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TONY’S CHOCOLONELY: CHANGING THE CHOCOLATE INDUSTRY BY

SELLING CHOCOLATE

By: Maddalena Galloni, Marleen Wierenga, and Patrick Shulist

INTRODUCTION

Ynzo van Zanten, Chief Evangelist for Tony’s Chocolonely (Tony’s), sat back at his desk and did what he

often did when he needed to reflect: he enjoyed a piece of milk chocolate Tony’s Chocolonely bar. On this

particular afternoon, Ynzo was reflecting deeply on the journey Tony’s had been through since 2003. What

started out as a single production batch of chocolate bars made in protest over Nestlé’s refusal to address

child labour and slavery in its supply chain had grown to be the largest chocolate company in the

Netherlands with global sales of nearly €70,000,000 by 2019. In accomplishing this, Tony’s had built its

own supply chains with West African cocoa producers and was committed to removing the root cause of

child labour – parental poverty – by paying farmers a fair price that went beyond typical Fairtrade

premiums. More than this, Tony’s had succeeded in getting other companies to follow its ethical sourcing

principles, and its lobbying had resulted in the Dutch government passing legislation aimed at ameliorating

supply chain abuses.

Surely then, Tony’s must be a success. Yet, in relation to the US$8.6 billion size of the chocolate market,

Tony’s accomplishments were but a drop in the bucket. This made Ynzo wonder what Tony’s could expect

to accomplish: could they ever hope to change the whole chocolate industry? Was change impossible, or

was it simply slow?

More than this, the journey from protest bars to chocolate giant had not always been easy; trade-offs had to

be made, and Tony’s core principles at times had to ‘bend’ to market needs. Though this problem was not

unique to Tony’s, it nonetheless made Ynzo think deeply. On the one hand, to change the chocolate

industry, Tony’s undoubtedly had to grow much larger, which meant adhering to market principles of

making money. On the other hand, changing an industry meant that Tony’s had to think beyond the

traditional business model of chocolatiers, hence why a focus on eradicating slavery was so central to their

entire brand. The key question thus because not if Tony’s should be progressive, but how progressive should

they be? How much was enough of a premium to pay farmers? Should they also try to make the industry

carbon neutral? Should they address the waste created by chocolate wrappers? As with everything related

to being a company with a social mission, there were no simple answers. Instead, there just seemed to be a

perpetual juggling act of balancing conflicting interests.

THE CHOCOLATE INDUSTRY

Chocolate is everybody’s favorite ‘guilty’ pleasure. People eat it out of happiness, out of sadness, and just

because it tastes good. Indeed, the sheer size of the chocolate industry underscores the seemingly endless

reasons that people eat chocolate: approximately four million tonnes of cocoa beans are processed annually

into chocolate, with an overall market value of US$8.6 billion in 2017 that was expected to grow at a

compounded annual growth rate (CAGR) of 7.3 per cent from 2019 to 2025. See Exhibit 1 for more

information on the industry (Voora et Al. 2019).

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Yet, the more one delves into value chain of chocolate, the more loaded the word ‘guilty’ becomes. For

starters, the history of chocolate is interwoven with that of colonialism and slavery. More than that, slavery

and child labour are today all too rampant in the chocolate industry.

A brief history of cocoa

Cocoa, scientifically known as Theobroma, has been grown in South and Central America for over 2000

years. The Mayan civilization considered cocoa sacred and used cocoa beans as a currency. Colonization

of the America led to cocoa’s introduction into Europe, which accelerated in the late 16th century under the

monopoly of Spanish colonies. As a taste for cocoa took hold in Europe in the 1800s, colonial powers set

up largescale plantations using forced labor (Sackett 2008). At this time, cocoa was usually consumed as a

drink mixed with sugar, cinnamon, vanilla, or other spices.

In the 20th century, Rudolf Lindt developed a process to make solid chocolate tablets, which launched the

modern chocolate industry. This accelerated the demand for cocoa even further. To meet this growing

demand, European countries such as Portugal, the Netherlands, the United Kingdom, and France rapidly

set-up cocoa plantations in their equatorial colonies (Geman, 2015).

