Divine Chocolate Presentation Script

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Slide 1: Introduction

Today, we are going to talk about Divine Chocolate, a unique company with a strong mission
to end exploitation in the cocoa industry. As their website states: ‘We exist to help end
exploitation in the cocoa industry.’ Divine Chocolate was established not just to make
chocolate, but to empower farmers and ensure fairness across the supply chain. The business
operates in the fair trade chocolate industry. Divine Chocolate works closely with the Kuapa
Kokoo cooperative who are also the co-owners of divine chocolate. It’s the only Fairtrade
company co-owned by farmers, ensuring that the people who produce the cocoa have a
voice in the business the cooperative, which is based in Ghana, West Africa, and includes
over 100,000 farmers. This cooperative was founded in 1993 and is the backbone of the
company. Divine chocolate is structured as a social enterprise, meaning their focus is on
both social impact and ethical business practices.

Some more background about the company…

SLIDE 2 BACKGROUND

In 1998, The Day Company was established The company was named after Richard Day, an
early member of the operation, and a way of honouring his contribution to the ethical
business movement it was named after him.
They had received initial support from The Body Shop, Comic Relief, and Christian Aid all
coming together to fund this initiative.
In 2007, The Body Shop donated its portion of the shares to Kuapa Kokoo, raising the
cooperative’s ownership to 44%. Although the body shop left the business, they still use
Kaupo Kooko services till this day to source their main ingredient for the cocoa butter in their
skincare products.
So the co-operative initially owned 44% of Divine Chocolate, however this share has recently
been reduced to 20% due to the involvement of Ludwig Weinrich, which is a German
chocolate manufacturer. While Ludwig Weinrich now holds a majority stake, this
partnership has allowed Divine Chocolate to scale its production capacity, though it has come
at the cost of reducing Kuapa Kokoo’s ownership.

In 2008, Divine Chocolate also became a Certified B Corporation, committing itself to the
highest standards of social and environmental performance. This certification reflects their
dedication to balancing profit with purpose.

Just a little bout the products they sell Divine Chocolate offers a wide range of products, they
have their classic range of fairtrade chocolate including classic milk, white, and dark
chocolate bars. They also introduce seasonal products and this year they had introduced their
new dessert bars to cater to a wider market.

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Slide 3: Market Score and Performance

Having explored the foundational principles and mission that underpin Divine Chocolate, we
can now turn our attention to its current standing in the market. Understanding the market
score not only reflects the company's performance but also highlights the effectiveness of the
ethical business model in a competitive landscape. While Divine Chocolate has a powerful
ethical mission, the company faces challenges in terms of profitability.
Clearly, they are not effective in making profit so they are not commercially viable. Their
social mission sometimes puts them at a commercial disadvantage compared to mass-market
brands that do not have to account for Fairtrade premiums and ethical standards. Maintaining
these ethical commitments while trying to remain competitive in a market dominated by
larger brands, who may not follow the same standards, adds financial pressure. Despite this,
Divine Chocolate has continued to prioritize fair wages and social reinvestment,
demonstrating that their model is cantered on long-term sustainability and community
impact rather than short-term profit maximization.
but it’s also important to note that this is a social enterprise where profits are reinvested into
supporting farmers and community development projects and so on. Also These fluctuations
don’t necessarily mean the company is performing poorly in its core business; rather, external
financial factors like currency exchange rates are influencing its reported profit

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Slide 4: Price of Cocoa and Volatility

Cocoa prices are volatile, and in recent years, they have fluctuated significantly.
Over the past few years, you can see cocoa trading below 4,000 yet it is still very volatile, as
you can see by the fluctuations, yet they may seem minor in the overview. Even small
fluctuations in cocoa prices can significantly affect the farmers’ income and the company’s
production costs, those very fluctuations can directly impact the welfare of the farmers.
While a rise in cocoa prices can indeed lead to higher incomes for farmers, it doesn't always
guarantee long-term stability.
According to a financial times article by Susannah savage earlier this year The price of cocoa
hit a record high on Thursday after an industry report said crop failures in west Africa in the
first quarter had further exacerbated the global shortage of beans for chocolate.

