It has been a bitter holiday season for the maker of foil-wrapped Hershey's Kisses. For nearly a month, a battle has been raging between the Hershey chocolate company and the West African farmers who harvest many of its cocoa beans. And it appears that the long-disenfranchised farmers may have scored a rare win.
The dispute began in November, when cocoa industry traders noticed that an unnamed source had purchased so many cocoa beans in the futures market that prices rose by more than 30 percent.
The close-knit cocoa industry quickly suspected that the buyer was Hershey. But the Coffee and Cocoa Council and the Ghana Cocoa Board were more direct with their accusations when they wrote a letter Nov. 30 to Hershey titled "Abuse of the derivatives market to impoverish the West African farmer." The groups wrote that they "have observed with great concern the actions taken by your company on the New York terminal" and accused Hershey of using "the exchange to take delivery of physical cocoa."
"This is a clear squeeze on the ICE US Exchange and a clear indication of your intent to avoid the payment of the Living Income Differential — LID," they said. The newly introduced LID requires chocolate companies to pay an extra $400 per ton of cocoa beans to address the grave poverty farmers face in West Africa, according to the letter.
The two groups, which are the source of roughly 70 percent of the world's supply of cocoa beans, pushed back against Hershey for having made what they said was an improper purchase. Ivorian and Ghanaian cocoa regulators accused it in the letter of being "highly unethical and in conflict with the concept of sustainability," referring to the company's sustainability programs, which address problems in the industry like child labor abuses.
The letter said the LID aims "to improve the incomes of three million of West African cocoa farmers," and as punishment, the groups threatened to bar Hershey from running any of the sustainability programs on which the company prides itself in their countries.
"Manipulation of the Futures market at the expense of Farmers' incomes should be denounced in the strongest terms," the cocoa regulators wrote.
By accusing Hershey of buying cocoa beans on an exchange, West African cocoa regulators suggested in their letter that Hershey would not be able to fulfill one of its major recent promises: It could no longer reassure chocolate lovers that the beans it bought on the exchange were not harvested by children, a problem the company had been earnestly addressing.
Asked for comment Dec. 1, Hershey spokesperson Jeff Beckman called the letter "misleading" and said it "jeopardizes" the sustainability programs Hershey is working on in Ivory Coast to combat child labor and agricultural exploitation. Beckman said Hershey recently bought "substantial" cocoa from farmers there and paid the LID.
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Asked about allegations that Hershey had bought beans on the futures exchange, Beckman would not confirm or deny where Hershey's recent cocoa purchases came from or whether they had come from the exchange.
"We don't discuss our cocoa buying strategy. We've never said that we bought a large delivery off the exchange," Beckman said. "That said, we have also bought cocoa from other origins around the world as part of our particular bean blend to achieve our unique Hershey's chocolate flavor profile. And we will continue to do so. This longtime practice of sourcing cocoa from around the world should not be conflated with avoiding paying the LID."
Beckman cautioned that if West Africa cuts ties with Hershey, the company would not be able to help farmers there in the future. He highlighted the company's programs to help with "child labor monitoring and remediation, farmer training, environmental protection" and other issues.
"By cutting off industry sustainability programs, cocoa farmers will be negatively impacted, as they will no longer receive the benefits provided by our on-the-ground programs," he said.
"I'd rather be supporting those programs, keeping them going, applauding them for the good work that they're doing and encouraging more of them than trying to take away the possibility of doing that work," Leissle said.
By Dec. 4, Hershey's had reached an agreement with Ivory Coast that it would buy beans from West Africa and pay the LID, according to a letter between Hershey and the Coffee Cocoa Council. Hershey confirmed that the letter, which was obtained by NBC News, was authentic.
By purchasing the beans from West Africa and agreeing to pay the LID, Hershey has less need to buy beans indirectly on an exchange at cheaper prices. After Hershey executives held a videoconference Dec. 4 affirming the agreement with the board representing farmers in Ivory Coast, the council agreed to end its threat to suspend Hershey's participation in the sustainability programs in Ivory Coast.
"This lifting of suspension follows your definitive commitment to pay the DRD [LID]," Coffee and Cocoa Council CEO Yves Koné wrote to the Hershey group. Hershey confirmed Monday that it will pay farmers the $400 LID in the future. It did not comment about the beans that the cocoa regulators accused it of buying on the exchange.
If Hershey did buy beans on the exchange to make chocolate bars and cocoa, it is unclear where those beans actually came from. Ghana also has not agreed to lift its ban on sustainability programs with Hershey. Beckman said Hershey executives planned to meet with the Ghana Cocoa Board to flesh out more details.
The battle sheds light on a decades long problem in an industry riddled with child labor violations. A widely acclaimed documentary the BBC aired in 2000 first revealed just how prevalent the use of child labor had become. Nearly two decades later, a 2018 report about the cocoa industry in Ghana and Ivory Coast, published by the U.S. Labor Department, found that nearly 45 percent of children living in agricultural households worked in cocoa fields, a total of at least 1.6 million children.
