Hershey to invest $500m in sustainable cocoa programme

Hershey is spending $500m in the hopes of producing its iconic chocolate Kisses from more sustainable cocoa.

Through its Cocoa for Good programme, the company will invest the funds to 2030 to support four areas: nourishing children, empowering youth, building prosperous communities and preserving natural ecosystems.

The initiative’s goals include eliminating child labour and increasing shade-grown cocoa, which can be productive for as much as 15 years longer than plants grown in full sun.

World cocoa supplies are tightening following a price plunge that hurt global farmers and forced lower production, eroding a global surplus. The shifting supply outlook caused a whipsaw in the market. Futures in New York have surged 39% in 2018 after tumbling 41% over the prior two years.

While recent “extreme” price volatility is typical of agricultural commodity markets, “we fully appreciate the complexity of addressing some of the challenges” for grower communities, Susanna Zhu, the firm’s chief procurement officer, said in Abidjan, the commercial capital of Ivory Coast. “That’s why we are committing significant resources for the next decade.”

Consumer-focused firms from Unilever to McDonald’s have invested more in sustainable sourcing as customers increasingly look for those credentials before spending their dollars. Starbucks has raised about $1.3bn over the past two years to fund its ethical coffee farming initiatives through sustainability bonds.

In 2016, the chocolate giant increased its certified and sustainable cocoa sourcing to 60% of its purchases and has said it remains on track to reach 100% by 2020. The company’s new programme will start with a focus on Ivory Coast and Ghana, the world’s top cocoa producers.

Hershey was seeking “a holistic” approach to sustainability and had plans to reach other producing areas, including in South America, Zhu said.

About 95% of world cocoa output is produced by small farmers, many of whom still use traditional growing methods. Because global yields have stayed stagnant, supply increases have come primarily through expansion of cultivated areas. At the same time, chocolate demand continues to grow. Global retail sales hit $102.3bn in 2017 and are expected to climb 8.2% by 2022, according to researcher Euromonitor International.