In mid-November, a joint press release declared a new “global partnership” between Fairtrade and Cadbury, the brand owned by global snack company Mondelēz International.
They announced that Cadbury Dairy Milk will no longer be Fairtrade certified. Instead, all Cadbury products will be brought under Mondelēz International’s in-house sustainability programme, ‘Cocoa Life’. The Fairtrade logo will be replaced with the Cocoa Life logo, and Fairtrade will become an implementing partner for Cocoa Life, with this partnership being indicated on the back of pack.
It has been seven years since Cadbury Dairy Milk became Fairtrade certified in the UK. It was a pivotal moment – perhaps the pivotal moment – in the ‘mainstreaming’ of Fairtrade in this country. At a stroke, 350 million chocolate bars a year were certified, bringing the Fairtrade Mark into every corner shop in the country.
Fairtrade campaigners celebrated and the future looked promising, with Cadbury chief executive Todd Stitzer saying that he planned to convert their other chocolate brands to Fairtrade "as soon as we can do it". It felt like perhaps Cadbury had re-engaged with its progressive Quaker roots, bringing a new 21st century ethics into the heart of its business model.
A year later, the company was the subject of a hostile and controversial takeover by US multinational Kraft, though not before they had converted the Green & Blacks range owned by Cadbury to Fairtrade. Although Kraft promised to honour Cadbury's Fairtrade commitments, it was clear that there would be no further expansion of Fairtrade certification as had previously been hoped. In 2012, Kraft split into two companies, and Cadbury became a brand owned by a new multinational food company called Mondelēz International.
The new joint announcement from Cadbury and Fairtrade unsurprisingly describes the new deal in glowing terms as a “ground-breaking commitment” and an “evolution of our partnership”. But for Fairtrade campaigners, it is mixed news at best.
A House of Commons select committee has released a critical report about Kraft's conduct in the wake of its takeover of Cadbury in 2010.
Though couched in the careful language of officialdom, Is Kraft working for Cadbury? reveals the frustration of MPs when Kraft CEO Irene Rosenfeld turned down repeated requests to appear before the committee to answer questions about the controversial acquisition.
A recent Guardian article reports that Cadbury is to be restructured by its new American parent company, Kraft, to avoid paying millions of pounds in UK tax.
The restructuring plan apparently involves creating a parent holding company in Zurich, which would allow much of Cadbury's profit to be booked in Switzerland, thus benefiting from a much lower rate of corporation tax. In Zurich, rates begin at 15%, whereas corporation tax in the UK is currently 28%. Last year, Cadbury paid £197m in UK tax.
This is a form of “tax avoidance”, which can be defined as the minimisation of tax liability by lawful methods, as distinct from “tax evasion” which refers to illegal efforts not to pay tax.
The fact that tax avoidance is legal doesn’t stop national governments from trying to crack down on it, though often with limited success.
In 2004, HM Revenue & Customs tried to stop Cadbury Schweppes from using subsidiary companies in Dublin to benefit from the 10% corporate tax rate there. In a landmark case Cadbury Schweppes appealed to the European Court of Justice and won. Now, Cadbury’s move to Switzerland underlines the dwindling strength of national governments as they attempt to tax footloose multinationals.
A far cry then from the early days of the company.
In the late nineteenth century George Cadbury was determined to use his wealth to promote social reform and justice, implementing and campaigning for improved labour conditions, shorter working hours, old age pensions and sickness benefits in a way that anticipated the founding of the welfare state.
He would have understood instinctively the tax justice argument: that tax represents a social contract between citizen and state. Tax revenues not only support collective goods such as the NHS or the education system, the very act of taxation fosters better and more accountable government.
Last week, Cadbury and Kraft agreed terms for an £11.6bn takeover. It ended a long, drawn out and very public campaign by Cadbury to preserve its independence.
Cadbury's unions have led the opposition to the takeover, warning that thousands of jobs will be put at risk. Kraft now has a considerable amount of debt and a record of aggressive cost-cutting. The Unite union put together an opposition document for Cadbury's shareholders.
Kraft has stated that it expects "to honour Cadbury's commitments to sustainable and ethical sourcing, including Fairtrade" but it looks unlikely that Kraft would continue to expand its use of Fairtrade cocoa beans into brands beyond Dairy Milk.
The deal has re-shaped the global chocolate industry, which is now dominated by just four large companies: Kraft/Cadbury, Mars, Nestle and Ferrero. This excellent interactive graphic at the Guardian website shows at a glance the new companies and their product range.
Nestle is now in the unsual position of being third place, behind the Mars and the new Kraft/Cadbury giant, an unfamiliar role for the world's largest food corporation. It might not remain that way for too long as it is eyeing up Hershey, an American company with an iconic status similar to Cadbury in the UK.
As reported widely over the past few weeks, Fairtrade Dairy Milk chocolate bars are at long last rolling off the production line at Cadbury’s Bournville factory. This is a momentous, if long overdue, event for the fair trade movement, increasing all UK Fairtrade sales by 25% in one swoop and making the Fairtrade Mark visible in many more retail outlets.
The Fairtrade certification of Dairy Milk is a massive piece of ‘choice editing’, in a similar way to when Sainsbury switched all its bananas to Fairtrade. Usually ethical consumers have to make an active choice when buying Fairtrade products. When switching completely to Fairtrade bananas, Sainsbury addressed the fact that most people won’t actively seek out products that address issues such as sustainability and human exploitation, but will buy them when they are their only choice and they are right under their nose. The fact that Cadbury has followed suit by converting the most popular chocolate bar in Britain to Fairtrade, so placing Fairtrade in every newsagent and supermarket in Britain at no extra cost to the consumer, is a welcome development.
The development does also mark a big shift in the balance of power within the fair trade movement, raising all the big questions that arise when multinational companies adopt the Fairtrade Mark. So while it is an excellent thing, we need to be wary and thoughtful about the long term impact, and in particular ensure that the Fairtrade mission is not compromised or weakened in any way.
The last two months have seen two of the biggest chocolate industry players announce major ethical certification initiatives.
Cadbury's Dairy Milk bar will be Fairtrade certified in the UK and Ireland by the end of 2009, with plans to convert more of their range, and Mars are working with Rainforest Alliance to sustainably source all their cocoa by 2020, starting with Rainforest Alliance certification for the Galaxy bar in 2010.
To put these announcements in context and explore their significance, we put some questions to Mars and Cadbury, and to three external commentators...
Short film by Reuters with Divine Chocolate welcoming British confectioner Cadbury's decision to convert its biggest selling chocolate bar, Dairy Milk, to Fairtrade.
Cadbury and the Fairtrade Foundation have announced that Cadbury's Dairy Milk chocolate bar, and its hot chocolate beverage, will become Fairtrade certified in the UK and Ireland by the autumn of 2009.
Dairy Milk is the UK's best selling bar, with 300 million of them being produced every year. The chief executive of the company, Todd Stitzer, says he plans to convert their other chocolate brands to Fairtrade "as soon as we can do it". Dairy Milk represents 20% of Cadbury's chocolate range.