25 June, 2020

Nestlé’s KitKat will stop being Fairtrade – FAQ

by Claire Liboureau

Since our statement about cocoa farmers’ concerns regarding KitKat moving away from Fairtrade, we have received many messages of support for farmers, as well as some questions. We have also seen questions on social media, so we would like to answer as many as we can.

What earnings were farmers making selling their cocoa and sugar on Fairtrade terms for KitKat?

  • The Fairtrade Minimum Price is a price safety net for farmers that kicks in when the market crashes. This is currently active in cocoa and has been protecting Fairtrade farmers for the last two years. The Fairtrade Minimum Price is $2,400 per tonne (i.e. £1,944 per tonne) and 100% of the minimum price goes to the farmer. This is guaranteed for cocoa farmers.
  • The Fairtrade Premium is a transparent, clear, additional amount of money. 100% of the Fairtrade Premium goes to the co-operatives whose members – the farmers – decide democratically for themselves how to spend it. The Fairtrade Premium is $240 (i.e. £194) per tonne for cocoa and $60 (i.e. £49) per tonne for sugar.
  • Given the number of KitKats sold in the UK and their cocoa and sugar content, this represents respectively £1.37 million and £583,000 in Fairtrade Premium. This means that, with KitKat Fairtrade, each year cocoa and sugar farmers receive a total of £1.95 million in Fairtrade Premium.

As Nestlé moves away from Fairtrade, what is the impact on farmers?

  • Cocoa and sugar farmers will lose the Fairtrade Premium of £1.95m per year (£1.37m for cocoa and £583k for sugar). The Premium is a transparent, clear, additional amount of money that is paid to Fairtrade co-operatives whose members – the farmers – decide democratically for themselves how it is spent.
  • Nestlé have announced publicly that they will invest ‘in a series of initiatives to support farmers and communities, including £1 million to improve incomes and a further £500,000 on community projects’, totalling £1.5 million over two years (equivalent to £750K each year). It is not clear how that will be delivered, whether it will go directly to farmers’ co-operatives and the amount of control they will have over how they spend that money.
  • As it stands and as per the information now available, after taking into account the above £1.5m investment over two years, cocoa and sugar farmers still stand to lose £2.4m over the first two years after the KitKat move, or £1.2m per year. It is not clear what happens after the first two years, there is not yet public commitment to any further investment.
  • Beyond the financial loss of the Fairtrade Premium, producers will also lose the safety net offered by the Fairtrade Minimum Price and the ability to decide for themselves how to spend their Premium and develop their communities.

There are many other terms and numbers around – can you explain some of them?

  • The Living Income Differential has been used in some of our communications. This is an additional amount to be added to the market price of cocoa as requested by Ivorian & Ghanaian governments. The Living Income Differential is mandatory for all companies that buy cocoa from Côte d’Ivoire and Ghana. Any company that pays this is not an exception but complies with legal requirements. It is new and only applies from the October 2020 harvest. It is independent of the Fairtrade Premium which is paid in addition.
  • The Rainforest Alliance Premium has been mentioned too. There has been no public communication as to what this amounts to and different numbers have been used. Unlike the Fairtrade Premium, the Rainforest Alliance Premium is not fixed but negotiated and so the amount paid varies. It is also not paid directly to producers’ co-operatives but to the traders, who are large multinational companies, and who then decide how that premium should be used and what portion should go to the farmer. We cannot give an accurate number on the Rainforest Alliance Premium that Nestle will pay and would hope Nestlé could confirm that, to the public, but most importantly to producers who are not connected to social media and need clarity on their future income. To give an indication, in 2019, on average, the Rainforest Alliance Premium was $84 per tonne.

Read the full statement and letter from the Ivorian Fair Trade Network

Fairtrade Blog