Cadbury an Ethical Company Struggles to Insure the Integrity of Its Supply Chain

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yale case 07-039 november 27, 2007 (revised august 24, 2008)

An Ethical Company Struggles to Insure the Integrity of Its Supply Chain Sumana Chatterjee1 Jaan Elias 2

Chocolate had always been considered an affordable little luxury, associated with romance and celebrations. Therefore in 2000 and 2001, revelations that the production of cocoa in the Côte d’Ivoire involved child slave labor set chocolate companies, consumers, and governments reeling. In the United States, the House of Representatives passed legislation mandating that the FDA create standards to permit companies who could prove that their chocolate was produced without forced labor to label their chocolate “slave-labor free.” To forestall such labeling, the chocolate industry agreed to an international protocol that would give chocolate producers, governments, and local farmers four years to curb abusive practices and put together a process of certification. The stories of child slave labor on Côte d’Ivoire cocoa farms hit Cadbury especially hard. While the company sourced most of its beans from Ghana, the association of chocolate with slavery represented a challenge for the company, since many consumers in the UK associated all chocolate with Cadbury. Furthermore, Cadbury’s culture had been deeply rooted in the religious traditions of the company’s founders, and the organization had paid close attention to the welfare of its workers and its sourcing practices. In 1908, the company had ended a sourcing relationship that depended on slave labor. Now for the first time in nearly 100 years, Cadbury had to take up the question of slavery again. By the 2005 deadline, the chocolate industry was not ready to implement the protocols and asked for two years more to prepare. Privately, many industry officials believed that the kind of certification sought by the protocols was unrealistic. Because cocoa was produced on over a million small farms in western Africa, insuring that all of these farms, most located deep in the bush, complied with child labor laws seemed impossible. Furthermore because beans from numerous small farms were intermingled before shipment, it was difficult to track those produced by farms in compliance with labor standards and those that were not. In 2008, a confrontation between U.S. government officials and the industry seemed imminent. Observers argued that this left Cadbury, a company that had done much to improve its supply chain, in a difficult position.

After a merger in 1969, the company was known as Cadbury Schweppes. In May of 2008, Cadbury Schweppes demerged into “Cadbury,” a stand-alone confectionary company, and “Dr Pepper Snapple Group,” an independent beverage company.

Slavery and the Political Economy of Cocoa
From Bean to Bar in Côte d’Ivoire Though chocolate today is enjoyed and produced world-wide, the confection was unknown outside of th Central America and the Caribbean before European exploration of the Western hemisphere in the 16 century. Spanish voyagers first came across chocolate when they encountered the Aztecs in the area of present-day Mexico. The Aztecs had long cultivated and enjoyed a bitter drink made from the cocoa bean. When transported to Europe, the Spanish added sugar to the cocoa drink and the popularity of the concoction took off and diffused throughout the continent. Numerous Europeans further developed chocolate manufacture. In 1828, a Dutch chocolate maker, C.J. Van Houten, invented the cocoa press that helped reduce the price of chocolate and bring it to the masses. In 1876, a Swiss man named Daniel Peter working in his friend Henry Nestlé’s baby-food factory discovered a method of combining chocolate with milk to produce milk chocolate. In 1879, Rodolphe Lindt of Switzerland, produced chocolate that melted on the tongue by inventing “conching,” a means of heating and rolling chocolate to refine it. European countries also diffused the cocoa trees that provided the raw...
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