Está en la página 1de 21

NEW THINKING IN INTERNATIONAL TRADE?

A CASE STUDY OF THE DAY CHOCOLATE COMPANY

Bob Doherty
Senior Lecturer Social Enterprise & Corporate Social Responsibility
School of Management,
Liverpool John Moores University

Sophi Tranchell ( Managing Director)


The Day Chocolate Company

Abstract

Set within the context of fluctuating commodity prices this paper explores an
alternative fair trade business mode called The Day Chocolate Company (Day). This
unique UK fair trade company connects smallholder cocoa farmers more directly into
global markets by making the farmers significant shareholders and therefore equity
owners of The Day Chocolate Company’s Fairtrade chocolate brands Divine and
Dubble (Tiffen 2002). This article examines how such an organisation can combine
both social and business goals in a highly competitive market and thus provide a
sustainable alternative model to conventional international trade.

The Day Chocolate Company (Day) set-up in 1998 shares with its partners a mission
to improve the livelihoods and opportunities for small-scale cocoa farmers in West
Africa. These farmers who are joint owners in DCC are members of a co-operative
called Kuapa Kokoo (Kuapa), which means “Good cocoa farmer” in local language
Twi (see figure one). The paper investigates the positive impacts that this model has
achieved on Kuapa members in Ghana from the Fairtrade relationship coupled with
the equity stake and explores how the Day Chocolate Company have achieved their
business goals in what is a highly competitive UK chocolate market. Each person on
average in the UK eats a sizeable 16kg of chocolate per year, which is the second
largest consumption per capita in Europe just behind Switzerland. This appetite for
chocolate results in a UK chocolate market valued at nearly £3.6 Billion (Mintel
2003).

The paper concludes that Day is achieving its social and business objectives. The
company has developed an excellent range of quality Divine Fairtrade products, a
wide and diverse distribution network through the UK, and consumer awareness far
in excess of that expected for new entrants to this market. Day represents the
interests of those who wish to demonstrate that it is possible and desirable to grow
an alternative model of doing international trade. Day’s success shows that
consumers are engaged and delighted by a trading vision that delivers high quality
products in the UK to the tangible benefit of the least powerful and most vulnerable
people in the trading chain. In the cocoa and chocolate business, this means low-
income, small-scale African cocoa growers. As a result Day’s sales have grown from
£103,500 in 1998/1999 to £5.5 million in 2004.
Methodology

Both authors were recruited as senior managers to the positions of Managing


Director and Head of Sales & Marketing (Sophi Tranchell MD, Bob Doherty Head of
Sales & Marketing) to the original commercial team of Day in 1999. This team
consisted of five employees none of whom possessed any specific experience in the
UK confectionery industry. To facilitate understanding of the UK chocolate market the
team right from the inception adopted a research philosophy as a way of helping
themselves to make practical decisions based on research findings. Data for this
paper is drawn from both qualitative and quantitative research carried out by the
authors over a five-year period, some of the data collection approaches are listed
below:

• A thorough analysis of the UK chocolate market its size, products,


dynamics, suppliers and consumers over a five-year period.
• Consumer trend and tracking studies carried out for Day as part of
Monitoring and Evaluation reports in 2001.
• Survey work in schools in collaboration with Comic Relief as part of Fair
Measures School Survey.
• An in-depth analysis of Day’s performance over a five-year period as
participants in company operations and strategy.
• Personal interviews with senior confectionery buyers in key UK retail
supermarkets. In addition senior personnel in charge of responsible trading
and retailer brand marketing are also interviewed over a five-year period
from a number of key retailers.
• Personal interviews with a number of key stakeholders including members
of The Day Chocolate Company team and Board of Director’s, the Fairtrade
Foundation and Twin Trading.

This paper will first explain the background to the unique governance structure of
DCC, the rise of fair trade and how Day has combined both social and business
goals.

The Day Chocolate Company and Kuapa Kokoo

The Day Chocolate Company is a private company limited by shares. Its 99 ordinary
shares are owned by three parties; 52% is owned by the Fairtrade NGO Twin
Trading (see figure one below), 33% is owned by Kuapa Kokoo farmers co-operative
and 14% is owned by the international retailer The Body Shop International. In
addition the international NGO Christian Aid also own preference shares and the
leading UK charity Comic Relief enthusiastically support the company and are also
partners in the Dubble Fairtrade chocolate bar (see figure one).

The board of directors includes two people from Kuapa (Managing Director of KK Ltd
and the Farmers Union President), two people from Twin and one person each from
The Body Shop, Christian Aid and Comic Relief (see figure one). This 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. (Duncan 1999). Key to the initial set-up and launch
of Day was a loan guarantee facility provided by DfID (Department for International
Development) to a commercial bank (Ronchi 2001). The DfID White paper on
international development (1997) identifies a more equitable trading environment is
key to reducing poverty and states new structures are necessary.