The cocoa industry today

Nowadays, over 70% of cocoa is produced in West African, mainly Ghana and Côte d'Ivoire (Ivory Coast),

(Food Empowerment Project 2020). In Ghana, cocoa is the most important export crop, contributing up to

30% of export earnings. Similarly, in Côte d'Ivoire, cocoa is considered more valuable than gold, accounting

for over 40% of the country’s export earnings in 2015 (Daoui, 2020).

Unlike the industrial agriculture of other cash crops, cocoa is primarily grown by rural smallholder farmers.

As such, millions of small-scale producers and their families are highly dependent on cocoa prices

(Minderoo Foundation 2020) and vulnerable to unequal asset distribution (Pinilla and Willebald 2018). On

average, cocoa farmers earn less than $2 per day, placing them below the poverty line.

As a result, cocoa farmers often resort to child labor to ensure they grow sufficient cocoa. In doing this, the

historical labour issues associated with cocoa are firmly extended into the present. Most severely, some

children are also victimized by traffickers who, with the promise of giving them a job, keep them in slavery

and force them to work in terrible conditions. Most of the children are not allowed to see their families and

are subject to torture if they work slowly or try to escape (Food Empowerment Project 2020). These words

may be hard to read, but they are unfortunately the truth.

Industry responses to labour issues

Although reports of slave labor on cocoa farms date back as early as 1998, major European and American

confectionary brands historically claimed that they are unaware of the problem and that the cocoa supply

chain is too complex to allow verification of the working practices on every single farm.

[W]e have been visiting the Ivory Coast for decades and working closely with many cocoa farmers.

In all that time, we have simply not come across such practices. We are confident that, while illegal

practices may exist, this is on a very limited scale indeed and confined to certain areas” - John

Newman, Director of the British Biscuit, Cake, Confectionery, and Chocolate Alliance (BCCCA),

June 20011

1 As quoted in Schrage and Ewing, 2005

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[N]o one, repeat no one, had ever heard of this. Your instinct is that Hershey should have known.

But the fact is we didn’t know.” (Robert M. Reese, Senior Vice President of Hershey Foods, June

2001).2

However, following pressure from international development organisations and the media, as well as in

response to consumer desires for ethically sourced chocolate, companies have been pushed to address the

problem of illegal child labor in their supply chains. In 2001, the chocolate industry, in collaboration with

US Senator Tom Harkin and Representative Eliot Engel, voluntarily signed the Harkin-Engel Protocol to

eradicate the “worst forms of child labor.” Some of the initiatives included monitoring and remediation

systems for child labor. However, they had very limited impact, given the rural nature of smallholder cocoa

growers, making them hard to monitor.

More recently, in 2016, the government of Côte d'Ivoire partnered with the International Cocoa Initiative

to reinforce its National Child Labour Monitoring System. Furthermore, in 2017, Ghana put in place its

National Plan of Action Phase II to eliminate the worst forms of labor (Minderoo Foundation 2020).

Despite these initiatives, relatively little progress has been made to eliminate child labor and slavery in the

cocoa industry of Western Africa. Resultantly, it is estimated that approximately 1.8 million children in the

Ivory Coast and Ghana may be exposed to the extreme forms of child labor on cocoa farms (Food

Empowerment Project 2020).

TONY’S CHOCOLONELY

Origins: A journalist trying to end slavery in the cocoa industry

We were never really aiming to become a company, we just saw [a] problem in society and in

[the] economic system and decided to tackle it head on because nobody was – Ynzo van Zanten

(2020), Chief Evangelist at Tony’s Chocolonely.

Tony’s story started in 2003, with a group of Dutch journalists whose television program – Keuringsdienst

van Waarde (Food Unwrapped) – focused on unseen practices in food production. In one episode, Teun

van de Keuken decided to look into the cocoa supply chain and found that child slavery was a common

practice in West Africa. Teun also discovered that many of the largest international chocolate brands had

recently signed the Harkin-Engel Protocol and thus were aware of the slavery risks in their value chains.