Slide 5: Price Volatility Explained Further

Price volatility occurs when supply and demand fluctuate rapidly. This instability affects
both the farmers’ welfare and Divine Chocolate’s production costs. Cocoa is highly
sensitive to market conditions, and there are many reasons to why the price can change an
example being climate related crop failures, so here Undersupply (or shortage) occurs when
the demand for a product is higher than the available supply. In such cases, the scarcity of the
product leads to increased competition since it is a limited resources, which often results
in higher prices. And the opposite can also occur, oversupply often results in surplus, which
can drive prices down.
For Divine Chocolate, managing this volatility is critical to ensuring both sustainable
incomes for farmers and stable production costs.
Slide 6: Fairtrade

This is where steps in fairtrade. Fairtrade helps mitigate the effects of price volatility by
ensuring that farmers receive a minimum price for their cocoa, regardless of market
fluctuations, Fairtrade offers farmers long-term contracts and guarantees a minimum price for
their cocoa, which protects them when market prices fall. While prices may currently be high,
they are historically volatile. Fairtrade ensures farmers have security during both high and
low price periods.

Slide 7: Fairtrade’s Role in Divine Chocolate

let's now explore how Divine Chocolate uses Fairtrade to create this stability.

farmers receive fair wages and additional premiums to support their communities. The
current rate of the premium Is around $240 on top of the $2000 minimum This protection is
vital, especially when prices eventually decline, allowing farmers to remain resilient and
continue benefiting from their work in sustainable ways. This provides long-term stability
and helps protect farmers from sudden drops in prices.
These images below show the typical flow of the cocoa beans in a fairtrade production line
and how it ends up to the consumer it’s a very traceable supply chain due to its fairtrade
nature so essentially its farmer to company to consumer.
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Slide 8: Social Enterprise Model

A social enterprise essentially is a business that’s uses profits to create social or

environmental value. Its primary goal is to solve social problems or improve communities,
with profits often reinvested to further its mission rather than maximize shareholder returns.
Slide 9: Social Enterprise In Context

So as a social enterprise, Divine Chocolate focuses on social value. Their business model
reinvests profits into community development, supports sustainable farming, and ensures
that farmers benefit from their labour. This creates a continuous cycle of reinvestment that
sustains their ethical mission.

Here is a diagram that shows how Divine Chocolate’s model works:

- Mission: Increasing the welfare of the workers.
- Profit: Reinvesting into the community.
- Community Impact: Empowering farmers and improving their livelihoods."

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Slide 10: Business Model

The divine business model is truly a unique one, the business model is built on the belief that
farmers should thrive and have a say in their own future as evidenced by the co-ownership of
divine by KAUPA KOKOO a co-operative of over 100,00 cocoa farmers in Ghana.
The diagram above shows the build-up of the different components of the business. At the
very top we have the main business: DIVINE CHOCOLATE the main for them is to
generate revenue which allows them to continue with their social mission and continue
ethical practices below them we have KAUPA KOKOO, these are the co-owners of the
business and they receive a share of the profits they are also on the board of the company.
With them we have Ludwig Weinrich who is a major German manufacturer, which helps
increase production capacity they are also the parent company of divine.
At the very bottom is the farmers they produce the cacao for the business, and this is where
the fair trade practices and the effects of them are most prominent.
Slide 11: Commercial Issues

On the commercial side, The problems Divine faces are:

1. COCOA BEAN SUPPLY
2. HIGH PRODUCTION COST
3. PRICE VOLATILITY

SLIDE 12: COMMERCIAL ISSUES EXPLAINED

- Price volatility: as mentioned before this occurs when there are fluctuations in supply and
demand In 2017, an oversupply of cocoa combined with a drop in demand (especially from
China) caused prices to plummet. This highlights how sensitive commodity prices like cocoa
are to changes in market conditions It directly connects to the idea that cocoa as a commodity
is highly sensitive to global market conditions.