Figure 1. The DCC/KKU Value network

Figure 1. The DCC/KKU Value networ


Cocoa farmers Villag

Kuapa Kokoo Fa
Village societies el
from these 7 mem
Councils elected, and
National Executive C
Kuapa Kokoo Ltd (KKL)
This coalition of partners was no accident. Twin Trading who’s missionPROFITS
to build better
livelihoods for the poorest and most marginalized in the trading chain was already
known for setting up the Fairtrade hot beverages company Cafédirect, The Body
• 97%cocoa
Shop uses Kuapa’s of shares held
butter in more bytwenty
than KKU Day Choco
of its products as part of its
(foundersChristian
Community Trade Programme. hold Aid
rest)
had a membership of over 250,000
K
people and Comic Relief has 96% brand awareness in the UK. In addition both
• Board of Directors:
Christian Aid and Comic Relief have mission’s to alleviate poverty. The overall
(33% sha
strategic aim of Day is to improve the livelihood of smallholder cocoa producers in
-6NEC farmers
West Africa by establishing their own branded proposition in the UK chocolate market
- 1 Managing
thus putting them higher Director
up the value chain. To achieve this mission a range of clear Twin
intermediate objectives are set-out (Tiffen 1998):
-4 Senior managers (52% sha
 • Staff
To take a quality and of 26 Society
affordable range of Fairtrade chocolate into the UK
mainstream market. Bod
 Development
To pay a Fairtrade price for all the Officers
cocoa used in the chocolate sold.
 To raise awareness of fair trade issues among UK retailers and consumers of(14% sha
all age groups.
 To be highly visible and vocal in the chocolate sector and thereby act as a Com
catalyst for change.
(1
Cocoa Marketing Chris
Company (CMC) (1
Monopoly exporting
Subsidiary of the
The Day structure represents a genuine business partnership with those least
powerful and most vulnerable in the trading chain. How Kuapa became
partners in Day is now discussed.

The Kuapa Kokoo Story

During the last 45 years cocoa prices in real terms have shown both a significant
decline and have been subject to a high degree of volatility, see figure 2. In fact
between 1986 and 1996, Ghana exported nearly 80% more cocoa but received just
2% more income (Robins & Roberts 2000)

Figure 2 Cocoa Prices 1970 - 2001 (ICCO website- www.icco.org/)

Cocoa world market price 1970- 2000

3500.0

3000.0
Price per tonne

2500.0

2000.0

1500.0

1000.0

500.0

0.0
1965 1970 1975 1980 1985 1990 1995 2000 2005

Year

Cocoa prices reached a 27- year low in November 2000 of $714 per tonne but have
since recovered to average $1500 per tonne. However this does illustrate the volatile
nature of world commodity markets which make’s it difficult for farmers to plan ahead.
Ghana in West Africa produces 15% of the world’s cocoa which is grown by 265,000
small-holder farmers owning between 1-2 hectares of land (Robins & Roberts 2000).
From 1947 until 1993 the Government in Ghana operated a state run buying system
called COCOBOD, which interfaced with millions of cocoa farmers. The cocoa price
was determined by the state who bought all the cocoa in Ghana. In 1993 the
Ghanaian Government agreed to liberalise the cocoa market within the framework of
the World Bank’s Structural Adjustment Program (SAPs1). According to Tiffen (2001)
"the introduction of the structural adjustment program by the World Bank (WB) and
International Monetary Fund into Ghana was a major precondition to Kuapa Kokoo
being born” (per coms). Liberalisation whilst making farmers more vulnerable to
international market forces, also enabled them to set up their own organisations and

1
SAPs are agreements whereby countries receive new loans from the World Bank in return for cutting
public spending and liberalising trade and exchange controls. This usually involves an agreement to
break -up certain state marketing boards dealing with key export commodities.
hence was vital to the formation in 1993 of the first co-operative licensed buying
company (LBC) Kuapa Kokoo.

This initial group of 2000 small-scale cocoa farmers lead by cocoa farmer Nana
Frimpong would collect and sell its own cocoa for the member farmers' own benefit
(Tiffen 2002). The start was very challenging as Kuapa Kokoo (Kuapa) was seen as
high risk for finance. However Twin Trading (Twin) provided start-up finance plus
operational and financial advice. Also SNV a Dutch Development Organisation
offered village level development and training. The mission of this farmer- rooted
response to liberalisation (Kuapa Kokoo 2001) was to:

• increase power and representation within the market for the farmers
• promote social, economic and political empowerment
• enhance women's participation in all its affairs
• encourage environmentally sustainable production processes

Established in 1994 by the Kuapa Kokoo Farmers Union (KKFU) the Kuapa Kokoo
Farmers Trust (KKFT) was set-up to receive premiums from the sale of cocoa to the
fair trade market (see figure one). These funds are prioritised for developing a
successful business coupled with the provision of clean water, education and health
facilities for village communities. Some examples of village projects are:

• Boring of water wells


• Income generating projects for women including nut crackers, palm oil
machines, soap making, corn mill machines
• Medical programmes using student doctors to carry out health
programmes at village level using mobile clinic
• Set-up of credit union using village based infrastructure
• Farmers training and education

By 1997 Kuapa had repaid their start-up loan and today Kuapa is a successful co-
operative in its own right with 45,000 farmer members across 1000 village societies
in Ghana and is responsible for 10% of Ghana’s cocoa supply. At Kuapa’s annual
general meeting in 1997 the farmers voted to set up their own company in
partnership with Twin and The Body Shop International. The aim of this venture was
to increase profits from their cocoa, increase their knowledge of the western
chocolate market and to produce their own, branded Fairtrade chocolate bar for sale
in western markets. Mr Ohemeng Managing Director of Kuapa explains that ‘‘we
wanted to increase the value we were receiving from the supply chain, the real value
is in the finished branded chocolate product’ (Mr Ohemeng interview 2001).

After several years of preparatory work with partners, Kuapa and a product
development process of more than one year, the first product of The Day Chocolate
Company, Divine Fairtrade milk chocolate, was launched in October 1998 (Day
Chocolate Company 1998). Kuapa farmer's representative said on record after the
launch "we want people to feel good about our chocolate, not guilty about the poor
farmer in the Third World" (Guardian Newspaper 1998). Page and Slater (2003)
argue that access to markets and the understanding of these markets is key route for
small-scale producers out of poverty, the governance structure of Day appears to
facilitate these conditions. Before we examine the enormous challenge faced by Day
in the UK confectionery market the paper will briefly explain the rise of fair trade as
an alternative to conventional international trade.

