American chocolate icon Mars Inc. sought to distance itself from rivals after the world’s top cocoa producers accused companies of trying to skirt paying a premium aimed at boosting farmers’ incomes.
In a letter to cocoa regulators in Ivory Coast and Ghana, the maker of M&Ms, Twix and Snickers said that it “categorically disagrees” with allegations that it changed its purchasing patterns to avoid paying the $400-a-ton charge, a practice that may be true for others in the industry.
The move comes after the West African nations, which account for about 70% of global supplies, accused competitor Hershey Co. of squeezing the futures market in New York to get its hands on cocoa that doesn’t incur the premium. The nations also accused Mars of changing its cocoa butter purchasing and Olam International Ltd. Of changing its recipes for the same reason.
“We remain extremely concerned by these false accusations which, while maybe true for other players in the industry, are in no way reflective of Mars,” Michelle O’Neill, global vice president of corporate affairs for cocoa at Mars, said in the Dec. 1 letter, requesting to discuss the matter with the cocoa regulators’ leadership “at your earliest convenience.”
Ivory Coast and Ghana started charging the hefty premium for their beans from the season that started in October. While most traders and chocolate makers agreed to support the so-called Living Income Differential aimed at improving farmer livelihoods, the pandemic that locked down cities from Paris to Los Angeles meant many needed to cut costs.
Mars was one of the first chocolate companies to publicly support the premium, announcing more than a year ago that it had started purchases for the 2020-21 season. The company said the recent cocoa butter it bought as part of regular, repeat purchases consistent with its supplies and cocoa-bean origins it used in the past three years, according to the letter.
“We were the first chocolate company to publicly support the LID, and are disappointed that others in the industry have recently chosen different purchasing routes,” Mars said in a separate statement. “For cocoa farmers to thrive, all chocolate manufacturers and suppliers should be following our lead by supporting the LID, investing in sustainability programs to protect children and forests, and purchasing responsible and sustainable cocoa.”
Ivory Coast and Ghana suspended Hershey’s sustainability programs in the countries and those of any third parties run on behalf of the Pennsylvania-based company. They also threatened to suspend the licenses of the companies that don’t comply with the order.
“It is sad that when all parties involved really want the same end results of lifting farmers standard of living, that it has become so fractious instead of collaborating and setting examples,” said Judy Ganes, president of J. Ganes Consulting, who has followed markets for more than 30 years and previously worked for Merrill Lynch.
Source: bloomberg.com