Teun was shocked and decided to make use of a Dutch Law which prosecutes the production and

consumption of goods that involve criminality. Because child labour and slavery are inherently criminal,

and Teun was aware of these abuses in the cocoa supply chain, he filmed himself eating several chocolate

bars and then attempted to have himself arrested as a criminal. In 2004, a judge refused to persecute Teun.

Yet, Teun did not give up, and with some legal help he decided to look for witnesses and victims in the

production of the chocolate he ate. In the Ivory Coast, Teun found four boys who used to work as slaves on

a cocoa farm and tried to use their stories as evidence against himself in court.

While waiting for the judge’s ruling, Teun approached Nestlé, the principal sponsor of the new ‘Charlie

and the Chocolate Factory’ movie, proposing that they produce a slave free chocolate bar for the movie

premiere. Nestlé was, unsurprisingly, not interested, as such a move would force them to acknowledge the

labour issues in their supply chain.

2 Ibid

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Not willing to let Nestlé’s refusal stand, and undeterred by their own lack of knowledge about the chocolate

industry, Teun and his colleague Maurice Dekkers produced a batch of 5,000 Fairtrade and what they

thought was “slave free” Tony’s Chocolonely bars in November 2005. The name Tony’s came from the

English version Teun’s name, while Chocolonely was a reference about how ‘lonely’ the mission to

eradicate the worst forms of child labour were (Blom et Al. 2014). Tony’s bars were an instant success and

received higher demand than expected with the pre-sale of 13,000 bars (Tony’s Chocolonely website 2020).

More than this, the duo had shown that there was a demand for slave-free chocolate. This provided some

solace when the Dutch judiciary again refused to indict Teun for being a “chocolate criminal.”

Transformation into a company with a social mission

With the sale of thousands of chocolate bars in 2005, Tony’s had shown that demand for ethical chocolate

existed. Yet, this was not enough. In 2007, Teun visited Ghana and discovered that sometimes even

Fairtrade certified farms used modern slavery, and that illegal child labor practices were a systemic issue.

Therefore, Tony’s changed its slogan from “100% slave free” to “on our way to 100% slave-free chocolate”

(Tony’s Chocolonely Official Website 2020).

Seeing no other route forward, Dekkers invested €60,000 and borrowed another €100,000 to set up Tony’s

Chocolonely, the first chocolate company to consciously offer slave free chocolate (Blom et al. 2014).

In 2009, Tony’s team grew with the addition of four people working in sales, finance, office management

and marketing. By then, the company established a stable revenue of approximately €1 million (Blom et

Al, 2014), with most production and operational matters being outsourced to Barry Callebaut, a major

manufacturer producing chocolate for dozens of different brands. More than anything, Tony’s revenue

showed that it was possible to be a successful company with a social mission.

In September 2011, Henk Jan Beltman, an experienced businessperson with a commercial background in

the food industry at Innocent drinks and Heineken, invested €330,000 in Tony’s and became the controlling

shareholder (51%) and CEO. Maurice kept 34% shares and Eveline Raymans, the former CEO, became a

shareholder with 15%. Tony’s entered a new phase of rapid expansion by securing deals with major

supermarket chains in the Netherlands, thus increasing the number of retailers by a factor five (Blom et Al.

2014) and introducing new products (Abu Ghazaleh et Al. 2018). From 2011 to 2012 revenues grew by

81% (Blom et Al. 2014), a pattern of rapid growth that continued for years, as shown in Exhibit 2 and

Exhibit 3.

At this time, Tony’s also established their key performance indicators (KPIs):3

• 50% increase in net revenue

• 40% gross margin

• 4% net profit

With these KPIs, Tony’s wanted to prove that profit could be generated ethically. More specifically, they

wanted to show other chocolatiers that Tony’s business model can viably be replicated throughout the whole

industry (Tony’s Chocolonely Annual Report 2016-2017).

