Ivory Coast and Ghana are cancelling all cocoa sustainability schemes that US-based Hershey runs in their countries, accusing the chocolate maker of trying to avoid paying a cocoa premium aimed at combating farmer poverty.
In a letter addressed to Hershey and seen by Reuters, the Ivorian and Ghanaian cocoa regulators accuse Hershey of sourcing unusually large volumes of physical cocoa on the ICE futures exchange in order to avoid the premium, known as a living income differential (LID).
The letter, which also accuses Fuji Oil Holdings' Blommer subsidiary of aiding Hershey, was verified as authentic by spokespeople for the regulators.
Sustainability Schemes
Ivory Coast and Ghana, which produce two-thirds of the world's cocoa, said they are also barring third party companies from running sustainability schemes in the west African nations on behalf of Hershey.
The schemes certify cocoa as sustainably sourced, allowing companies to market their chocolate as ethical and charge a premium for it.
Hershey and Blommer had no immediate comment.
Hershey said last week it was committed to paying the LID, and that the majority of cocoa it bought would continue to come from West Africa and would include the LID for the 2020-21 crop and beyond.
Several market sources said Hershey had recently struck a deal with the ICE exchange to take physical delivery of a large amount of cocoa, allowing it to buy less from Ivory Coast and Ghana and so avoid the premium.
LID On Cocoa Sales
The west African nations last year introduced a $400 a tonne LID on cocoa sales for the 2020/21 season, but have since struggled to sell their beans as chocolate demand has been hit by the coronavirus-induced recession.
In a separate document seen by Reuters, the world's top cocoa producers said they had withdrawn from membership of a US cocoa industry association, accusing the body of helping companies including Hershey avoid paying the LID.
The Cocoa Merchants Association of America (CMAA) is "condoning and conniving with American companies against poor West African cocoa farmers", the document, also verified as authentic by the Ivorian and Ghanaian regulators, read.
Ivory Coast and Ghana also said they are reviewing their membership of the Federation of Cocoa Commerce (FCC), a UK-based international organisation that aims to promote, protect and regulate the cocoa trade.