- Increased Production Costs: Due to Fairtrade premiums, Divine’s costs are higher than
those of competitors. In 2022 $58 million was paid in premiums
Divine Chocolate faces high production costs due to the Fairtrade premiums they pay,
which add to the base price of cocoa they do this to ensure ethical practices and community
development. This premium increases their overall cost of producing chocolate, making it
harder to compete with mass-market brands that don’t bear such additional expenses. This
premium is used for community development projects, but it adds to the overall production
costs of businesses.

- Cocoa supply shortages: this is a critical commercial issue for Divine Chocolate. The
shortage drives up the cost of cocoa, shortage exacerbates production costs, complicates
supply chain management, and increases competition This puts pressure on Divine
Chocolate's supply chain and, therefore the shortage exacerbates production costs, causing
issues.
Slide 13 & 14: Ethical Issues
THE ETHICAL ISSUES DIVINE FACES ARE:
1. DEFORESTATION
2. POVERTY
3. CHILD LABOUR

- Deforestation: Cocoa farming often contributes to deforestation,

Deforestation in Tropical Regions: Cocoa farming often contributes to the destruction of
tropical rainforests, leading to biodiversity loss, soil erosion, and increased carbon emissions.
Large-scale farming practices may exacerbate this environmental impact. So divine chocolate
needs to ensure that they avoid this if they want to align with their social mission.

- Poverty: poverty is a major issue faced by cocoa farmers, it is known that the cocoa
industry generates more than $100 billion in revenue annually, however most farmers earn
less than $1 a day Many cocoa farmers live in poverty. Generally speaking, The prices, they
receive for their beans are often unstable and insufficient to cover the basic costs of living or
farming, trapping them in a cycle of poverty

- Child Labour: In some regions, child labour is an issue in cocoa farming. Child labour in
cocoa farming is a serious issue, as many children in cocoa-producing regions grow up in
households facing extreme poverty. child labour in cocoa farming is a widespread issue, Due
to extreme poverty, many farming families rely on their children's labour to help manage
cocoa farms. These children often work in hazardous conditions, handling sharp tools and
carrying heavy loads, rather than attending school. The root cause is the low income farmers
receive, forcing them to use all available labour, including children, to sustain their
livelihoods due to this they miss out on education perpetuating a cycle of intergenerational
poverty.
Slide 15: Overcoming Ethical Challenges

Divine Chocolate overcomes these ethical challenges by:

Divine says they are committed to preserving the environment. They overcome the issue of
environmental degradation from deforestation by Sourcing from smallholder farms what
this means is they make sure The cocoa used in Divine Chocolate's core range is not grown
on plantations, since it may require clearing of rainforest trees, but rather farm on individual
smallholder farms which have been in farming families for generations

- Empowering farmers through co-ownership and profit-sharing helps to alleviate the

issues surrounding poverty. To overcome this issue Divine gave Kaupa Kokoo convenorship
of the company and heavily focuses on fair trade practice, they also invest in community
development. Divine Chocolate's efforts to combat poverty align closely with Sustainable
Development Goal 17 (SDG 17), which emphasises partnerships for the goals. By
collaborating with Kuapa Kokoo, Divine Chocolate fosters a model of co-ownership that
empowers farmers and gives them a voice in decision-making. This partnership enables fair
trade practices, ensuring that farmers receive equitable prices for their cocoa, which directly
contributes to poverty alleviation. through these collaborative efforts, Divine Chocolate
exemplifies how strategic partnerships can drive significant social change, fulfilling the
objectives of SDG 17 and contributing to a more sustainable world.

- Divine chocolate acknowledge the importance of child labour and they address it on their
website… they say they tackle this issue by education and awareness programmes in
partnership with Kuapa Kokoo. this program educates communities about the dangers of
child labour and promotes alternatives, such as ensuring that children attend school rather
than work on farms. Additionally, by paying farmers Fairtrade premiums and offering them
a fair price for their cocoa, Divine helps improve the overall income of farming families,
reducing their reliance on child labour for additional support.

