Most important KPI is a living income for cocoa farmers

Sourcing commodities tends to be a shrewd business of supply and demand aimed at paying the lowest possible price. However, Dutch chocolate manufacturer Tony’s Chocolonely is keen to pay cocoa farmers a higher price aimed at improving living standards and eliminating the root causes of child labour and illegal deforestation. Frans Pannekoek, Head of Operations, explains how this affects his approach to supplier management, including why direct contact with local communities in Ghana and Ivory Coast is crucial.

It is actually pretty unusual for food manufacturers to have direct contact with the farmers at the very beginning of the supply chain. That’s especially true in the cocoa supply chain, where the relationships between farmers, cooperatives, traders, raw material processors and chocolate manufacturers have become increasingly distant and anonymous over the years.

According to Frans Pannekoek (photo), this is partly why the problems have arisen: “In the very early days, traders came to Europe to sell their cocoa and there was personal contact. But at some point the futures market was introduced and, from then on, commodities were traded as a kind of investment product. Buyers no longer cared where a product came from. For a long time, people were unaware that the prices farmers were receiving for their beans were so low that they could no longer earn a living, while large multinationals at the other end of the chain were generating enormous profit margins.”

Tony’s Chocolonely set out to distribute the proceeds fairly among the supply chain partners and eliminate modern slavery in the cocoa industry. In that sense, marketing and selling tasty chocolate bars worldwide is only a means to an end. The company wants to set a good example by providing full transparency about where the ingredients of a chocolate bar have come from and ensuring that the farmers involved receive a fair price. It has defined five sourcing principles… … …

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