitKat bars in the UK and Ireland will no longer be certified Fairtrade.  The Chief Executive of the Fairtrade Foundation referred to their decision as “profoundly disappointing” and that cocoa farmers in Ivory Coast were “devastated” by the news.

As the Managing Director of an organisation that works closely with smallholder farmers to provide much needed finance, I know that this move will have a huge impact on people, co-operatives, and communities.

Two thirds of chocolate consumed worldwide includes beans from West Africa, and Côte d’Ivoire will be hardest hit.  According to Fairtrade Foundation, 27,000 farmers will be affected in this region, Fiji, and Malawi collectively.  These are all areas where cocoa production is a genuine lifeline, and for many, sadly there is no other source of income.

We already know that a typical farmer, working outside fair trade, lives on around 75p per day. That is below the World Bank’s extreme poverty line of about £1.40.  When we consider that cocoa producers currently only receive about 6% of the value of the global chocolate industry, it is hard to imagine how they will cope with this latest blow.

It is not just farmers’ daily income that will be affected in the autumn, when the Nestlé departure coincides with the main cocoa harvest in West Africa.  The move will also mean a loss of almost £2 million in Fairtrade Premium each year for co-operatives, and communities as this guaranteed fund, currently worth $240 per tonne of cocoa, will disappear along with the promise of a Minimum Price that protects farmers if world markets collapse.

Last year, we ran a feature in our investor newsletter, on cocoa pricing and the importance of living income.  You can read the story in full here.  In it, we included the story of Asunafo, a fast-growing Ghanaian co-operative with a membership of 6,500 farmers, over half of which are women. As one of the biggest cocoa bean suppliers to Mondelez, their Fairtrade contract was replaced with Cocoa Life. Up until this point, they were able to undertake community projects using the Fairtrade Premium.  Under the Cocoa Life certification, they reported a reduction of 80 US Dollars per tonne, which has led Asunafo to seek further financial support.

Fairtrade has the highest fixed Premium of any independent certification scheme in cocoa, which goes directly to the producers' co-operatives on top of market price.  In an open letter to Nestlé, Atse Ossey Francis, Chairman of the Board of Directors of the Ivorian Fair Trade Network, said: “We ask Nestlé to continue the incredible work that has been done over the past 10 years so as not to cut the lifeline of the Fairtrade Premium at a time when we producers need it most!'”

Aside from the challenges faced environmentally and economically, farmers are also facing the health and infrastructure challenges caused by Covid-19.  In response to this, our charity has relaunched its Livelihood Security fund and you can find out more about it here.  News from our regional team in West Africa is that co-operatives in both Ghana and Côte d'Ivoire have been making serious efforts to reduce the impact on the cocoa sector, which they describe as their economic lifeline.

Many are already using their Fairtrade Premium to introduce wellbeing initiatives, which are proving vital.  Asunafo had opened a dispensary for the health needs of workers, and facilities for those who had diversified into soap making. Fortunately, they had trained 25 farmers in liquid and solid soap making before the pandemic began, using the leftover cocoa elements and shea butter.  Previously sold at the local market the liquid soap is now donated to the community, again using funds from their Fairtrade Premium.  

As Atse says in his open letter: “The decision to stop buying cocoa and sugar on Fairtrade terms means fewer schools, water pumps, health centres and the end of many other essential services. We call on Nestlé to maintain its commitment to us Fairtrade producers by considering the devastating effects of the current COVID 19 crisis.  On behalf of cocoa farmers in Côte d'Ivoire, we ask Nestlé to keep KitKat Fairtrade.”

You can read more about the official response to Nestlé by following the links in our News article.  Please also look out for updates on the situation here on our website and social media channels.

BUILDING STRONGER COMMUNITIES DURING AND BEYOND COVID-19

Our charitable arm, Shared Interest Foundation has re-launched its Livelihood Security Fund to help producers meet basic needs and support income levels during and beyond the Covid-19 crisis.

You can read more about the campaign here.

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By Shared Interest Managing Director, Patricia Alexander

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