Situational Analysis of ‘Cadbury: An Ethical Company Struggles to Insure the

Integrity of Its Supply Chain’

Executive Summary
The purpose of the report is to perform a situational analysis of the ongoing threats faced by
Cadbury relating to its Ethical practices and the integrity of its Supply Chain. The first section
briefs the problems faced by Cadbury in the past followed by the steps taken by the company
to tackle these problems. With this background, the on-going threats faced by the company
are detailed in section 3 of the report.

Contents
1. Issues faced by Cadbury ..................................................................................................... 1
1.1 Allegations of child slave labor in the process of harvesting cocoa ........................... 1
1.2 Decline in price of cocoa due to political instability ................................................... 2
2 Steps taken by Cadbury ...................................................................................................... 2
2.1 Cadbury’s legacy ......................................................................................................... 2
2.2 Financial incentives ..................................................................................................... 2
2.3 Better infrastructure and amenities to workers ........................................................... 3
3 Threats ................................................................................................................................ 3
3.1 Protests against Cadbury on account of Environmental degradation .......................... 3
3.2 Loopholes in Supply chain and Quality Control ......................................................... 3

1. Issues faced by Cadbury

1.1 Allegations of child slave labor in the process of harvesting cocoa
In 2000 and 2001, revelations that the production of cocoa in the Côte d’Ivoire involved
child slave labor set chocolate companies, consumers, and governments reeling. The
stories of child slave labor on Côte d’Ivoire cocoa farms hit Cadbury especially hard
since the company sourced most of its beans from Ghana and also since many consumers
in the UK associated all chocolate with Cadbury.

In the US, the House of Representatives passed legislation mandating that the FDA
create standards to permit companies who could prove their chocolate was produced
without forced labor to label their chocolate “slave-labor free.”

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 On April 22, 2001, international news outlets began to broadcast unconfirmed reports
of a small ship off the coast of Benin with about 200 children from Mali and Burkino
Faso that were headed to Gabon where the children would work on coffee and cocoa
plantations. This led to more probing from other news organisations.

1.2 Decline in price of cocoa due to political instability

The history of political instability and deterioration in Côte d’Ivoire led to the decline
in the price of cocoa, which meant that the farmers received a smaller percentage of the
declining world price of cocoa. Cocoa farms in Côte d’Ivoire were small family-run
operations and the farming process required a lot of manual labor. To reduce costs,
farmers pulled their children out of school to help harvest cocoa beans. Others resorted
to human trafficking to obtain slaves.

When the public learned of the possible slavery of children during Easter 2001, attention
focused squarely on the cocoa industry. Côte d’Ivoire, which was becoming preoccupied
with civil war, was in a state of denial about the seriousness of the international
consequences of the child slavery problem.

2 Steps taken by Cadbury

2.1 Cadbury’s legacy
One hundred years of relationship-building in Ghana put Cadbury in a unique position
to improve conditions in the country. William Cadbury had begun cultivating cocoa
sources from Ghana after he quit sourcing cocoa from São Tomé because of the slavery
situation present there. While Cadbury’s legacy continued to influence the company, the
change in ownership structure and governance of the company during the 20th century
brought changes in how decisions might be made.

Using its leverage in the industry, Cadbury also engaged the UN and other development
organizations to look at how the policy agenda was created and how it translated from
the government level to the farm level.

2.2 Financial incentives

John Cadbury, served as an overseer of Birmingham, worked to improve the
Birmingham General Hospital, encouraged the creation of the Post Office Savings Bank
to allow working people to build savings and campaigned against child labor. John’s
business passed to his two sons Richard and George. The brothers’ business took off in

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 1866 when Cadbury became first British chocolate maker to purchase a cocoa press that
allowed them to sell ‘pure cocoa essence’ that was not adulterated by starches.

2.3 Better infrastructure and amenities to workers

The Cadbury brothers inherited their father’s concern for workers. When the time came
to expand manufacturing to meet growing demand, they combined practicality and
ethics by building the new factory in a rural area outside Birmingham. Next to the
factory, they constructed a model village (Bournville) for workers from their own firm
as well as other companies. Unlike the urban ghettos most workers resided in at the time,
Bournville featured mixed income developments, integrated public schools, and parks
and open space.

3 Threats
3.1 Protests against Cadbury on account of Environmental degradation
With their efforts for ethical sourcing successfully focused on cocoa, Cadbury
executives were caught off guard at the annual shareholders’ meeting in May 2004.
Friends of the Earth protestors lined the London streets denouncing the leading
chocolate maker and distributing candy bars with fabricated labels warning of
environmental degradation caused by palm oil, a minor ingredient in Cadbury’s
chocolates. Palm oil represented less than .001% of its source ingredients and yet the
media and public opinion were galvanised against the company.

3.2 Loopholes in Supply chain and Quality Control

Cadbury realized that the entire supply chain located around the globe required risk
assessments, rigorous examinations and verification of compliance to Cadbury’s Ethical
Sourcing Standards, and its Human Rights and Ethical Trading Policy. It set the goal to
achieve sustainable agriculture programs in at least 50% of those crops by the end of
2010.

A few small firms had bucked the industry consensus and produced organic, “fair-trade”
chocolate. These companies sourced their cocoa beans from small co-operatives and
paid farmers premium prices to insure organic farming techniques and adherence to
labor standards. Cadbury had taken note of this trend and purchased the largest of these
boutique brands, Green & Black’s, in 2005.

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While the chocolate industry presented a united front to the public, behind the scenes,
companies differed as to their commitment to improve conditions for suppliers. Cadbury
had worked well with some of the companies in the cocoa chain to coordinate
development efforts, yet several other major cocoa processors were notably reluctant to
follow suit. In the international market, it was also difficult to differentiate beans coming
from areas with questionable labor practices from others. Furthermore, there was the
danger that consumers would not differentiate one major producer from another, and the
entire chocolate category could suffer.