Changing the World: One Bar at a Time
September 1, 2007
Changing the World: One Bar at a Time
By Mary Ellen Kuhn
An emerging group of mission-driven companies is expanding the niche for products that benefit people and planet.
A decade ago, awaiting the birth of his first child, Canadian chocolate maker Karlo Flores had an epiphany.
“When my son was going to be born,” recalls Flores, a fifth-generation chocolatier, “I felt a responsibility to do something good for his world, his future. I started reading about organic, and it made sense.”
So much sense, in fact, that he decided to introduce a line of chocolate bars produced with ingredients grown organically without pesticides or herbicides. Not long after the arrival of his son, Flores launched his Terra Nostra (Latin for “our earth”) brand.
But organic chocolate was just a starting point for Flores and his campaign to make the world a better place. Today Flores’ company, Vancouver, British Columbia-based Terra Nostra Organic, helps provide agricultural training for Nicaraguan cocoa growers, produces chocolate in energy-efficient plants and buys wind power credits to offset its carbon emissions. The self-described “small but intent” chocolate maker uses only ingredients that are Fair Trade Certified, which means their producers are guaranteed a living wage.
Most recently, Flores has begun working with Santa Monica, Calif.-based distributor Essential Living Foods to establish a new approach to Fair Trade certification. Still under development, the venture will operate under the banner Equitable Trade.
“Eventually, what our Equitable Trade initiative will do will be to give a platform for others who want to do something socially responsible,” says Flores.
Terra Nostra isn’t the only chocolate company with a conscience. Companies large and small are introducing brands that wear a mantle of social and/or environmental responsibility — i.e., are Fair Trade Certified, sustainably grown or supportive of initiatives to help growers of the cocoa beans used in chocolate making. Certainly the industry could benefit from some halo polishing.
Chocolate’s image was seriously tarnished in 2001 when a series of media stories pointed to the existence of child slavery on cocoa farms in West Africa, the largest source of cocoa beans. Since then the chocolate and cocoa industries have taken steps to bring an end to such labor practices, but “ethical” and/or “green” products still make particular sense for the category. Now retailers are finding a place for them in the store, and research suggests that shoppers will be increasingly receptive to them.
U.S. consumers’ attitudes toward green issues shifted dramatically within the past year, according to the 2007 ImagePower Green Brands Survey conducted by global brand experts Landor Associates and two partner companies.
“A year ago, 58 percent of those polled in the online study said they were not interested [in green issues],” says Russ Meyer, Landor’s chief strategy officer. This year, however, virtually 100 percent of those polled reported at least some green attitudes and behaviors, says Meyer, who is based in the company’s San Francisco office.
Consumers come in “different flavors of green,” Meyer points out, noting that the way in which the concept is defined varies from one person to the next. “‘Green’ means more than one thing,” he says. It may signify “good for the environment, good for the body, good for the world at large. Each of those is part of the green message.”
For chocolate, a “good for the world” positioning often means Fair Trade Certified. Cocoa growers certified as Fair Trade producers are paid a guaranteed minimum price for their crops, work in safe conditions and receive a “social premium” that goes toward community and business development projects, explains Anthony Marek, public relations manager for TransFair USA, Oakland, Calif., an independent certifying agency.
Fair Trade Certified imports into the United States have increased at an average annual rate of 76 percent for the past five years, Marek reports.
Understanding Fair Trade
Still, the majority of U.S. consumers are not clear on the concept of Fair Trade. In 2006, just 39 percent of U.S. adults reported recognizing the Fair Trade Label, and only 13 percent claimed to fully understand it, according to research conducted by The Natural Marketing Institute, Harleysville, Pa.
The Fair Trade movement hasn’t been embraced by the mainstream, but it is picking up steam, contends Steven Hoffman, president of Compass Natural Marketing, Boulder, Colo., and a specialist in socially responsible marketing/communications campaigns.
“Fair Trade is probably where organic was 20 years ago in the consumer’s mind, and look where organic is now,” notes Hoffman.