The rise of fair trade

“If the world is serious about changing sustainable development … then new
thinking is required on how international trade can become a positive motor for
change stimulating sustainable trade” (Robins & Roberts 2000 p3).
“Sustainable trade takes place when the international exchange of goods and
services yields positive social, economic and environmental benefits “ (ibid p6).

Eagles (2001) reports that since the Rio Summit in 1992 large companies have
increased their control of basic commodity markets. The United Nations Committee
on Trade and Development report that between 1997-2001 the price index of all
commodities fell by nearly 50% (www.unctad.org). Despite mounting evidence of the
negative impact of these factors in developing countries, according to Oxfam (2002)
the World Summit on Sustainable Development in Johannesburg delivered no
international plan to address low commodity prices. We have discussed cocoa but
also Coffee has seen a spectacular decline in price leaving 25 million coffee farmers
living in poverty. Robusta beans (used in instant coffee) have decreased from 180
cents per Ib in the early 1990’s to 17 cents per Ib by 2000; higher quality arabica
beans have also shown a similar decline in value. The abandonment of the
International Coffee Agreement in 1989, which helped to regulate supply and
maintain stable prices, is seen as a key factor in this decline. (Fairtrade Foundation
2002). Civil society has responded to the plight of marginalized producers by the
rapid emergence of the fair trade market, both within the UK and internationally.

The UK market for Fairtrade Marked goods has grown significantly in 2003 to an
estimated retail value of over £92m, 46% up on 2002 when £63m was spent by UK
shoppers (Fairtrade Foundation 2003). Consumers can now choose from over 250
UK Fairtrade products which include a range of fresh fruit, coffee, tea, sugar, fruit
juice, honey chocolate, preserves, snacks, flowers and footballs. The Fairtrade
Foundation is the UK national body who, by an independent social auditing system,
verify the Fairtrade supply agreement and code of conduct on
products that meet internationally recognised standards of Fairtrade (Crane & Matten
2004)
. Products from companies, which meet these strict controls, are awarded the
Fairtrade Mark, which is shown in figure 3 below. The rapid growth in Fairtrade
Marked sales to approaching £100 million has also corresponded with an increase in
the awareness of the Fairtrade Mark. According to MORI (Fairtrade Foundation
2004) 39% of UK population now recognise the Fairtrade Mark (see figure three)
compared to 14% in 1999 (Fairtrade Foundation 2004).

So what does the Fairtrade Mark mean, the widely accepted definition of Fairtrade is:

“Fairtrade is a trading partnership based on dialogue, transparency and respect,


that seeks greater equity in international trade. It contributes to sustainable
development by offering better trading conditions to and securing the rights of,
disadvantaged producers & workers- especially in the South”
The Fairtrade Foundation Annual Review (2003)

The Internationally recognised Fairtrade standards that are a part of the Fairtrade
supply agreement and code of conduct include: -

• Fairtrade minimum price paid to producers must cover cost of sustainable


production & living. In the case of cocoa this is $1600 per tonne (Ronchi 2001)
• Pay a social premium on top of the minimum price that producers can
invest in community infrastructure projects which could include providing clean
water supplies, building schools, income generating projects for women,
medical programmes and credit Union finance just to name a few. The cocoa
social premium is $150 per tonne (Ronchi 2001)
• Making of partial advance payments at key periods
• Sign contracts that allow for long-term planning & sustainable production
practices
(see Crane & Matten 2004 for details)

The fair trade movement comprises a vast body of organisations, from Non-
Governmental Organisations (NGOs), producers, importers and wholesalers to co-
operative groups and retail outlets, who all share broadly common aims. There are
two main routes to market for Fairtrade products (Brown-Barratt 1993); the first is via
the so called “alternative trade organisations” represented by International Federation
of Alternative Trade (IFAT) and through labelling initiatives such as the Fairtrade
Mark.

Figure 3 The New Fairtrade Mark

The Fairtrade Foundation along with other national labeling initiatives are responsible
for both certifying Fairtrade products but also for continuing to monitor producers,
importers and retailers qualifying to use the Fairtrade Mark to ensure that the criteria
are strictly respected (Brown- Barratt 1993). One of the first Fairtrade Marked
product’s launched into the mainstream was Cafédirect Roast & Ground Coffee in
1993. Cafédirect is now the 6th largest coffee company in the UK with a £13million
annual turnover (CD Annual Report 2002) and is sold by most major retailers in the
UK. Cafédirect Roast & Ground holds a market share of between 4-5% in this sector
of the UK coffee market. The sale of these Fairtrade products in the UK now provides
a better standard of living for over one million farmers and workers throughout Latin
America, Africa and Asia. Worldwide sales of Fairtrade Marked products are now
thought to total over £500m a year with products being available to consumers in 17
different countries (Guardian 2003).
Author’s Doane (2001) and Nichols (2002) report that ethical factors are increasingly
important in influencing consumer-buying behaviour. Nichols proposes that
the exploitation of developing countries is high on the list of consumer
issues. This appears to be supported by recent consumer research carried
out by NOP for the Co-operative Group, which ranks Fairtrade in a top ten of
ethical consumer concerns (NOP Survey 2003). This growth of consumer
interest in Fairtrade is being driven by the interaction of a number of political,
cultural, academic and informational factors, which has resulted in
recognition of fair trade in some of the developed world (Nichols 2002).
Consumers are now not only concerned with in the intrinsic properties of the
product but also on supply chain and production issues. This work is further
supported by recent articles in Marketing (Gray 2003 and Clarke 2003) which
discuss the proposition that consumers take notice not only of product
content and performance, but also labour exploitation, environmental issues
and financial transparency. It’s a world where food marketers have had to
take radical action to protect their brands in the face of increasing consumer
interest in nutrition and fair trade.

