It's rare to find people who don't like chocolate. But there seems to be a sizable number of folks who are concerned about the origins of their favorite comfort food. Paradoxically, this could be an opportunity for confectioners.
The Chicago Tribune featured a story yesterday highlighting a protest by a group of schoolchildren, religious leaders, and union representatives at the All Candy Expo, currently meeting in the city. The protest called for "fair trade" practices in the chocolate industry to bolster the income of cocoa farmers in West Africa.
Fair trade, a campaign to pay farmers in developing nations minimum prices for various commodities, has become a major buzzword in the coffee industry. Companies such Starbucks (NASDAQ:SBUX), Green Mountain Coffee (NASDAQ:GMCR), and Procter & Gamble (NYSE:PG) offer fair trade brews. In the chocolate industry, though, the movement is far from mainstream.
A spokeswoman for privately held M&M Mars explained that her company does not see fair trade as a viable option because it would be difficult to organize farmers into cooperatives. Such a system, she said, would create an artificial price for chocolate. Instead, higher efficiency among farmers is seen as a better answer to the plight of growers.
While farmers may see benefits from efficiency improvements and organizational issues could be impediments to fair trade schemes, a recent article in TheWall Street Journal suggests that candy outfits such as Hershey Foods (NYSE:HSY) and Cadbury Schweppes (NYSE:CSG) could be missing out on an opportunity. Specifically, the piece noted that many retailers have been able to cash in on the trend by selling fair trade goods at premium prices.
Chocolate is not coffee, but it certainly seems possible that a sizable number of consumers would be willing to pay extra for fair trade chocolate and cocoa. Some might brand the suggestion that major candy corporations enrich themselves from fair trade chocolate grown by poor farmers a cynical enterprise.
From a glass half-full perspective, though, this initiative could be viewed as a possible "win-win" proposition in which farmers and shareholders both benefit. At the very least, candy companies expanding into premium-branded fair trade chocolate seems to make more sense than venturing into low-carbohydrate foods.
For now, candy outfits have been slow to adopt fair trade. But the opportunity for a risk taker could be significant.
Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.
