The British love chocolate. So for any chocolate maker, it's one of the world’s most attractive markets. But it’s also one of the most mature: there aren’t many other consumer products where today’s principal brands remain those that have been known and loved over several generations. So when Divine – a young, small social enterprise – announced its plans to enter this market, perhaps it wasn’t surprising that there were a few sceptics.
But how wrong the sceptics were.
For a start, consumers did take to the chocolate. And second, Divine had a mission and a story to tell.
It was formed in 1998 by Twin Trading (the company which also set up Cafédirect) and Kuapa Kokoo, a cocoa farming co-operative in Ghana. The initial investment came from Body Shop and the Christian Aid and Comic Relief charities. A £400,000 loan guarantee from Department for International Development (DifiD) enabled the fledgling company to secure funding and the means by which the farmers could earn their share in the business. "Two government departments worked together to assess our business plan," says Tranchell, who joined the company as managing director in 1999 from a background in the film industry. “It was a pretty amazing bit of joined-up government.”
Divine Chocolate has a conventional legal structure – it's a company limited by shares – but the farmers own 45 per cent and have two representatives on the board. It’s not entirely unknown for farmers to own their own brand – Ocean Spray and Kerrygold are examples – but Divine is showing the way for farmers in developing countries to see the power of brand ownership.
Divine operates as a marketing and distribution company in the UK, sub-contracting the chocolate manufacture. The farmers supply cocoa, which is delivered to the chocolate factory in a traceable and sustainable supply chain, and receive a guaranteed Fairtrade price plus a social premium which the farmers invest in community improvements like drinking water, healthcare, and schools. Divine also invests two per cent of its turnover on "producer support and development" which funds the logisitics of democratic organisation and elections as well as initiatives such as a pilot educational radio programme.
When we first pitched the concept of a delicious Fairtrade chocolate that was owned in part by Ghanaian cocoa producers, a lot of people thought that it was a nice idea but not commercially feasible in the long run
- Divine Chocolate managing director Sophi Tranchell.
THE SWEET BUSINESS OF EXPORT
The business has always been international in its outlook. Since 2002, it has had a contract from Starbucks to produce the chain's own-label chocolate bars for the UK and Europe, which includes Russia and Turkey.
Divine’s own bars sell in Scandinavia, Czech Republic and the Netherlands, mainly via Fairtrade specialists who sell a range of Fairtrade products. "These markets have grown quite nicely," says Tranchell. Interestingly, there’s a north/south divide when it comes to chocolate: northern Europeans prefer it to have a smoother, more caramel flavour; southern Europeans prefer it to be more bitter. South Korea and Japan are also export markets, and the company has used UKTI to support its exhibition presence at key food trade fairs.
The big action is in North America. Divine’s bars have been sold in America and Canada from the outset, initially through Fairtrade specialists. In 2007 a separate company was established to sell Divine. “We had reached the end of what we could do from this distance,” explains Tranchell. “To get further we had to work locally in a more commercial way.”
To set up the US company, Divine received investment from Oiko Credit and support from Lutheran World Relief – having its six million-plus network of supporters buying bars has given Divine national rather than just regional scale. It is also selling through the nationwide Whole Foods Market chain.
Currently, the turnover of the US business is $6m and its average annual growth rate is currently at a healthy 25 per cent clip. The same trend for dark, premium chocolate is happening in the US as well as in Britain.
A TIME FOR GROWTH
So the growth in popularity of premium block chocolate means that Divine has hit a good time. "We're delivering six per cent growth and we’re in a good place to build the company. We are going in the right direction quite nicely," says Tranchell.
The company has recruited on both sides of the Atlantic. “We are keen that our new staff understand our mission and strategy and share our values. When they join, it’s pretty immersive. You are very quickly surrounded by chocolate!”
But growth is not without challenges. The company's exposure to adverse exchange rates – it buys in euros and sells in sterling and dollars – has been tough. And both the giant chocolate companies, as well as its direct upmarket competitors, have entered the Fairtrade arena. Where once Divine was on its own, it is now in a crowded room.
To respond, and to keep punching above its weight, the company has recruited senior people with heavyweight commercial skills. Also, intriguingly, it has used the Knowledge Transfer Partnership programme (HTP) to enhance the skills of its business. "When you first hear of a Knowledge Transfer Partnership, you think it is only for engineering and science-based companies but it is a really valuable piece of support," says Tranchell.
Under the KTP, Divine has worked with Liverpool John Moores University (LJMU). Three separate departments of LJMU were able to assist Divine from packaging and food technologies to their business processes.
“It’s funny, people think that we are much bigger than we are,” says Tranchell. “We have only got 18 people but we do things really efficiently.”
MAKING AN IMPACT
“My hope was and is that being a Fairtrade chocolate was the minimum,” says Tranchell. “It is a decent way of trading. Surely you should pay enough for a commodity so that people who grow it can send their children to school?”
More than that, she says that Divine has given Ghanaian farmers the chance “to speak for themselves.”
“We have managed to make change happen: consumers have got fabulous chocolate, and the farmers get a fair share. We make a difference every day. When we started people thought it was implausible. But we have inspired big business to behave differently, to converted some of their supply chain to Fairtrade. It’s not only right – it’s also possible. When Divine started, it had many audacious goals including the aim to change the chocolate industry forever. We have achieved some of those goals.”
"What gives me the greatest satisfaction is that Kuapa Kokoo is still there and flourishing. When it started in 1993, it too was an implausible idea. A co-operative of 2,000 people in 22 villages set itself up to run a licensed buying company where the only way it could prosper was by being more efficient. The original farmers mortgaged their farms to capitalise the supply chain. They invested in buying scales so that people could trust the transactions. They kicked out the incompetent and the corrupt."
“Today Kuaka Kokoo has 80,000 members across 1,287 villages in all of the cocoa growing regions in Ghana. It runs a democratic, accountable and transparent business. That is an enormous achievement. They have shown that the way to get business done better – is to do it. They have changed the deal for all farmers in Ghana. Last year, the organisation turned over just short of $100m – more than 40k tons of cocoa which us just under six per cent of Ghana's output and just under one per cent of the world’s production. It is headed up by a woman who has been elected right to the top from thevillage level.”
“In terms of changing what people ever thought was possible, that is the biggest impact.”
The above feature first published on greatbusiness.gov.uk.