Despite this growing consumer interest in fair trade the challenge for Day in the
highly competitive UK chocolate market is enormous. The Head of Co-op Brand &
Technical David Croft at the Co-operative Retail Group (CRG) explains that “ the
chocolate sector is hugely dominated by the major brands and therefore creates a
significant challenge, you would have questioned whether it was worth entering at all”
(pers comm. 2004). Ian Bretman Deputy Director at the Fairtrade Foundation
explains “chocolate is also a low priced market made possible by huge economies of
scale. The major brands are long established, at the outset of Day in 1998 it
appeared a huge challenge and it was felt that Day Chocolate could be “biting off
more than they could chew”(pers comm. 2004). Cafédirect had been successful in
coffee so why not Day Chocolate in confectionery, Ian makes the point that the UK
chocolate market is more competitive than coffee “more players exist in the coffee
market, and a wider range of both tastes and prices prevail “. To add to this David
Croft also explains that Fairtrade goods also had a reputation for poor taste.

The overall aim of improving livelihoods is indeed dependent on selling chocolate


and establishing a brand successfully in the UK chocolate market. It is therefore
essential that an overview is needed of the UK chocolate confectionery market to
illustrate the scale of the challenge.

UK CONFECTIONERY SECTOR

Market Trends
The chocolate market appears to exhibit a number of characteristics associated with
highly competitive markets (Johnson & Scholes 1999). Both Mintel (1999-2003) and
Euromonitor (1999-2003) confirm that chocolate is the largest pre-packaged food
market in the UK and is relatively static despite a proliferation of new product
variants. The retail market size in 2003 is recorded at £3,586 compared to £3.6
billion in 1999 illustrating the markets mature nature (Euromonitor 2003). Milk
chocolate with on average 20-28% cocoa content) dominates the UK market, in the
block chocolate category in which the Divine range competes over 90% of the sales
are represented by milk chocolate. However Simms (2004) reports that sales of block
chocolate containing between 70% and 80% cocoa solids rose by about 15% in 2003
and now account for nearly £20m of a £512m block chocolate segment. Barriers to
market entry are high and the cost of brand development and promotion is significant
(Mintel 2003), consequently with a few exceptions new brand launches have been
rare in the past 4 years. The highly competitive nature of this sector exhibited by its
concentration of power, is outlined in the next section.

Competitive Conditions

The chocolate confectionery sector is particularly concentrated between the three


leading manufacturers who possess long established brands. Cadbury, Nestlé and
Mars (Masterfoods) accounted for a combined value share of 77.5% in 1999; by
2002 this had increased to 80%. In the block chocolate segment Cadburys are the
most successful with a market share of 53.1% primarily due to the leading brand in
this segment Cadburys Dairy Milk (Simms 2004)). The economies of scale afforded
by the international resources of these leading firms make it increasingly difficult for
smaller national players to compete in terms of price, distribution, range of products
and marketing spend (Euromonitor 2003). For example Nestle UK spent £9million on
the launch of Kit Kat Chunky (Mintel 1998). To compound these competitive
conditions Green & Black’s were already in the UK chocolate market with the first
ever Fairtrade chocolate product Maya Gold launched in 1994 which contains 70%
cocoa solids and tropical spices creating a specialist flavour.

This concentration of power is also exhibited at retail and independent distribution


level, according to Mintel (2003) approaching 43% of all chocolate confectionery is
now sold in the UK is purchased via multiple supermarkets compared to 39% in
1998. Euromonitor (2003) attribute this rise to the leading retailers working in
conjunction with confectionery manufacturers on large national in-store discounted
price promotions of branded chocolate products. Buying decisions for entire UK
supermarket store networks are made centrally by category buyers and not at
individual store level. David Croft Head of Co-op Brand & Technical at CRG argues
that gaining any distribution in this sector is incredibly difficult “retailers are not going
to jeopardise large annual overrider payments of up to one million pounds by
stocking a new untried brand” (pers comm. 2004). The author’s explain that overrider
payments are annual financial bonus incentives paid by manufacturers when retailers
and wholesalers achieve a pre-set sales volume target. Despite a decline in
chocolate sales via independent CTN’s (Confectioners, Tobacconists and
Newsagents) from 16% in 1998 to 12% in 2002 the major manufacturers still
maintain sales representation even at this level The author’s explain that the head of
buying in one large wholesaler supplying chocolate to the independent sector
acknowledged that he had “too much too lose in annual overrider payments and
would not stock Dubble”.

This concentration of power manifest’s itself in the form of the concept called
“category captains”. Joanna Blythman (2004) explains that a supermarket retailer will
appoint a major supplier to their particular category say confectionery as a category
“captain or partner”. The “captain” is charged to manage the product category jointly
with the retailer, to decide product offering. For the category captain there are
obvious advantages such as sight of competitor marketing plans, which, is a concern
for leaders of Fairtrade companies (interviews) due to the nature of the Fairtrade
differentiation. It also provides major suppliers with even more greater resources and
strength. Retailers stock thousands of products in their stores; working with
manufactures with specialist knowledge is seen as an advantage. Day’s first listing in
October 1998 was in a major supermarket retailer, however despite a reasonable
sales performance Day received a short fax in January 1999 explaining that in a
range review supervised by a major manufacturer (category captain) that Divine
along with a number of other products including Toblerone from Kraft Jacob Suchard
had been de-listed from the product range. This initial setback highlighted the
challenge for Day and provides evidence to justify the concerns of senior managers
in fair trade companies.

