In preparation for the Fair Trade Futures conference in September, CRS Fair Trade is putting on our thinking caps and wrestling with some challenges facing the Fair Trade movement. For the next few months, we’ll post our thoughts on these challenges and we welcome yours.

If you haven’t noticed yet, we’re focusing on chocolate this month. Whether you gave chocolate as a Valentine’s gift or you gave it up for Lent, chocolate is on a lot of people’s minds this February. When we talk about chocolate, we usually are talking about our chocolate partners, SERRV, who sells Divine Chocolate, and Equal Exchange. Both of these companies are fully-committed to Fair Trade. From our relationship with them we know which cooperatives they source their cocoa from and the relationship they have with their farmer partners and their customers in the U.S.  We’re confident about their operations and we’re confident promoting them.

When you get beyond the CRS Fair Trade world, however, things aren’t always so clear. The overall demand for Fair Trade chocolate is on the rise and that is a good thing.  However, the price of cocoa has rallied and is well-over the Fair Trade guaranteed minimum. For instance, the Fair Trade minimum price for cocoa is $1600/ton + $100 social premium. The current cocoa price has consistently been over $3000/ton. Fair Trade growers are receiving the market price + the $100/ton social premium, so it’s a good time for them.

Photo credit: David Snyder for CRS.

For chocolate makers, companies and consumers, it’s another story. The increasing price of cocoa and cocoa related products like cocoa butter has meant the profit margin for chocolate has dropped across the board. Chocolate companies have had to look for cheaper substitutes for their ingredients, increase chocolate prices and in some cases, decreased the size of their bars. For Fair Trade chocolate companies, many of their ingredients are also Fair Trade and cannot be substituted, nor do they have large profit margins from other products, like Kraft or Nestle may, to help control costs. This means Fair Trade chocolate prices will rise at the same time many Americans are cutting out luxury spending.

With no end of the cocoa rally in sight, it also means there’s little price difference between Fair Trade certified and non-Fair Trade cocoa. While there’s certainly an ethical motivation for mainstream companies to switch to Fair Trade, with the recent price parallels, we have seen a few taking advantage of this opportunity. For instance, last year Cadbury’s in the UK declared they would use Fair Trade cocoa  in their big seller, the Dairy Milk bar, in 5 of their markets. This February, Kraft acquired control of Cadbury’s and has indicated they will keep Cadbury’s Fair Trade commitment for the Dairy Milk bar.  Late last year, Nestle’s also declared their Kit Kat bar in the UK would convert to Fair Trade chocolate.  While much of this is happening in the UK, we shouldn’t be surprised when it trickles over to the U.S.

Photo credit: David Snyder for CRS.

So what will happen when it does? As the Fair Trade chocolate market grows, without a doubt, more cocoa growers will benefit from a Fair Trade price and the social premium. While this is a very good thing, there is some skepticism as to whether or not corporations will offer the same transparency regarding their relationships with cooperatives as Equal Exchange, SERRV and Divine Chocolate do. While CRS Fair Trade would be happy to see more farmers benefiting from Fair Trade terms, we will not partner with a chocolate company that doesn’t purchase all of its cocoa under Fair Trade terms.  We have to ask: What terms is the rest of the cocoa purchased under?

These things are important to us because we want to support “the gold standard” of business, businesses we feel model the principles of Catholic social teaching.  We wonder how will our fully-committed partners fare when they are faced with a Fair Trade Kit Kat bar? Do the differences in models and impacts on companies make a difference to you?  What should the role of CRS Fair Trade be in the Fair Trade chocolate future?

Let us know what your perspectives are.