Where organic is, for the record, is growing nicely. U.S. sales of organic chocolate totaled $70.8 million in 2006 — up 33 percent over the prior year, according to market research firm Euromonitor.
Here’s a look at three premium/gourmet chocolate companies, all built on the conviction that there’s an opportunity in the marketplace for businesses that embrace core values of social and environmental responsibility — without neglecting sound business practices.
Theo Chocolate: ‘People, planet, profit’
Joe Whinney, founder and president of Seattle-based Theo Chocolate, began importing organic cocoa beans into the United States in 1994 and dreamed for years of establishing his own chocolate-making venture. In 2004, he moved to Seattle from Cambridge, Mass., and started the process. Theo chocolate bars made with organically grown, Fair Trade Certified ingredients began rolling off the production line in March 2006, and swiftly met with a warm reception from critics, retailers and consumers.
This summer the fledgling organization clinched the product award for Outstanding Chocolate at the Fancy Food Show in New York City. Last year Theo was recognized with three medals in the International Academy of Chocolate Awards program in London.
Theo products already are sold by hundreds of specialty retailers as well as major grocery chains including Whole Foods, Wild Oats, Hannaford and Shaw’s.
Business has been going even better than expected, reports Debra Music, vice president of sales and marketing. “We expect to quadruple our sales in 2007 over 2006, and the future continues to look bright as the story of our mission and our products becomes better known,” she says.
Whinney received an in-the-fields introduction to cocoa growing 15 years ago when he worked as a volunteer for a small conservation foundation in Central America. “One of the things I saw was that both social and environmental degradation are really economic issues,” Whinney reflects. “Just putting a fence around the rain forest isn’t necessarily going to save the planet,” he continues. “It really comes down to finding business solutions that address environmental problems.”
Thus, producing a top-notch, gourmet product and maintaining a profitable bottom line have always been key components in the Theo business plan. Social and environmental responsibility are critically important, Whinney emphasizes. At the same time, he stresses, “We need to know that our business is solid.” The company’s shorthand for its triple-focus is “people, planet, profit.”
Divine Chocolate: Heavenly chocolate with a heart
The Washington, D.C.-based arm of a company founded in the United Kingdom in 1997, Divine U.S. made its debut on Valentine’s Day 2007. Divine sells an assortment of 1.5-ounce and 3-ounce chocolate bars, and it also recently introduced a chocolate-filled Advent calendar that Whole Foods will be selling this holiday season.
The company has a unique business model. It is partially owned by the Ghana-based Kuapa Kokoo cocoa farmers’ cooperative, with additional investment from several nonprofit and development organizations. All of the cocoa used in Divine Chocolate products is purchased from Kuapa Kokoo growers on Fair Trade terms, and the growers hold two seats on Divine’s board of directors.
“We have a goal of getting farmers farther up the value chain,” explains Erin Gorman, chief executive officer of Divine U.S.
The company’s relationship with Kuapa Kokoo farmers is making a difference in their lives, Gorman emphasizes. To date, the co-op members have voted to invest their social premium funds in community projects that have included building schools, supporting health clinics and digging wells for clean drinking water.
Natural foods stores in the Washington, D.C., area were among the first to take on Divine chocolate bars, but the company aspires to — and has been achieving — broader-based distribution, Gorman reports. In the United Kingdom, mainstream retailers including Tesco, Asda and Sainsbury’s stock Divine products.
Divine also targets its bars to organizers of school fundraisers and religious groups like Catholic Relief Services, which has teamed with Divine for a Fair Trade Chocolate sales effort.
Endangered Species Chocolate: Passion + purpose
While its name may suggest a more exotic base of operations, Endangered Species Chocolate is headquartered in Indianapolis, home to owners Randy Deer and Wayne Zink. The company was established in 1993 with a focus on animal preservation, but the corporate mission has since been expanded, explains Zink, who is chief operating officer.
Artwork depicting various at-risk species is featured prominently on the product labels, and information about the animals’ plight is included inside — which not only educates consumers, but helps set Endangered Species apart from other chocolate brands.