In addition to these market conditions we have already established that Day pays
more for its cocoa. Day as part of its mission also pays a percentage of its turnover in
producer support and development of Kuapa farmers and also a percentage of list
price to the Fairtrade Foundation for use of the Fairtrade Mark. The article will now
examine the progress of this new small Fair Trade start-up, which launched with one
product, Divine milk chocolate in October 1998. This paper now turns to discuss
how DCC is performing towards its key objectives.

Progress Towards Business and Social Objectives

To mainstream a quality and affordable range Of Fairtrade chocolate

Excellent quality chocolate using natural ingredients (real cocoa butter and natural
vanilla and GMO Free) matching the taste profile of the UK consumer has enabled
chocolate consumers to switch to Divine Fairtrade chocolate. Findings from both
consumer trend and tracking research and consumer sensory evaluation studies
carried out between 1999 –2003 demonstrate that the Divine range of Fairtrade
chocolate meets the critical success factors of quality, taste, texture and appearance
preferred by the UK consumer. Interviews with key retailers and key stakeholders
such as the Fairtrade Foundation identify the taste profile of Divine and Dubble as
key to mainstreaming Fairtrade chocolate. Ian Bretman (Deputy Director) at the
Fairtrade Foundation argues that “ Day got the taste profile right to compete in the
mainstream, this meant that Day was able to focus resources more on its unique
Divine Fairtrade “Bean to Bar”story. In contrast Green & Black’s have spent
resources trying to persuade people towards their taste profile” (pers comms). The
position of Day is clear, the more people who switch to Fairtrade the greater the
benefit to farmers. Day now boast a Divine range that totals some 15 products
including Darkly Divine (70% cocoa content) launched in 2002 in response to growth
in the 70-80% cocoa solids product segment (see section on market trends). The
Divine range is shown in figure 4; in recent taste tests carried out by leading
chocolate experts Divine performs very well (Telegraph 2004). In addition to the
Divine range Day launched in partnership with Comic Relief the first ever Fairtrade
chocolate snack bar for young people in November 2000. Dubble was launched in
conjunction with both a major education pack on Fairtrade and the dubble.co.uk
website as the vehicle’s for concretising for children some of the complex issues
surrounding Fairtrade.

In addition to the branded products (Divine and Dubble) Day has also developed a
sizeable supermarket own-label business. In November 2002 in an historic move the
Co-operative Retail Group entered into a “truly co-operative “ venture with Day which,
resulted in the Co-op switching all its own- label chocolate business valued at £3
million retail to entirely Fairtrade sourced from Day. Sales of this new Co-op range in
comparison to the previous own label range have been nothing short of outstanding,
in 2003 sales increased by 21% despite a decline in branded sales of 1.1%. In the
first 16 weeks of 2004 this trend continued with a growth in Fairtrade own-label of
36% compared to a decline in branded products of 15% (pers comm. 2004 Brad Hill
Marketing Development manager).
In addition to the own label Co-op range, Starbucks Coffee Company now sells three
Fairtrade chocolate bars that are also sourced from Day.

• To raise awareness of Fairtrade issues among UK retailers, consumers of


all age groups, retailers, manufacturers and Governments

Day aims to excel at marketing communications, chocolate provides an easy and


popular way to understand what Fairtrade means and what it can achieve. Brad Hill
(Marketing Development Manager at the Co-operative Retail Group) agrees and
explains, “ a key strength of Day is their excellent ability to communicate their unique
story and achieve impressive media coverage ” (pers comms). Day is the first UK
fair trade Company to advertise on TV and the first through its partnership with
Comic Relief to bring an awareness of fair trade to young people. This collaboration
with Comic Relief has resulted in production of an award winning ‘Papapaa’ school
education pack used now in 15,000 UK schools and the sponsorship indents for the
first Celebrity Big Brother. Also the first TV advertising campaign for Dubble Fairtrade
chocolate was produced by bringing together Comic Relief, Nickelodeon TV, pop
star Samantha Mumba and the Funday Times (Sunday times Newspaper Children’s
supplement) to launch a competition for young people to create a TV advert which
was screened on Nickelodeon TV for a whole month in 2001. The above are just a
few media highlights resulting from Day’s innovative approach to public relations. A
selection of key media highlights from 1998-2004 are identified by Day are presented
in Appendix 1.

From consumer trend and tracking studies carried out in 2001 the impact of the
investment in marketing communications can be seen. Fully two thirds of Divine
consumers surveyed stated that Fairtrade awareness coupled with widespread
availability of Divine and Dubble had reduced their consumption of other chocolate.
In the same consumer study the results show that eleven percent of Divine
supporters had come to Fairtrade for the first time and forty percent of Dubble
consumers had never purchased a Fairtrade product before. From the Fair Measures
Survey carried out with 9,000 school children in 2003, thirty percent said they had
consumed Dubble Products. Eighty per cent of those consumers highlighted taste as
the number one reason for purchase, fifty percent identified Fairtrade as the key
factor and forty five percent identified the association with Comic Relief as the main
driver.

