The Chocolate War - Assignment Example

During the height of fighting in January 2003, the price of cocoa on world commodity exchanges more than doubled surpassing $2,700 a ton. While it has fallen back to about $1,700 a ton now that a tentative peace prevails, it remains historically high. (Cocoa was trading for about $1,000 a ton before the outbreak of the war). Chocolate companies have already passed some of the added costs to the consumers. In 2003, Nestle increased its chocolate prices by 10% while Hershey’s and Mars raised the wholesale price of some of their most popular candy bars y a similar amount.

Swiss chocolate maker, Lindt, Kellogg’s Keebler, and Kraft’s Nabisco have also raised prices. The war has also set back attempts by the world’s large chocolate companies to curb the use of child labor and help improve the lives of the people in the Ivory Coast by teaching them new farming techniques and business practices. Worse still for the Ivory Coast, where the incomes of six million people – about 35% of the population – are linked to cocoa farming, is that chocolate companies may begin rethinking their reliance on the country amid fears of continuing political instability.

“If things don’t improve,” says Anne Prendergast, an analyst with the commodities trading firm Refco in New York, “over the next five years one may see a gradual erosion of production from the Ivory Coast.” In the succeeding weeks, the rebels and the government have made progress toward peace. The next several months are critical. If the Ivory Coast can begin to mend its shredded political and social fabric, it may be able to undo the damage already done to its cocoa economy.

But if unrest continues, the situation could become dire for both the country’s cocoa farmers and the world’s chocolate companies. The war turned any of the major cocoa centers in the western part of the Ivory Coast on the battlefields.