3 Abu Ghazaleh et Al. 2018

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Developing a cocoa sourcing system

Coinciding with this rapid transformation and growth, Tony’s grappled with the challenges of sourcing

cocoa. In 2007, Teun visited Ghana and discovered that the Fairtrade certificate did not guarantee slave-

and child labor-free production, as these practices were widely used on certified farms in West Africa. The

partners thus realized that slavery was highly entangled in chocolate production, and the whole supply chain

needed rethinking chain. As mentioned, this realization is why the company changed their slogan to “on

our way to 100% slave free chocolate.” This change was transparently communicated to consumers.

Financially supported by Oxfam Novib, Tony’s started by establishing direct relationships with cocoa

farmers in West Africa. The reasoning was that this direct relationship would allow them to guarantee an

ethical product, something that could seemingly not be guaranteed by purchasing ‘certified’ beans on the

open market.

While these direct sourcing relationships were being developed, Tony’s continued to purchase Fairtrade

certified cocoa based on the mass balance principle (Tony’s Chocolonely website 2020). In the Fairtrade

mass balance principle, if 20% of the input cocoa is Fairtrade certified, then 20% of the output chocolate

will similarly be Fairtrade certified. However, as certified and non-certified beans not physically separated

throughout the whole supply chain, Fairtrade labeled chocolate may not necessarily contain the certified

beans (UTZ Certified 2020).

The logic for this seemingly odd situation was that the mass balance approach allowed for a reasonable

compromise between simpler supply chain logistics and impact, especially considering that Fairtrade and

‘normal’ beans have no taste differences. For instance, if a chocolatier purchases 10,000kg of certified

beans, then farmers – somewhere – would have been paid the premium for 10,000kg of cocoa beans,

regardless of whose chocolate bars those beans ended up in.

Under the Fairtrade mass balance system, only a farm has to be certified. This was much simpler than

having to also certify that beans were separated during transportation, and that beans were not mixed in a

production facility. Put another way, instead of having to develop two entirely parallel chocolate systems

(e.g., double the logistics routes, and double the production equipment in factories), the existing system

could continue to operate with minimal disruption, keeping costs down. This is much the same logic under

which consumers paying for green electricity may not actually use that electricity; the consumer is actually

just paying for a green producer to supply the metered amount of electricity into the grid. As green

electricity has identical performance characteristics to ‘dirty’ electricity, there would be no performance

benefits to establishing a parallel distribution system.

Yet, Tony’s found this system to be entirely unsatisfactory for two reasons. First, Fairtrade did not guarantee

that beans were free of child and slave labour. Second, Tony’s wanted to guarantee their customers that the

chocolate bar they were eating was an ethical one. As such, the mass balance system was inadequate.

Therefore, and working to further solidify the legitimacy of their social mission, Tony’s started the Bean-

to-Bar project in February 2012 to drive transparency in its supply chain and tackle the issue of slavery.

After a detailed analysis of the cocoa farming sector, Tony’s found three main reasons for slavery and child

labour on cocoa farms:

1. Due to the low productivity and prices, cocoa farmers’ wage were often below the poverty line of

$2 a day (Ferreira et Al. 2015), meaning that slavery and child labour were seen as a way of making

much needed money

2. There was a lack of infrastructure, limiting farmers’ ability to break the poverty cycle

3. Farmers perceived slavery practices as acceptable, given that they had existed for so long

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To tackle these issues, Tony’s made the strategic decision to purchase its raw cocoa directly from

cooperatives, and put in place five sourcing principles for these cooperatives to follow (Exhibit 4):4

1. Full traceability of cocoa beans

2. Provide a sustainable living income for farmers

3. Better quality and productivity

4. Long-term relationships of at least 5 years with farmers

5. Strengthen the position of farmers

In 2012 and on the basis of the five sourcing principles, Tony’s signed five-year contracts with Ecokim and

ABOCFA, two cooperatives in Ghana and Ivory Coast that represented 529 farmers.