Retailer interviews revealed the positive impact of Day visiting buyers to present the
Divine story and discuss Kuapa Kokoo (even bringing farmers from Ghana to visit UK
retailers). Retailers are impressed with the supply chain and its traceability, but also
have acknowledged the associated “halo effect” of DCC and their own brands.

• To be highly visible and vocal in the chocolate sector and thereby act as a
catalyst for change
Divine and Dubble are now available alongside the major chocolate brands in over
5,000 UK retail outlets. In addition to some supermarket retailers, Day has taken
Fairtrade products into new mainstream distribution including Woolworth’s,
Blockbuster video stores and major petrol forecourt chains. Initial breakthroughs in
distribution during 1999 included the decision by The Body Shop to sell Divine in its
254 high street stores during Easter 1999. Then in late 1999 Day launched a
promotion with Sainsbury’s supermarkets and Christian Aid supporters which
involved a special feature in the Christian Aid Action mailing accompanied by a 20p
price reduction coupon only redeemable in Sainsbury’s. This resulted in an unusually
high coupon response rate for redemption persuading Sainsbury’s to increase the
distribution of Divine from 70 stores to 343 stores. Further leaps in distribution were
achieved at the launch of the Dubble Fairtrade chocolate snack bar in November
2000 which was the first ever Fairtrade product for young people. Day won
distribution in newsagents, vending machines and some regional convenience store
chains. Then at the launch of the Co-op own label range Day was able to add
another 3024 UK stores to its rapidly expanding list of outlets stocking Day products.

The success of the partnership with the Co-op (see above) has provided the
business case for the Co-op to continue with its Fairtrade own label programme.
David Croft Head of Co-op Brand explains

“The relationship is a real partnership with Day. We both have a shared vision
and a shared ownership perspective of key issues. Discussions are easier and
there is a greater degree of flexibility in the relationship in comparison to the
major players, which actually means the relationship between the Co-op, and
Day is stronger. For example the relationship with the major players is based
on the need to make more money. With Day it is a different level of
relationship, of course there is a need to make money but what we are doing
together is much broader than just making money. This is illustrated by a
number of actions including the funding by the Co-op of marketing initiatives to
promote Fairtrade such as TV Advertising campaigns, instore advertising and
sampling. Normal practice with major players is to expect full funding on their
part for these type of initiatives. The Co-op we estimate has spent
approaching £3m on the marketing of Fairtrade products. This figure does not
include marketing activity to our membership of 1.3 million members. We are
convinced that our funded marketing activity has assisted in mainstreaming
fair trade and as probably been a key factor in stimulating other retailers such
as Tescos to stock fair trade lines” (pers comm. 2004)

Day is also a member of the chocolate industry’s representative body, the BCCCA
(The Biscuit Cake, Chocolate and Confectionery Association) and has always looked
for opportunities to bring Fairtrade issues before fellow members. Day presented to
the BCCCA annual conference 2001.

The progress towards these business objectives as resulted in the sales performance
shown in figure 5 below. Regarding market share Divine milk chocolate records a
market share of <1% within milk chocolate blocks. However Darkly Divine 70% cocoa
content launched in 2002 has achieved an impressive market share in value terms of
between 2-3% in the 70-80% cocoa solids block segment. It is worth noting here that
this market share figure would increase if calculated in volume terms due to lower
retail price point of Darkly Divine compared to more expensive products in the same
segment.

Figure 5 The Day Chocolate Company sales performance 1999-2004


(source Day Chocolate Company accounts 1999-2004)

Sales (£million)

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0
1999 2000 2001 2002 2003 2004

It is important to now investigate the impact of this sales growth of Fairtrade


chocolate on Kuapa.

Impact of Fairtrade on Kuapa Kokoo Ghana

As Day has succeeded in growing the market for Fairtrade chocolate, it has been
able to buy increasing quantities of cocoa at Fairtrade prices. Kuapa’s Fairtrade
income and additional social premium has grown year on year accordingly giving it a
solid and stable base on which to grow and develop its business and improve living
standards of its members. The governance structure means that KK members owns
shares in a UK company, have influence over the end product in the market place
and have developed an excellent understanding of the trading chain. Kuapa’s profile
in the marketing communications of Day has in part led to the development of
Kuapa’s international reputation as a successful business. From the Monitoring &
Evaluation research with Kuapa members in both 2001 and 2003 some of the key
impacts of Fairtrade on Kuapa Kokoo objectives are summarised in table one
Table 1 Fairtrade Impact

INTERMEDIATE IMPACT
OBJECTIVE
To Provide a Forum for KK is strongly represented at the national level in Ghana
the empowerment of Ownership structure of KK and DCC creates an increased sense of control
Farmers over developmental process
30 % of Kuapa members are now women. Women representation at all
levels of the co-operative from village to national executive have increased
To provide incentives Since 1993 KK has received just over $2million in extra Fairtrade
& opportunities for premiums
financial gain Part of this premium has been paid has extra income to farmers. This is
equivalent to the annual primary schooling costs for some 250,000
children. In Kuapa Kokoo Annual Report for 2003 Fairtrade volume sales
had more than doubled.
High awareness of Credit Union benefits, 46% of farmers are now
members of Kuapa Kokoo Credit Union compared to 33% in 2001. This is
permitting farmers to engage in alternative livelihood activities
To build organisational Some 40% of projects have at least initiated projects on their own
capacity of societies Society executives are being trained in keeping consistent records &
minutes but need further training.
To provide social The majority of Kuapa’s development activities impact on non-members of
Infrastructure Kuapa as well as Kuapa members
Over 100,000 people (members & non-members) in communities with
Kuapa societies have received free medical care & prescriptions via
mobile clinics. This medical care is achieved by using medical students
who are in turn sponsored by Kuapa to complete their medical degrees.
Four new schools have been constructed and each serves children in a
4km radius
19% of all village societies now have access to clean water. Families are
experiencing benefits such as reducing incidence of water borne diseases,
water wells in villages also reduces the walking time to fetch water (4
hours per day) which often means that girls have more crucial time for
education such as attending school and time for homework.