“The idea of helping the environment is actually built into the branding of the chocolate,” says Zink. “Our goal is to help people understand that habitat, humanity and species are all interconnected,” he continues, noting that Endangered Species’ core value of reverence for life is based on the ethic of humanitarian Albert Schweitzer.
The company donates 10 percent of net profits to a rotating group of three charitable causes, each selected via a rigorous screening process. Current beneficiaries include a Nigerian community of cocoa growers, an ocean conservancy project and a haven for chimpanzees in Louisiana.
Zink says Endangered Species products are all “ethically traded.” In 2006, the company elected to work directly with the growers that source its cocoa rather than participating in TransFair’s certification program, which charges a fee of 10 cents per pound of cocoa purchased.
It’s no surprise, perhaps, that many socially responsible brands have found a home in natural foods stores. But Zink says he is particularly pleased about Endangered Species’ expansion into more mainstream channels.
“Our growth as a company — which is over 200 percent in the past year — is in conventional retailers — Kroger, Albertsons, Ralphs, Bashas’ and Target,” he says. This spring, for example, Target stores featured Endangered Species bars not only in the center-store candy set, but in the much sought after retail real estate at the front end as well.
Zink says he has found that some mainstream retailers are willing to moderate their expectations for trade spending and vendor deals. “They’re making real financial allowances for our mission,” he says. “A year ago, we’d sit in these meetings [with retail buyers] and feel we couldn’t afford it.” This year, some buyers are showing more flexibility, Zink observes.
“Retailers are starting to realize that they have to participate because the consumer base is growing,” contends Theo Chocolate’s Whinney.
“I think social responsibility [in positioning food products] is an evolving movement that more and more people are becoming aware of,” says Jennifer Rudolf, public relations manager at TransFair USA. “It is in part driven by consumers. ... I think retailers are responding to that demand.”
That may be true, agrees Jay Jacobowitz, president of Retail Insights, a Brattleboro, Vt.-based consultancy to the natural products industry. But he points out that it all boils down to the appropriateness of the product for a retailer’s target audience.
“I don’t think sustainability trumps slotting fees,” says Jacobowitz. “The marketing positioning of a sustainable, premium, organic chocolate product is dead-center target for a Whole Foods positioning and thus equals low or no resistance. If you go to the other end of the spectrum, which is a price-positioned, regional, conventional supermarket serving a blue-collar market with a price point image, that probably equals maximum resistance.”
In other words, he says, socially responsible chocolate will be most at home in a natural foods chain or other upscale retail environment. In fact, Divine Chocolate’s Gorman reports that the high-end department store chain Nordstrom has approved Divine Chocolate bars for sale in its cafés.
“There are so many specialty chocolate offerings out there,” Gorman acknowledges. “They’ve chosen to go with a product that is Fair Trade ... which I think is really interesting and says a lot about them positioning themselves as a retailer that is trying to be socially responsible.”
As for a mass market retailer like Target devoting substantial space to Endangered Species SKUs, that makes sense too, Jacobowitz continues. “They want to be trend-forward, so that would lower the barrier [to entry] for a product like this.”
Stocking a socially responsible chocolate brand is a good way for a retailer to enhance its cachet, agree Jacobowitz and Landor branding expert Meyer. Meyer notes that retailers — Whole Foods, Wild Oats and Trader Joe’s — led the list of top U.S. “green brands” identified by consumers in the study cited earlier.
“Clearly grocery stores is a category that is green or should be green,” says Meyer. Thus, “having green products in their stores would have a beneficial effect on the image of a retailer,” he says.
From mission to message
Of course, building social responsibility into a product doesn’t always come cheaply, thanks to higher costs for ingredients and fees for Fair Trade Certification, for example. That’s another reason these products tend to fit best in upscale retail environments, where a shopper might be more willing to fork over $5.99 for a 3-ounce bar of Theo Chocolate, for example.
“It’s our responsibility to educate consumers so they understand why the price point is higher,” says Music. “It’s a combination of the fact that the product is high quality and we’re passing [some of the profits] back to the growers, who are growing organically and sustainably.”