For managing logistics, Tony’s used the local buyer Hubert Hoondert’s. Hoondert’s was responsible for

purchasing the cocoa beans from the cooperatives and arranging transportation to the Dutch food processor

Barry Callebaut. However, at Barry Callebaut, Tony’s found an obstacle against guaranteeing traceability

of the raw cacao, as the manufacturer used the mass-balance principle for processing Fairtrade chocolate.

After several negotiations, Tony’s convinced Callebaut to put in place a segregation approach for Tony’s

beans. They reached a similar agreement with Athea, Tony’s molding and packaging partner (Blom et Al.

2014).

Strengthening Tony’s mission to eradicate child labour

At the same time, Tony’s established the Chocolonely Foundation, a fund to support projects aimed at

increasing productivity amongst cocoa farmers, creating awareness about child slavery, and empowering

cooperatives and local communities. In 2014 the foundation received 10% of Tony’s annual net profit,5

though that number was decreased to 1% in 2020.6 In addition, Tony’s changed the design of the chocolate

bars by dividing them into unequal pieces that represented both the map of Western Africa and the

inequality of the supply chain (Exhibit 5). (Abu Ghazaleh et Al. 2018).

2016 and 2017 were very important years in Tony’s journey to eradicate child labor in its supply. In 2016,

Tony’s launched Child Labor Monitoring and Remediation System (CLMRS), a project devoted to

identifying cases of child labor, and to finding solutions to prevent child labor practices as much as possible.

In 2017, in partnership with Walk Free Foundation and Tulane University, Tony’s reviewed its supply chain

and reported zero cases of child labor.

However, cases of child labour did continue to be found. As seen in Exhibit 7, Tony’s Child Labor

Monitoring and Remediation System (CLMRS) found 258 cases in Tony’s supply chain. During the fiscal

year 2018/19, Tony’s and CLMRS have managed to resolve 56 cases of illegal child labor, but as the

company keeps expanding so will the risk of finding more cases of illegal child labor. This underscores the

inherent complexity of managing a far-flung supply chain that has historically involved reprehensible

labour practices. But, while other chocolate companies turned a blind eye, Tony’s took action.

Further Expansion

By 2017, Tony’s was officially the largest brand in the Netherlands with a market share of 16.7% (Abu

Ghazaleh et Al. 2018). In the same year, Tony’s worked to expand internationally. In May Tony’s entered

4 Abu Ghazaleh et Al. 2018 5 Blom et Al. (2014) 6 Chocolonely Foundation 2020

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the US, a key market due to the high demand and proximity to the biggest competitors (Dow Jones

Institutional News 2017).

Recognizing that this geographic expansion would require increased supply, Tony’s started a one-year

collaboration with two new cooperatives in Ghana: Asunafo and Asetenapa. After the introductory year for

assessing the cooperatives’ performance and areas of improvements, Tony’s and the cooperatives signed a

five-year strategic plan.

To fuel this expansion, Tony’s received an undisclosed sum from the Belgian private-equity firms

Verlinvest and JamJar Investments. Ben Black from Verlinvest and Adam Balon from JamJam joined

Tony’s supervisory board, however CEO Henk Jan kept 51% of the voting rights.

Tony’s maintained steady revenue growth over the years, yet profitability was still a struggle. Since the

fiscal year 2016/2017, Tony’s net income has decreased dramatically, to almost €0 in the latest fiscal year

(Exhibit 2 and Exhibit 3). Specifically, in 2019, despite the increase in revenue from €55.1 million to €69.9

million, the company concluded the year with a profit of less than €3,000 due to the many unplanned

investments, increasing employee benefits from 11.6% to 13.3%, and higher marketing and consultancy

costs. Additionally, Tony’s reported an increase in logistics costs due to higher volumes shipped to the US

and the UK (Appendix 5). All of these actions should increase Tony’s long-term value creation, but in the

short term they were costly.