Interviews with parents & children indicate that the school building projects
has improved pupil attendance and quality of education
Women’s IG projects have awakened entrepreneurial spirit in the women
members leading to 28 new projects in 2003 compared to 19 in 2001. New
initiatives include soap making for export and growing vegetables

It is evident from the summary above that the impact of Fairtrade and this unique
business model are far reaching and are not only focused on the price premium
component.
Conclusions

The capital, expertise and market understanding for a primary producer group in the
south marketing a consumer good in the North are overcome by Day’s unique
governance structure, this appears to support the work done by Page & Slater
(2003). The principal problems facing a new Fairtrade start-up chocolate company
are the highly competitive forces, which prevail in this sector dominated by large
corporations with pre-eminent brands built on decades of expensive advertising
spend. In particular the challenge of gaining distribution was initially resolved by the
presence of the national high street retailer The Body Shop in the ownership
structure. Both Christian Aid with their active network of consumers and Comic Relief
with their strong brand and innovative approach to marketing have assisted in raising
both consumer and retailer awareness for the Fairtrade chocolate brands Divine and
Dubble and have therefore overcome some of the problems associated with a low
marketing budget in such a market sector.

Marketing a Fairtrade product involves ensuring developmental processes and


verifying Fairtrade standards. The work done by both Twin Trading and Kuapa Kokoo
have been key to underpin the Divine “bean to bar” story so important in helping Day
to excel in marketing communications. A public relations strategy based on both the
unique story and excellent tasting chocolate has enabled Day to achieve both above
and below the line media coverage beyond expectations. Day has created marketing
networks to develop TV advertising campaigns on satellite TV and also sponsorship
of high profile TV programs (see appendix one). The unique story was also sought by
the Co-operative Retail Group to play a key role in their “Responsible Retailing”
strategy, which resulted in an historic switch of all their own label chocolate business
to Fairtrade and a major international media feature on BBC News 24. Another key to
mainstreaming Fairtrade chocolate is the taste to match the British palate, Day now
boast a Divine range of 15 products, which have attracted acclaim for their excellent
taste. It is interesting that currently Darkly Divine is outperforming Divine milk
chocolate in key retailers and is rapidly growing its share of the 70-80% cocoa solids
block chocolate segment with initial calculations showing a market share of between
2-3% in this segment. These achievements in communications and product quality
have led to a wide and diverse distribution of over 5,000 UK retail outlets.

Day is the first fair trade company to bring Fairtrade chocolate into the mainstream
UK market. It is the first to bring an awareness of Fairtrade to children and teachers
and the first to advertise on TV. After five years Day demonstrates a viable business
model achieving both its social and business objectives. Robins and Roberts (2003)
argue that sustainable trade takes place when the international exchange of goods &
services yields positive social, economic and environmental benefits. This paper
shows that The Day Chocolate Company demonstrates an excellent case for
sustainable trade and through its governance structure shows that new thinking in
international trade does work!
APPENDIX 1

The Day Chocolate Company Media Highlights 1998-2004 (source The Day
Chocolate Company Media Library)

PROMOTIONALACTIVITY MEDIA SOURCE DATE OUTREACH


Divine Launch Breakfast TV News 09- National televised coverage
BBC Lunchtime News 10/1998
BBC 6 PM News
BBC News 24-hour live
(twice)
ITN Channel 5 News
SM TV
National Print Media
45 gram Divine Bar Vegetarian Magazine 03/1999 Monthly circulation
 Cover Mounted 200 000
 Three page spread
Fair Trade Fortnight Ben Elton TV Advertisement 03/1999 Over the two weeks of
Body Shop Promotion airing, it occupied
Re-cut 03/2000 14 national and 44 other
regional slots
An estimated 5% of
population (9.5 million
people) watched the advert
at least once
The highest exposure was
to women (17%), 16-24
year olds (17%) and adults
Over 55 (20%)
Iceland (supermarket) Ben Elton TV 11/1999 43 TV adverts Channel 4
Promotion Advertisement
Divine 1st Birthday The Express Newspaper 10/1999 Average Net circulation:
Celebration Extensive coverage
 Key Note Speaker: 963 433
Clare Short
Minister
Overseas Development
Kuapa Kokoo and Fair Trade BBC Newsround 11/1999
chocolate Approximately
(In association with Christian 1 million viewers
Aid)

Second piece: launch of 10/2000


Dubble, Fair Trade and
Kuapa
Product Sample Good Food Magazine 03/2000 45 000 issues sold
Cover mounted Divine specifically to Sainsburys
DCC short listed for 07/2001 Average Net circulations:
Business in the Community Independent on Sunday 231 46211
innovation award Financial Times 467 564

Dubble Launch Smash Hits 10/2000 Circulation:


Cover mounted
8 week double page spread 250 000

Dubble Launch Match 10/2000 Circulation:


Cover mounted
8 week double page spread 100 000
Double page spread The Sun 10/2000 Average national
Dubble circulation:
3 601 410
Cover Mounted The Big Issue Scotland 11/2000 Circulation:
45 000
Body Shop Promotion 03/2001 Circulation
Divine Chocolate The Mirror M Mag 2 million +
Woman 600 000 +
Bliss 300 000+
Sugar 400 000+
Girl About Town 85 000 +