The following year, the Harkin-Engel Protocol, often referred to as the Cocoa Protocol, was created to ensure that production of cocoa beans and chocolate followed international labor standards. The protocol laid out timelines for chocolate companies to follow the standards. Eight chocolate companies, including Hershey, signed it and agreed to follow the timelines.
But because the International Labor Organization said the companies were not meeting the deadline, it extended it until the end of this year. For chocolate to be legally sold under the U.S. fair trade system, the production of cocoa must be free of environmental and human rights abuses, specifically child labor.
Hershey Co. has shown some commitment to addressing child labor abuses. In 2018 and 2019, it had its suppliers adopt its child labor monitoring and remediation system. By tracking 69,988 children in Ghana and Ivory Coast, it discovered 4,616 children doing what it deemed "inappropriate" work and tried to address the problems, according to its website.
Hershey is not the only chocolate company trying to address child labor problems. In 2005, human rights lawyer Terrence Collingsworth sued Nestlé USA Inc. and Cargill Inc., representing six children who were trafficked from Burkina Faso and enslaved to work in the cocoa fields of Ghana and Ivory Coast. He was trying to hold the companies accountable for the exploitation of children on cocoa plantations. The case reached the Supreme Court on Dec. 1, and during oral arguments, some justices expressed doubt that the companies should be held accountable.
Collingsworth said that conditions for children in Ghana and Ivory Coast continue to be dire and that they have changed little since he took his first trip for the case in 2001. He said that in his most recent trip to Ivory Coast in 2019, he saw children as young as 8 work long hours and carry machetes to harvest cocoa. Collingsworth said that when he came across enslaved children, they scattered and hid, as they were instructed by their boss to avoid outsiders like Americans.
Child labor is too deeply ingrained in the culture because of farmers' dire financial circumstances, Collingsworth said.
"These farmers are so poor that they are now reliant on child labor that is free, and Cargill and Nestlé and the others are likewise dependent on a system they created that has the cheapest possible labor," he said.
Nestlé called child labor "unacceptable" and promised to source all of its cocoa through its Child Labor Monitoring and Remediation System program, which involves identifying children at risk, gathering data about children working in fields and providing educations to children who cultivate cocoa beans.
"Regardless of the outcome of this lawsuit, we remain committed to combatting child labor within the cocoa supply chain and addressing its root causes as part of the Nestlé Cocoa Plan and through international efforts," a Nestlé spokesperson sad.
Cargill, which makes the Ambrosia, Merckens and Peter's chocolate brands, among others, said in a statement that "any instance of a child performing work that is dangerous or that might harm their health or education is one too many." It has also adopted a monitoring and remediation system, which it said has already "reached 58,000 farmers in the Ivory Coast, Ghana and Cameroon." Cargill said it "recently invested $12.3 million toward cocoa sustainability and traceability programs that will create more jobs while enhancing the safety and well-being of farming families."
Hershey's latest actions have especially troubled cocoa industry experts who considered the LID a start to resolving some problems. Leissle said improving wages would be a start, because farmers now get only 3 percent of total chocolate sales.
"It's about an old industry. There's a lot that's entrenched about it, including child labor, including poverty," Leissle said. "The LID was put into place to correct a long-term injustice."
Cocoa industry experts also say that under current conditions, farmers have little choice but to employ children. According to a UNICEF report titled "Children's Rights in the Cocoa-Growing Communities of Côte d'Ivoire," the average income of a cocoa farmer in West Africa is 50 cents to $1.25 a day, among the lowest in all producing regions. "Côte d'Ivoire" is Ivory Coast's name in French.
The increased payments inevitably help the children. Amourlaye Touré, a founding member of the Ivorian Human Rights Movement, a leading rights-based organization in Ivory Coast, said the LID infuses money into a labor system in which children often work with harmful pesticides, miss school and starve.
"What's not acceptable is the extreme poverty in which these small farmers are," Touré said, "and the huge benefit international companies are making on cocoa."
CORRECTION (Dec. 13, 2020, 7:32p.m. ET): An earlier version of this article misspelled the last name of Hershey’s spokesman. He is Jeff Beckman, not Beckham.
CLARIFICATION (Dec. 13, 2020, 7:32 p.m. ET): An earlier version of this article included a statement from a Hershey spokesman saying the company purchased some cocoa from West Africa. The spokesman said Hershey purchases a “substantial" amount of cocoa from West Africa, though for competitive reasons would not discuss the specifics of the company’s cocoa purchases. At the company’s request, the article has been changed to reflect the company’s assertion that the amount purchased is substantial.
CLARIFICATION (Dec. 14, 2020, 9:38p.m. ET): An earlier version of this article said that Hershey buys its beans directly from farmers. Hershey clarified that it does not buy cocoa directly from farmers, but that cocoa goes through a “complex” supply chain process starting with farmers before it reaches the company.