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Slide 16: Overcoming commercial Challenges

OVERCOMING PRICE VOLATILITY

Divine Chocolate manages the challenge of price volatility by paying farmers a Fairtrade
minimum price, which acts as a safety net against fluctuating market prices. This guaranteed
minimum, currently set at $2,400 per tonne of cocoa, ensures that farmers receive a stable
income even when global cocoa prices drop. This not only protects farmers from sudden
price changes but also helps them plan for the future with more financial security.

OVERCOMING COCOA BEAN SUPPLY ISSUE

Cocoa bean supply issue When an issue with the supply of cocoa beans arises divine
chocolate can overcome this issue as they practice fair trade, meaning they offer their farmers
long term contracts, ensuring a steady supply even during market disruptions. The contracts
provide stability for both parties By guaranteeing purchase agreements, Divine secures
a steady supply of cocoa, even during periods of global shortages or market fluctuations.
This gives them a reliable source of ethically sourced cocoa, unlike companies that may
struggle to find suppliers during shortages. They secure long-term contracts with farmers,
ensuring a steady supply even during market disruptions.

HIGH PRODUCTION COSTS

Divine Chocolate has been able to overcome some of these cost challenges through their
partnership with Ludwig Weinrich, a larger German chocolate manufacturer Ludwig .
Weinrich brings large-scale manufacturing capabilities to Divine Chocolate.

This allows the company to produce chocolate in greater volumes than they could on their
own. With increased production capacity, they can manufacture more chocolate without
significantly raising operational costs.

Also, Weinrich’s advanced manufacturing technology and specialized experience in chocolate

production can also lead to greater operational efficiency, reducing waste and improving
processes.

As a larger manufacturer, Weinrich can produce chocolate at a lower cost per unit. By
increasing the volume of production, Divine can spread fixed costs (such as factory
operations, equipment, and labour) over a greater number of units. This means that each bar
of chocolate costs less to produce, even when accounting for the higher raw material prices
due to the Fairtrade premium. This concept is called economies of scale.

SLIDE 17 & 18: LONG RUN AVERAGE COST CURVE

Economies of scale can be visualised on a graph showing the reduction of long run average
cost with the introduction of greater output. Q1 here shows the quantity output being low and
consequently the cost being higher p1, the long run average cost curve helps us visualise what
it cost per unit may be if we shift io a higher output in quantity so if we shift production to q2
and produce mire units you can see that price drops and becomes lower and this is due the
costs being spread over a greater number of units,

This shows us more context and you can see here with the introduction of Ludwig we can
expect a lower average cost.

SLIDE 19: CONCLUSION

Divine Chocolate operates under a social enterprise model that prioritizes ethical sourcing
and farmer empowerment through Fairtrade practices. Their business model is built on the
partnership with the Kuapa Kokoo cooperative, ensuring that farmers co-own the company
and receive a fair share of profits. This unique structure sets Divine apart by aligning social
impact with business operations.

However, the company faces significant commercial difficulties, particularly in terms of

price volatility, high production costs, and cocoa supply shortages. Paying Fairtrade
premiums and guaranteeing a minimum price to farmers raises Divine’s production costs,
making it harder for them to compete with larger mass-market brands. These commercial
pressures challenge their profitability, especially in an industry affected by global market
fluctuations.

Despite these difficulties, Divine Chocolate remains committed to its ethical values and has
implemented strategies to mitigate these issues. Through partnerships, like the one with
Ludwig Weinrich, they’ve expanded production capacity and leveraged economies of scale
to reduce costs. In terms of supply chain stability, long-term contracts with farmers help
ensure a consistent supply of ethically sourced cocoa, even during shortages.

In conclusion, while Divine Chocolate has not completely avoided these challenges, their
strategies demonstrate a strong commitment to balancing profitability with social impact. By
addressing both commercial and ethical issues head-on, Divine continues to fulfil its mission
of creating a fair and sustainable cocoa industry.