Dubble Indents Celebrity Big Brother 03/2001 1 program/night


Product sponsor for Celebrity 7 nights
Big Brother Channel 4
10 million + viewers
Chocolate Competition Daily Mirror 07/2001 Average Net circulation:
2 225 015
Competition entries
received:
4 000
TV Advert Competition TV ad campaign on 05- 64 ad features on
Nickelodeon TV 06/2002 Nickleodean TV
Double page feature in Funday Times Circulation
Feature in Funday Times
Co-op Story BBC News 24 11/2002 International coverage
Fair Trade Fortnight Kuapa GMTV- Loraine Kelly 03/2003 National coverage
Kokoo Uk farmers visit
Kuapa Kokoo Tenth Observer Food Monthly- 7 11/2003 Circulation
Anniversary Feature page feature
Kitty’s (school pupil) Daily BBC Newsround TV & 9/2003 National Coverage
Diary of visit to Kuapa Tenth Website September 2003
anniversary Tour in Ghana
Divine taste test Daily Telegraph 03/2004 Circulation 1 million plus
REFERENCES
Blythman, J. (2004) Shopped, Fourth Estate, London

Brown Barratt, M (1993) Fair Trade: Reform and Realities in the International Trading
System Zed Books, London & New Jersey

Cafédirect (2002) Cafédirect Annual Report 2002 London

Clarke, B (2003) “Brands are now judged on what they do, not say” Marketing UK

Co-operative Group (2002) Co-op Chocolate Report: A campaign for Fairtrade


chocolate and an end to exploitation, Co-operative Group Published November 2002

Crane. A & Matten. D (2004)


Business Ethics, Oxford University Press

Day Chocolate Company (1998) Report on the Launch of Divine October 1998: Sales
& Marketing Report

DfID (1997) Eliminating Poverty White Paper London

Doane, D (2001) The Ethical Purchasing Index- taking flight: the rapid growth of
ethical consumerism New Economics Foundation 2001

Duncan, S (May 1999) Millennium Products- a CBI News/Design Council Report


“Thinking Outside the box”, CBI Newsletter, London

Eagles, C (2001) “Analysis: with coffee producers unable to solve coffee Crisis has
the time come for renewed producer-consumer market co-ordination?” available at
www.reports@commodityexpert.com

Fairtrade Foundation (2002) SPILLING THE BEANS on the coffee trade, London

Fairtrade Foundation (2003) Fairtrade Foundation Annual Review

Fairtrade Foundation (2002) Fairtrade Foundation Newsletter Spring 2003 London

Fairtrade Foundation (2004) Fairtrade Foundation Licensees Report

Gray, R (2003) “Badge of Belief” Marketing Magazine 23rd October 2003 p.23-24

Guardian Newspaper (1998) ‘ Divine launch’ November 6th 1998.

Vidal, J (2003) ‘Retail Therapy” The Guardian Society 26 February 2003

Hooley, G, Saunders, J & Piercy, N (1998) Marketing Strategy & Competitive


Positioning 2nd edition Prentice Hall Europe London

International Cocoa Organisation (2001) ICCO http://www.icco.org/ website


Johnson, G & Scholes K (1999) Exploring Corporate Strategy Prentice Hall, Europe
Kuapa Kokoo (2001) Kuapa Kokoo Farmers Trust and Fairtrade 2001 Leaflet

Kuapa Kokoo (2001b) Report on Kuapa Kokoo Farmers Trust Kumasi Ghana

Kuapa Kokoo (2003) Kuapa Kokoo Annual Report 2003 10th Anniversary

Mintel International Group Limited (2003) “UK Chocolate Confectionery Report”


10/2001 accessed through Mintel Database

Mintel International Group Limited (2001) “UK Chocolate Confectionery Report”


10/2001 accessed through Mintel Database

Mintel International Group Limited (1998) “UK Chocolate Confectionery Report”


10/1998 accessed through Mintel Database

Nichols, A.J. (2002) “Strategic options in fair trade retailing”, International Journal of
Retail & Distribution Management, 30, 1, 6-17.

NOP (2003) Co-operative Group Responsible Retailing Consumer Survey

Observer (2004) “Fair trade: coming to a shelf near you” N. Mathiason 29th Feb 2004

Oxfam (2002) Make Trade Fair document: Rigged Rules and Double Standards
Oxfam International 2002

Page S & Slater Rachel (2003) “Small Producer Participation in Global Food
Systems: Policy Opportunities and Constraints”, Development Policy Review, 21 (5-
6) p641-654

Robins, N & Roberts, S (2000) The reality of sustainable trade, IIED London

Ronchi, L (2001) Fair Trade Chocolate Impact Monitoring and Evaluation University
of Sussex Brighton UK

Ronchi, L (2003) Fair Trade Impact Monitoring & Evaluation Progress Report
University of Sussex Brighton UK

Simms, J (2004) Sector Insight Block Chocolate “Breaking the impasse” Marketing,
9th June 2004.

Telegraph (2004) “Taste Test Chocolate feature” March 2004

Tiffen, P (1998) The Day Chocolate Company Ltd: A Fair Trade Investment
Opportunity October 1998 p383-397

Tiffen, P (2002) “ A chocolate-coated case for alternative international business


models” Development in Practice, Volume 12, Numbers 3 & 4, August 2002
UNCTAD official web site of United Nations Committee on Trade and Development
available at www.unctad.org accessed February 2004