In just 12 years chocolate maker Divine has gone from a small confectionery brand to a growing £10m a year business. As a Fairtrade champion, it has empowered African cocoa farmers and paved the way for other ethically minded companies
Fairtrade chocolate brand Divine has something that sets it apart from competitors in a fierce market. Farmers from the Kuapa Kokoo co-operative in Ghana, who supply the cocoa for the chocolate, own a 45 per cent stake in the company.
Divine was founded in 1998 by Fairtrade company Twin Trading and a group of UK businesses. Founding chairman Sandy Balfour says there were two motives behind Divine. The first was about empowerment – creating a brand in the UK market that delivered real benefits to farmers in Ghana. The second was to offer consumers a different way of thinking about what they do when they buy something. "The normal consumer proposition is, what do I get for my money, but Divine's is, who gets what for my money?" he says.
Managing director Sophi Tranchell joined the company 12 years ago. "I thought the product was great, the brand fantastic and to run a company that is significantly owned by the farmers sounded like an irresistible combination."
Formerly in charge of art house film distributor Metro Tartan, she had no experience in retail or food – something she says worked to her advantage. "If I had had a background in retail I would have seen all the reasons why it wouldn't work, but because I didn't have that knowledge I felt there was a fantastic product and a great story," she explains. Since 1999, Divine has grown to 18 staff in the UK and six in the US. Turnover hit £10m last year and its chocolate bars are sold in many European countries as well as South Korea.
How it works
The benefits for Kuapa Kokoo farmers are fourfold. Divine pays out a guaranteed Fairtrade Foundation minimum price, which at $2,000 (£1,233) a tonne is currently lower than the world market price of $3,200 (£1,963) – although this is not relevant because the farmers charge whichever is higher. "But when we started the Fairtrade price was twice as high as the world market price so the farmers really benefited then," says Tranchell. They also receive a $200 (£123) social premium for every tonne sold to Divine. In the past they have spent this money on sinking water wells or new school buildings. Divine also pays a two per cent dividend for producer support and development.
"If you work with poor people in developing countries who are running businesses, being a decent business costs money," says Tranchell. "They run a democratic organisation with more than 45,000 members in 1,400 villages that don't have running water let alone electricity and computers. Previously we have supported training on co-operative principles and values. Every annual meeting you have to get 3,000 people, two from each village, to one place and a place to stay. That can be expensive."
Because the farmers own 45 per cent of Divine the fourth income stream is the same percentage of any profit. "This has not been enormous but it has been something. So if we pay a bonus of £50,000 they may buy everybody a machete," says Tranchell.
For Balfour the most important benefit for the farmers is the capital asset in Divine that they own. He explains that the co-op buys cocoa from its members and sells it to the Ghanaian government. It's a cash business so they have to borrow a lot of money and interest rates in Ghana are high at 25 to 30 per cent, making it expensive.
"With Divine, they use their shares in the business as security and are able to borrow hard currency at five per cent interest," says Balfour. "So they have been able to borrow $5m (£3.1m) at five per cent saving them $1m (£615,000) in interest charges – that is why ownership matters. In 2009, the amount saved on rates was bigger than the earnings from the social premium paid on the Cadbury's Fairtrade deal and to my mind that is the single great achievement of Divine," he adds. The producer support and development, the dividend and the capital asset are all above and beyond what is required of Fairtrade standards.
Harriet Lamb, executive director of the Fairtrade Foundation, says that deal makes Divine pretty special. "In every way they go the extra mile – or two even," she says. "They have always stuck to their principles but never compromised on commerciality or quality – and that is really hard to pull off."
But Tranchell says Fairtrade is about more than money. "When we first went to Ghana most of the farmers had never tasted chocolate and they had no sense of what their cocoa was being used for. It was just a commodity," she says. "Over the past 12 years they have met prime ministers, mayors and UK supermarket bosses and they are able to represent themselves. They sit on the board and have a direct say. But they've also become players in the industry with a reputation of their own."
Competition from giants
Cadbury's converted its Dairy Milk bar to Fairtrade standards in 2009 and Nestlé the Kit Kat last year. "What Divine did was show how Fairtrade could work for chocolate and they really blazed a trail. People have always got a story about how it can work in one sector and not another so you need companies like Divine," explains Lamb. "Divine has been a critical part of showing how Fairtrade can work in chocolate and it has paved the way for others to come in with even bigger volumes."
The Cadbury's and Nestlé conversions have boosted competition for Divine, but Tranchell says this was always part of her objective. "When we were writing brainstorms we wanted to make Fairtrade the normal way to do business," she says. "To have got Cadbury's to convert a significant brand to Fairtrade is part of our success. When we started, awareness of Fairtrade was seven per cent, it's now 80 per cent."
Partnerships have been struck with businesses and organisations, including Body Shop, Christian Aid, Comic Relief and the Co-op group. Since 2002 Divine has also supplied Starbucks's own-label chocolate. "Partnerships are important, but I think you need to be careful about who you pick and make sure you share some values and that you are doing something mutually beneficial," says Tranchell.
Kuapa Kokoo, which produces 42,000 tonnes of cocoa every year, has done extraordinary work with women – not traditionally at the forefront of business in Ghana. "They listed women's empowerment as one of their founding principles. They quoted it, so at village level three out of the seven executives had to be women," explains Tranchell. "They now have a fantastic group of confident women who are participating and in an election last year they elected a woman president."
Tranchell speaks of a healthier business model where financial decisions and money are in the hands of the many and not the few. "Before the [financial] collapse people made high-risk decisions and they were rewarded as individuals, but if we have even just three people around the table there is a chance one of them will question whether a decision is the right one," she says. "It's one thing having
a diverse boardroom but the quality of the conversation is always the most important."
Having posted its first loss since 2006 last year – due to a product recall – and grappled with challenging exchange rates between the pound and the euro, Divine is now focused on returning to profit. Tranchell aims to take turnover up a notch from the £10m mark, excluding the US side of the company, which has reached £3m. She would like to see it hit £25m in the next three to five years. "I would love to get to a point where we can feel a bit more secure," she says.
Tranchell believes taking risks and having ambition are vital for growing a social enterprise to scale and she doesn't lack ambition for Divine. "I would love to be the next Cadbury's, but that doesn't mean I want to be a multibillion-pound business. I want to be everything that Cadbury's was famous for. It was built on running an exceedingly decent business; they invested in their employees and their suppliers and where people lived. They were good Victorian philanthropists," she says. "I want Divine to be the people who are leading the way that decent business is done in the 21st century."
The farmer's story
Kuapa Kokoo farmer Kojo Aduhene-Tano says co-ownership of Divine has given co-operative members a lot of pride. "Life is so much better," he says. "I'm able to pay my children's school fees and three of them are at university now."
Community benefits have been felt, too. "We have access to clean drinking water that was provided with Farmers Trust Funds. We don't have to walk three miles into the forest to get dirty drinking water," he adds. "We're all healthy now."