Amplifying the impact: Changing the cocoa system

Tony’s inherently realized that they alone could not rid the chocolate industry of child labour. Indeed, this

is clearly laid out in Tony’s Code, a set of principles to measure Tony’s social impact (Exhibit 6 ). In Tony’s

Code, creating awareness and leading by example – both of which Tony’s had done remarkably well to date

– were only the first steps to systems change. The final part of Tony’s Code – inspiring others to act – is

where any true hope of eliminating the worst labour abuses in the supply chain lay.

To this end, Tony’s was not satisfied to simply grow as a business and successfully address slave and child

labour in its own supply chain. Instead, Tony’s launched Open Chain: an open-source collaboration

platform where all of Tony’s knowledge and tools were available to other chocolate producers. With

launching the platform, Tony’s reiterated the necessity of working together to end modern slavery and child

labor. However, it took two years for the system to have any success. In 2019, Albert Heijn, the biggest

retailer in the Netherlands, became the first company to sign up to the platform, agreeing that all of their

Delicata chocolate bars would be made with fully traceable cocoa beans purchased from Tony’s partner

and manufactured through chocolate processor Barry Callebaut (Thompson 2019a).

This new collaboration was a key step to pressuring the broader industry to adapt. Yet, with this success,

Tony’s simultaneously degraded its own competitive advantage. If other companies followed suit, would

Tony’s be able to differentiate itself in any way?

Working a different angle, Tony’s and other chocolate companies started lobbying for European legislation

in 2018. The Tony’s Team went to the European Convention on Human Rights and Fundamental Freedoms

in Strasbourg and left a letter (and chocolate bars) on the desk of the convention’s attendees as a reminder

to take action to stop modern slavery. This was just the beginning of Tony’s new strategy of lobbying for

stricter legislation. Tony’s sent a letter to the Dutch Foreign Trade and Development Cooperation Minister

Sigrid Kaag to support the Living Income reference price for cocoa and received a positive response.

Additionally, in February 2019, Tony’s met the Dutch Minister of Agriculture, Carola Shouten, on a tour

of Ghana and Ivory Coast. The Minister visited various local farms and projects concerning food security

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and climate change, including Tony’s partner cooperative ECOKIM (Tony’s Chocolonely Annual Report

2018/19 2019).

In May, Tony’s celebrated a big victory, the Illegal Child Labor Due Diligence Bill was approved by the

Dutch Upper House. The bill requires all companies selling goods and services in the Netherlands to do

their outmost to prevent child labor in their supply chains. Tony’s lobbying efforts did not stop here, in

December 2019, the company launched the 100% Responsibility petition worldwide to tackle the issue of

modern slavery and illegal child labor in supply chains. The petition seeks to collect 1 million signatures to

put pressure on governments to strengthen policies from self-regulation to legislation.

Finally, Tony’s was working to use its most recent round of investment to create Tony’s Chocolonely

Chocolate Circus, a chocolate factory and educational visitor’s center in Zaanstad, Amsterdam region,

where consumers will learn about inequality in chocolate production (Harvey 2020). Tony’s is expecting

to receive half a million visitors every year that will enjoy a ride on the rollercoaster and discover Tony’s

chocolate making processes (Tony’s Chocolonely Annual Report 2018/19).

BALANCING SYSTEMS CHANGE WITH BUSINESS REALITIES

Climate change and social change

Starting in 2019, Tony’s worked to make their supply chain carbon neutral. One part of this involved

purchasing biofuel on a mass balance principle to offset all sea freights emissions. This led to savings of

approximately 200 tons of CO2. Additionally, Tony’s calculated its operational carbon footprint and

compensated 100%, or 33,903 tons, with Justdiggit by means of climate friendly land-reclamation projects.

Interestingly, though both initiatives had real climate impacts, they both diverged from the approach Tony’s

used in sourcing and producing chocolate. Notably, Tony’s demanded that they be able to trace all cocoa

beans from the farm to the chocolate bar. This required substantial effort on their behalf, but changing the

chocolate system was Tony’s mission, after all. Yet, for climate endeavours, Tony’s seemed more willing

to accept and use the standard strategies employed across many different industries, such as purchasing

offsets.

