The position undertaken by both Ghana and neighboring Coted’Ivoire that major international chocolate makers must pay the US$400 a tonne premium known as the Living Income Differential in order for the two countries to remain in their production sustainability schemes has got a new boost from the results of a recent study carried out by Cargill.
The new major survey from Cargill has found that 70% of consumers in Europe are now factoring sustainability into their purchasing choices for product ranges including core cocoa and chocolate ranges, and are willing to pay more for them.
This means that most consumers in the biggest market for consumer products prefer paying a premium on their purchases as long as they are confirmed to be made from sustainable, ethical production processes than buying cheaper products not confirmed to be sustainable.
This works in Ghana and Cote d’Ivoire’s favour – both countries are only willing to be part of the major chocolate makers sustainability schemes if they pay the LID premium which goes directly to the farmers that produce the cocoa used in making the chocolate products.
Indeed, both countries recently pulled out of Hershey’s sustainability scheme a fortnight ago in protest against efforts by the American chocolate maker to purchase large amounts of cocoa through the ICE futures market so as to avoid paying the LID.
However, following firm assurances from Hershey that it will not try that again Cote d”Ivoire has rejoined the sustainability scheme and Ghana is expected to also do so shortly.
This has sent a clear message to major chocolate makers that any attempts to evade paying the LID will be punished by withdrawal from sustainability schemes and Cargill’s latest study suggests that this would lead to a sharp reduction in demand for their products in Europe.
The global ingredients and agricultural solutions business has surveyed more than 7,000 consumers to identify their preferences and quizzed them of their perceptions of brands and their respective approaches to issues relating to ethical and transparency within their operations. One of the key aims of the study was to help manufacturers enhance and refine their sustainability plans for the future.
As the company noted, ranges with strong sustainability credentials have taken on an increased importance, especially those businesses that are willing to invest in environmental or social initiatives that consumers can readily relate to.
The issue of engaging with consumers has become ever-more under the spotlight, and the survey in 10 European countries, found an even higher general response to chocolate products – with nearly three quarters of people reporting they prefer to buy sustainable products. This pattern was particularly the case with the 18-34 year-old age bracket, with younger consumers seen as being the most in tune with environmental issues.
“Consumer expectations are higher now than ever before,” said Niels Boetje, managing director Cocoa at Cargill. “Our research suggests that increasingly, consumers look for responsibly sourced brands, backed by concrete claims and compelling stories that connect the products they purchase with tangible progress on critical issues like child protection and deforestation elimination.”
Among 18-34 year olds, 76% acknowledged sustainability has become more important to them in the past year when choosing chocolate products, with just over half of these Gen Z and millennial shoppers reporting a corresponding uptick in sustainable product purchases.
Within chocolate, consumers’ affinity for products perceived as sustainable was even more apparent. While flavour and price remain the top two considerations for these purchases, survey respondents ranked environmental and social sustainability on par with factors like nutritional value, brand name and previous product trial.
As Cargill noted, given the breadth of issues encompassed by sustainability-linked initiatives, the research dug into consumers’ highest concerns related to chocolate products. Child labor topped the list, followed closely by farmer income and deforestation. It found that companies’ commitments in these areas had a positive impact on brand perceptions, with consumers viewing brands who would make these investments as more premium, trustworthy and of higher quality, among others.
Despite the importance of sustainability in product decisions, consumers cited limited product availability – along with challenges determining which products are sustainable – as key barriers to purchasing sustainably sourced products. Those concerns ranked above factors such as higher price and trust in sustainability claims.
Further, the majority of consumers, 68%, said they would pay more for a chocolate product made with sustainable cocoa. Consumers also indicated they were more willing to pay a premium for chocolate products with sustainability claims as compared to those made with less sugar, single origin cocoa or even organic claims.
“Sustainability is rising in importance across a broad range of consumers, providing an opportunity for brands to elevate their existing commitments and invest in initiatives that truly resonate with their customers,”
“At Cargill, we operate in the middle of the supply chain, creating a bridge between the cocoa-producing countries and our customers that produce consumer products. As a result, we are well-positioned to support food and beverage manufacturers’ sustainability commitments and collaborate on initiatives that reflect their customers’ priorities. We can help reinforce their brand values and bring their sustainability goals to life with assets that communicate in an engaging way,” said Boetje.
The results of the survey means that Ghana and Cote d’Ivoire hold all the aces in the skirmish between them and the major chocolate brand owners. Therefore, it appears that LID has come to stay.