“There’s definitely a large educational exercise that has to go into marketing a Fair Trade or socially responsible product,” adds Whinney, “but it’s getting easier and easier because it’s not just something that other small companies are doing.”
Major chocolate makers are moving into the socially responsible arena with a variety of initiatives as well as via the acquisition of organic brands. (See sidebar on page 80.)
Simultaneously, the increased availability of single-origin chocolate, which touts the fact that it is made from cocoa beans harvested in a specific location, helps bridge the gap between ingredient producer and chocolate bar purchaser.
“In evoking a specific country or region, single-origin chocolates really help the consumer understand that the chocolate comes from a place-based agricultural product,” says Melissa Schweisguth, marketing manager of Dagoba Organic Chocolate, Ashland, Ore. “Single-origins naturally lend themselves to sharing the story of the faces and places behind the label.”
“We’re calling out the origin,” says Whinney. “For us, that becomes a launching pad to go deeper into telling the story of the producers of the cocoa.
“The first and easiest thing to do is to start with the name of the country,” he continues. “The next layer is to start telling regional stories and specific farmer stories.”
In the end, it’s the authenticity of the message that will matter most to the purchaser of socially responsible products, contends Divine Chocolate’s Gorman.
“I think conscientious consumers want that story to be robust and to give them a picture of the world and — above all things — for it to be true,” she says.
Next Issue: An in-depth look at Fair Trade Certification of chocolate products.
Ethical Chocolate Glossary
Fair Traded Certified - Guarantees growers receive fair wages and have safe working conditions; no official government guidelines for certification
Organic - Refers to crops raised without using most conventional pesticides or fertilizers; certification administered by the U.S. Department of Agriculture
Sustainable - Describes agricultural production that preserves the environment
TransFair USA - Agency that audits and certifies transactions between U.S. companies that offer Fair Trade Certified products and their international suppliers
Sources: TransFair USA, U.S. Department of Agriculture, World Commission on Environment and Development
Major Players Embrace Social Responsibility
Ethical chocolate initiatives aren’t limited to idealistic niche players. Leading companies are pouring millions of dollars into projects to promote sustainable crop production and to improve conditions for cocoa growers.
They’re also adding organic and Fair Trade Certified brands. The Hershey Co. bought organic chocolate pioneer Dagoba in 2006, and Cadbury Schweppes Plc acquired the highly regarded Green & Black’s brand of organic chocolate the prior year.
Barry Callebaut, the world’s largest producer of cocoa and chocolate products, supports several industry initiatives, including the World Cocoa Foundation’s (WCF) Sustainable Tree Crops Program, which teaches African growers environmentally friendly farming techniques that improve crop yield and quality. The Zurich-based company also has opted to introduce its own programs.
“Our goal is to drive change in how cocoa is farmed by working on the ground in cocoa-farming communities,” says Massimo Garavaglia, Barry Callebaut’s president of food manufacturers and gourmet/specialties in North America. “We focus our energies at the start of the cocoa supply chain — on the farm,” says Garavaglia, referring to the company’s Quality Partners program in West Africa, which provides education, training and health care for farmers.
“Specifically,” Garavaglia continues, “the program trains cocoa farmers on various farming methods, enabling them to produce more and better quality cocoa beans and increase their income.”
M&M’s maker Mars Inc., already a supporter of WCF projects and other industry initiatives, announced this spring that it would invest an additional $4.5 million in development programs for cocoa growers over the next three years.
Meanwhile at the Hershey Company, the issue of corporate social responsibility is moving into the spotlight. The company created a new position, vice president of corporate social responsibility, this spring and named longtime communications executive John Long, who serves as chairman of the WCF, to fill it.
Hershey also has extended its focus on sustainability as part of a venture with Starbucks in which the two companies plan to develop new premium, coffee-flavored confections. Making the announcement this summer, Hershey addressed the social responsibility angle, pledging in a corporate press release to purchase only cocoa that is “socially responsible, economically viable and ecologically sustainable.”