In another initiative during Fairtrade Week in the Netherlands, the company ran a “Buy a Bar – Plant a

Tree” promotion at Wereldwinkels and Spar supermarkets. Tony’s ended up planting 17,000 shade trees at

cooperatives in Ghana and Ivory Coast. Farmers supported this initiative, due to the multiple benefits of

shade trees: preventing extreme weather conditions, boosting biodiversity, and slowing down weed growth.

This was underpinned by the fact that cocoa was amenable to growing in the shade.

Furthermore, the company replaced Tiny Tony’s, Tony’s boxed chocolate selection, packaging with foil

made of mono-plastic, which according to Tony’s, is the most recyclable option that met packaging

standards. Tony’s claimed that bioplastics had also been taken into consideration during the selection

process, but because they cannot be disposed as compost, and the raw materials come from high negative

impact crops, they were not selected. The mono-oriented polypropylene used for the new packaging is

100% recyclable and even if simply burnt, it does not emit harmful substances.

Overall, all these new environmentally conscious investments led to Tony’s being awarded the most

sustainable brand in the Netherlands. This was the third time.

Operations, impact, and growth

Early on, Tony’s rapid growth made it challenging to make 100% of its beans traceable:

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Years ago, we were facing unexpected growth in our company, and we ran into situations where

we didn't have enough fully traceable beans, which is one of the existential parts of our strategy….

What do we do? Do we just stop producing because we don't have traceable beans anymore? This

means that we don't have our bars on shelves anymore…with the challenge and the danger that

we might not get [the shelf space] back? I mean there's nothing worse than getting off shelves and

then trying to reclaim shelf space, right? 7

Tony’s thus faced a choice of keeping the promise to guarantee the full traceability of the beans, or

ensuring it stayed on shelves and was able to continue pushing for change in the industry. In other

words, if they compromised on their principles today, could this ensure a bigger impact in the future?

Ultimately, Tony’s decided they needed to ensure the business stayed viable, and thus bought cocoa beans

from the world market.

For us it was an impact trade-off…we realized that if we were to remain on shelves by using

untraceable cocoa beans – bought from the world market without the option for us to pay a

premium to the farmers at the beginning of the supply chain – we would be able to make more

impact a year afterwards because we would still have that shelf space8

Critically though, Tony’s maintained transparency and communicated clearly with customers about why it

made the decision it did.

Running out of beans was not the only time Tony’s faced a dilemma between maintaining production and

abiding by its principles. In 2018, Tony’s discovered a production error in one batch of cocoa powder from

its cooperatives. The batch could not be used in the chocolate bars, but Tony’s needed to maintain

production. Tony’s therefore used an alternative Fairtrade certified chocolate powder from Barry Callebaut

for two production runs. The result was that the quality was preserved, but the cocoa was not traceable.

In April 2019, Tony’s made another strategic decision concerning its sourcing standards when it decided to

stop producing the popular Milk Popcorn Sprinkle Disco bar. The special popcorn required to make the

chocolate bars no longer met Tony’s sourcing standards. In this case, Tony’s was not willing to violate its

sourcing principles because the decision only impacted one product and not a whole product line (Tony’s

Chocolonely Official Website 2019).

Paying a premium to farmers; how much is a living wage?

Because there was a direct link between parental poverty and the use of child or slave labour, a core

component of Tony’s commitment to changing the chocolate system was paying cocoa farmers a living

wage. However, it was not always clear exactly what a living wage should be, nor was it clear how other

factors, such as productivity, family size, and other income should be taken into account. Should a living

wage be paid even to unproductive farmers? Should a living wage come only from the sale of cocoa beans,

or should other farm-based activities be expected?

