1. Evaluating Policies and Actions on Cocoa Sourcing
and Marketing & Health Issues
Page No. 1 of 8 London 2013
Mars
Evaluating Policies and Actions on
Cocoa Sourcing and Marketing &
Health Issues
Travis High

2. Evaluating Policies and Actions on Cocoa Sourcing
and Marketing & Health Issues
Page No. 2 of 8 London 2013
1. Executive Summary
Historically consumed as a special treat, chocolate bars are now a regular delight for consumers
worldwide and mean big business. However, several externalities have been revealed in the
cocoa supply chain. The focus in this paper is on ethical sourcing on the back end and nutrition
challenges at the consumer level. As the world’s largest chocolate supplier, Mars is an
interesting company on which to base an analysis of the policies and actions of a major
chocolatier.
This paper will first review the Mars context, second, its business model including the Five
Principles and its supply chain, third, how it stacks up against its competitors on cocoa sourcing,
fourth, its promotion of consumer health, and finally, some concluding remarks on the case for
change.
2. Mars: History and Financials
Mars, Inc. is one of the largest privately owned corporations in the United States and is based in
suburban Washington, DC. Begun in 1911 by Frank C. Mars in Washington state, the company
is now is a multinational corporation and features six divisions: Petcare, Chocolate, Wrigley’s,
Food, Drinks, and Symbioscience. (Mars, n.d.) The focus of this paper is on the operations of the
Chocolate division.
The estimated value of the company was $30 billion in 2012. (Yahoo! Finance, n.d.) As a private
company, further information on its financials are not available, but the Mars founding family is
known to be among the wealthiest in the U.S. In the global confectionary market, Mars is the
market leader in a crowded, fragmented market, as seen in Table 1. (MarketLine, 2012)
Chocolate accounts for 52.6% of the confectionary market value.
Table
1
Global confectionary market
by value, 2011
Company % Share
Mars, Inc. 16.8%
Kraft Foods, Inc. 15.4%
Nestle S.A. 9.1%
The Hershey Company 6.8%
Other 51.9%
3. Business Model
Mars Chocolate has a business model based on commoditization of chocolate candy bars, to be
sold in grocery and retail stores worldwide. Similar to Coca-Cola, the aim is to have a universal
presence in order to be top-of-mind. As a commodity, the pricing strategy is to price low in
order to be competitive with other offerings.
5 Principles
Mars has a set of five core principles on which it aims to measure its performance. They are:
quality, responsibility, mutuality, efficiency, and freedom. (Mars, 2003) By responsibility, the
company means that employees at all levels are to be responsible for results, but also to act

3. Evaluating Policies and Actions on Cocoa Sourcing
and Marketing & Health Issues
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responsibly and ethically. Mutuality means “mutuality of benefits” in business relationships, a
key standard from the early days of the company. (Mars, n.d.) It also purports to offer mutual
benefits to the communities where Mars operates. (Mars, 2003) By freedom, the company means
specifically the financial freedom that private ownership permits.
Supply Chain
The supply chain for Mars Chocolate is highly sensitive to the price of cocoa beans, which are a
commodity like any other. Figure 1 shows that in the past decade the price has been rising,
although the price has recently fallen to an intermediate value of $2,000 per metric ton. (Index
Mundi, 2013) Meanwhile, productivity has fallen around the world. (Mars, n.d.) (Fair Labor
Association, 2012) (Cameron, 2009) Mars expects demand to outstrip supply by 2020.
Figure
1
Although cocoa only represents 3.2% of the raw material input (by volume) across all Mars
businesses, it is one of the most critical for the business. (Mars, n.d.) Cocoa is the focus of the
company’s efforts in the area of sustainable sourcing and indeed may prove to be a model for
other commodities.
Mars has a Code of Conduct that it implements in all of its business units. With regard to its
supplier relationships, the company stipulates the following:
- Suppliers must be compatible with the 5 Principles.
- The Code of Conduct follows ILO standards.
- Reports on risk, including social and environmental risk, are gathered from Maplecroft,
a consultancy.
- At-risk suppliers are selected for self-assessments.
- Mars appoints independent auditors to audit its suppliers. Corrective action plans are
developed for identified suppliers.
- There is a global Center of Excellence to support and train purchasing teams in best
practices for their line of work. (Mars, n.d.)
This analysis of the Mars chocolate business found two major categories of possible
externalities: cocoa sourcing at the suppliers in Africa, Southeast Asia, and Latin America and

