Ivory Coast and Ghana are cancelling all cocoa sustainability schemes that U.S.based Hershey runs in their countries, accusing the chocolatemaker of trying to avoid paying a cocoa premium aimed at combating farmer poverty.
In a letter addressed to Hershey and seen by Reuters, 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, known as a living income differential (LID).
The letter, which also accuses Fuji Oil Holdings’ Blommer subsidiary of aiding Hershey, was verified as authentic by spokespeople for the regulators.
Ivory Coast and Ghana, which produce two-thirds of the world’s cocoa, said they are also barring third party companies from running sustainability schemes in the West African nations on behalf of Hershey.
The schemes certify cocoa as sustainably sourced – meaning its production is free of environmental and human rights abuses,such as using child labour or being grown in a protected forest.
This allows companies to market their chocolate as ethical and charge a premium for it.
Hershey, makers of such popular candy items as Hershey chocolate bars, Hershey’s Kisses and Kit Kat, said it is fully participating in the LID and will continue to do so. It sources substantial volumes of supply from West Africa, it added.
“Our concern is that by cutting off industry sustainability programs, cocoa farmers will no longer receive the benefits provided by our programs… (like) the price premium for certified cocoa,” the company said in a statement.
Blommer had no immediate comment.
Several market sources said Hershey had recently struck a deal with the ICE exchange to take physical delivery of a large amount of cocoa, allowing it to buy less from Ivory Coast and Ghana and so avoid the premium.
The West African nations last year introduced a $400 a tonne LID on cocoa sales for the 2020/21 season, but have since struggled to sell their beans as chocolate demand has been hit by the coronavirus-induced recession.
In a separate document seen by Reuters, the world’s top cocoa producers said they had withdrawn from membership of a U.S. cocoa industry association, accusing the body of helping companies including Hershey avoid paying the LID.
The Cocoa Merchants Association of America (CMAA) is “condoning and conniving with American companies against poor West African cocoa farmers”, the document, also verified as authentic by the Ivorian and Ghanaian regulators, read.
The CMAA did not respond to Reuters requests via email and phone for comment.
Ivory Coast and Ghana also said they are reviewing their membership of the Federation of Cocoa Commerce (FCC), a UK-based international organisation that aims to promote, protect and regulate the cocoa trade.
(Reporting by Ange Aboa and Maytaal Angel; Editing by Angus MacSwan)