In terms of price, in 2014 following studies published by True Price, Tony’s started to pay the cocoa farmers

25% premium on top of the local farm gate price (Tony’s Chocolonely FAIR Report 2013/2014), finally

achieving a living income (Tony’s Chocolonely website 2020). However, in mid-2017, the global price for

cocoa fell by 40% globally due to an exceptional harvest and market speculations. Consequently, the

minimum price paid to farmers fell by almost 40% in Ivory Coast causing tremendous impacts on the

7 Ibid 8 Ibid

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farmers’ lives, such as the inability to pay children’s school fees (Tony’s Chocolonely Annual Report

2018/19 2019).

As Tony’s purchase price was tied to the market price, they ultimately ended up saving on the purchase of

cocoa for their chocolate bars. Part of this savings was passed on to customers:

Two years ago, when price went down, we also did a price decrease because we wanted to show

the consumer that it's ridiculous that if cocoa prices go down the total remains the same price in

the in the stores. That’s a wrong signal […] the price of [other brands’] chocolate on shelves

remained the same or went up and [...] there was something between 3 to 8 billion euros stuck in

the system somewhere and that definitely didn't go to the farmers, they earned half. That money

went somewhere in the industry to the chocolate manufacturers and retailers, which is ridiculous9

CHARTING A PATH FORWARD

As he enjoyed more of his chocolate bar, Ynzo continued to reflect. He wondered first and foremost if

Tony’s ever had a chance of changing the chocolate industry on a global scale. Furthermore, he wondered

if Tony’s had made the correct choices in the past when they prioritized production over traceability. More

granularly, he wondered how best to balance the creation of sustainable value with the necessity of growing

the business. How much of a premium should farmers be paid, and how environmentally progressive should

Tony’s work to be? Though the answers to these questions would never be settled, considering them deeply

was imperative to charting the path forward.

9 Ibid

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EXHIBIT 1: GLOBAL COCOA AND CHOCOLATE MARKET SIZE

Source: https://www.fortunebusinessinsights.com/industry-reports/cocoa-and-chocolate-market-100075

Source: https://www.iisd.org/sites/default/files/publications/ssi-global-market-report-cocoa.pdf

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EXHIBIT 2: 2018-2019 P&L

(Tony’s FAIR Annual Report 2018/2019 2019 p. 39: https://tonyschocolonely.com/us/en/annual-fair-

reports/annual-fair-report-18-19)

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EXHIBIT 3: TONY’S REVENUE

Fiscal Year Revenue Net Income

2012-13 € 4,532,130 € 98,474

2013-14 € 7,381,336 € 82,007

2014-15 € 17,621,473 € 729,421

2015-16 € 29,305,706 € 1,445,207

2016-17 € 44,924,181 € 2,717,292

2017-18 € 55,051,839 € 2,481,348

2018-19 € 69,619,907 € 2,656

(Source: Tony’s Chocolonely Annual Report p. 37)

€ -

€ 10,000,000

€ 20,000,000

€ 30,000,000

€ 40,000,000

€ 50,000,000

€ 60,000,000

€ 70,000,000

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Revenue Net Income

Page 14

EXHIBIT 4: TONY’S FIVE SOURCING PRINCIPLES

(Tony’s FAIR Annual Report 2018/2019 2019 p. 14: https://tonyschocolonely.com/us/en/annual-fair-

reports/annual-fair-report-18-19)

Page 15

EXHIBIT 5: UNEQUAL DIVISION OF TONY’S CHOCOLATE BAR

(Tony’s FAIR Annual Report 2014/2015 2015 p. 2:

https://tonyschocolonely.com/storage/configurations/tonyschocolonelycom.app/files/jaarfairslag/2014-

2015/tc_jaarfairslag_2014_en_lowres_spread.pdf)

Page 16

EXHIBIT 6: TONY’S CODE

(Tony’s FAIR Annual Report 2018/2019 2019 p. 10: https://tonyschocolonely.com/us/en/annual-fair-

reports/annual-fair-report-18-19)

Page 17

EXHIBIT 7: TONY’S ASSURANCE REPORT

(Tony’s FAIR Annual Report 2018/2019 2019 p. 12: https://tonyschocolonely.com/us/en/annual-fair-

reports/annual-fair-report-18-19)

Page 18

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