4. Evaluating Policies and Actions on Cocoa Sourcing
and Marketing & Health Issues
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the effects of unhealthy eating on consumer health. The following sections examine these in
greater detail.
4. Sustainable Cocoa: Policies and Actions
Many analyses have been made of chocolate company sustainability programs, but there have
not been many cross-company studies to add perspective. In order to understand Mars
Chocolate, it is helpful to compare it with its main rivals in the industry. Table 1 provides such
an analysis for three of the leading companies mentioned earlier.
Table
2
Company Mars Nestlé Hershey
Revenue from
Chocolate
$20b1 $8b2 $6.6b3
Program funds Principles in
Action report
does not reveal
amount dedicated
to cocoa
sustainability.
CHF 110m over
10 years (1999-
2008) = CHF
11m/year =
$11.8m4
$10m over 5
years (2013-
2017) =
$2m/year7
Proportion of
sales (est.)
NA 0.147% 0.030%
Program
Details
Sustainable Cocoa
Initiative - expand
certification,
research on cocoa
breeding,
investing in
sourcing areas.
Certification
through UTZ, the
Rainforest
Alliance, &
Fairtrade
International8
Nestlé Cocoa
Plan - Includes
Plant Expertise
and Propagation,
Training,
Traceability,
Farmer
Premiums, and
Social Projects4
Bliss line of
certified
chocolate - small
line meant to be
premium,
CocoaLink
mobile program
in the Ivory
Coast, Hershey
Learn to Grow
Farm and Family
Development
Center in Ghana,
$10 million to
reduce child
labor5
Fair Trade
Commitments
100% certification
by 20206
Varies by region.
100% in Europe
and Canada by
2014.7
100%
certification by
20208
Fair Trade
Progress
10% certified as of
2011, 20% as of
20126
100% UTZ
certification
already in UK,
U.S, Oceana
Other market
data is not
provided.7
Currently only
in certain smaller
brands like Bliss
and Scharffen
Berger8
1. There is no reliable estimate of the Mars chocolate business. Estimate is 2/3 of total sales of $30b (Yahoo!
Finance, n.d.) 2. Total Nestlé revenues CHF 92b ($102b), of which CHF 7.5b ($8.0b) are from chocolate – 8%,

5. Evaluating Policies and Actions on Cocoa Sourcing
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based on exchange rate of 1 CHF=1.06871 USD. (Nestle, 2013) 3. (The Hershey Company, 2013) 4. (Fair Labor
Association, 2012) 5. (Kim, 2012) 6. (Mars, n.d.) 7. (Nestle Cocoa Plan, n.d.) 8. (The Hershey Company, 2013)
The table reveals that the companies are all moving towards full fair trade certification of cocoa
beans in their products. However, there is an interesting divergence in application. Mars is
steadily moving in the direction of 100%, whereas Nestlé is nearly there or already there in
some countries. Hershey, meanwhile, only in October 2012 moved to announce its commitment.
(The Hershey Company, 2013)
Fair trade, or alternative trade organizations, aim to ensure adequate compensation to farmers
and positive social impacts in the communities. The concept involves the forming of farmer
cooperatives in order to maximize bargaining power and coordination of resources. A study of
TransFair USA certified coffee farms in Nicaragua, Peru, and Guatemala found that
participation in the cooperatives was correlated with higher income and education compared to
non-participants, although the effects appeared to be uneven. (Arnould et al., 2009) There is no
universal agreement on the utility of fair trade organizations, but it is encouraging to note that
large companies have increasingly thrown their support behind it. Indeed, they have committed
to 100% certification.
In addition to certification, Table 2 also shows commonality across thematic areas in the
companies’ sustainability programs. Increasing productivity, community welfare, environmental
protection, and child labor elimination are common features. For productivity, there is a very
clear business imperative, a business problem, that the initiatives respond to. As mentioned
earlier, there has been a decline in productivity worldwide. This hurts chocolate companies,
their suppliers, and the workers who depend on it for their livelihood.
Child labor is a risk, particularly in West Africa. However, elimination is difficult because it is
sometimes expected that children help out on the family plot. It is the physical hazards in cocoa
farming that pose the greatest risk for children, and that is the danger of using child labor. Both
are to be eliminated in accordance with standards set by the International Labor Organization
and other actors. For Nestlé, training programs emphasize that hazardous work should only be
done by adults and that children should have the opportunity to go to school. (Fair Labor
Association, 2012) In Hershey’s case, opposition from the Raise the Bar, Hershey Coalition may
have led to the announcement of child labor eradication programs. (Kim, 2012)
Mars and other chocolatiers must actively engage with their stakeholders to understand their
needs, not impose ones dreamt up at corporate headquarters. A survey in Kenya found that not
all concerns of smallholders are addressed by ethical sourcing programs. (Blowfield, 2003) That
may be because of a failure to think locally.
5. Marketing and Health Issues
Another case is the health impact of selling chocolate. Chocolate is like many substances; it can
be dangerous if consumed out of moderation. Obesity is rising around the world, especially
among children. One of the causes is snack food consumption. A recent UN FAO report reveals
that Mexico is now the most obese industrialized nation at 32.8% of the population, compared
with the U.S. at 31.8%. (Food and Agriculture Organization, 2013) Diabetes is one of the
leading causes of death in Mexico. (The Economist, 2013) Rising snack food consumption in
that country since the 1990s is one of the culprits.

6. Evaluating Policies and Actions on Cocoa Sourcing
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Of course, food health is a multifaceted problem that involves government regulation, individual
choice, exercise behavior, sedentary habits, as well as dietary choices. However, it is also
believed that company marketing may be behind the poor dietary choices of consumers.
Mars recognizes this. Increasingly, it is engaging in what has elsewhere been called choice
editing, or the offering of products that meet a higher standard of sustainability and corporate
responsibility. Responsible marketing is an important aspect of this. One example of choice
editing is its restricting of advertising to children below 12. (Mars, n.d.) Another is the target to
implement Guideline Daily Amount nutritional information on all confectionary products by
2013 and all other food products by 2014, even in countries where it is not required. These are
positive steps forward. However, at the end of the day, like Coca-Cola, Mars is a company that
sells products – chocolate in this case – that are known to cause a host of health issues.
An interesting case is the company’s plan to stop selling any chocolate product with calories
above 250 by 2013. (Jaslow, 2012) The Snickers king size chocolate bar has 540 calories, so it is
one of the targets for elimination. However, even though king-sized Snickers bars are to be
removed, the plan is to repackage it so that individually wrapped portions can be saved. (Jaslow,
2012) According to Mars, the intent is to “enable sharing or saving a portion for later.” (Forer,
2012) However, Dan Ariely, professor of behavioral economics at Duke University, comments:
“there’s a question of whether you would be able to stop after the first or you just take another
bite, and another bite, and not stop until you finish the whole package.” (Forer, 2012) The
utility of the change for the goal of reducing snacking is thus somewhat limited.
Finally, it is pertinent to this discussion to ask whose responsibility is it to encourage healthy
consumption. A study of consumers in the UK found that consumers believe people themselves
are the most responsible for poor dietary habits, secondly the confectionary manufacturers.
(Bhate, 2007) Consumers do realize they have the responsibility to choose healthy products.
However, if manufacturers collectively continue to provide the unhealthy products, there is an
element of enabling that should not be overlooked. To that end Mars does spread word on
healthy eating through online content and other promotions. (Mars, n.d.)
6. Case for change
Consumer awareness is often cited as one of the reasons for the rising preference for products
with fair trade-certified ingredients. While this is increasingly true, fundamentally the decision
to pick up a candy bar remains taste. It is about indulgence. Therefore, the case for change in
supplier relationships lies elsewhere: it is in the deteriorating productivity of the farms that
grow cocoa. This paper has found that sustainability programs in this industry target
productivity increases, which are good for the company and farmer stakeholders. The other
pressure comes from the industry; indeed, Hershey switched tack in 2012 because it was falling
behind Mars and Nestlé.
There is also a compelling business case for change in how companies like Mars comprehend
their responsibilities in nutrition. First Lady of the United States, Michelle Obama spoke at the
Grocery Manufacturers Association urging companies to take healthy food promotion seriously,
to not mislead consumers, and in particular not market unhealthy food to children. (Nestle,
2010) Politicians are also taking concrete action; New York City Mayor Michael Bloomberg
made headlines with the proposed ban of large sodas. Snack food is the next target. Meanwhile,

7. Evaluating Policies and Actions on Cocoa Sourcing
and Marketing & Health Issues
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savvy companies are beginning to take so-called healthy, premium chocolate as a very serious
growth opportunity, such as Kraft Foods’ recent promotion of Green & Black’s organic
chocolate. (Joseph, 2012)
In sum, the rationale for change on both fronts is there. The question is if it is powerful enough.
Mars’ actions seem to recognize that it is.
7. Reference list
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Bhate, S., 2007. Health of the nation: An individual or a corporate social responsibility? A preliminary
investigation into consumer perceptions. Journal of Public Affairs, 7(2), pp.164-80.
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