Heaven sent? The Divine Chocolate story

This month sees the tenth anniversary of the launch of a bold experiment. Unlike many great business ideas, it has not made any individual fabulously wealthy, but those behind it believe it has made a significant difference to trade between the developed and developing worlds.

Successful entrepreneurs are rightly hailed for their ability to spot niches. But few at the time would have argued that there was much of a gap in the chocolate market. There are many chocolate brands on sale in the UK and the largest producers, such as Cadbury, spend significant proportions of their profits on advertising, making it especially difficult for new entrants to break in. Yet the Day Chocolate Company – which launched its Divine milk chocolate bar in October 1998 – created a niche by deciding to launch a chocolate bar that was Fairtrade yet not premium-priced.

At the time, the venture was described as "a great idea...which could never work". But it has not only survived, but thrived. In the year to 30 September 2007, the company made pre-tax profits of £635,137 on sales of £10.7m, up from £611,071 and £8.98m a year before. Along the way it has received high-profile support from the charity Comic Relief, which has won it publicity for its Dubble bars, and it has launched many new products, including Easter eggs, drinking chocolate and muffins. But it has remained true to its intent of competing with mass-market rather than premium-priced chocolates. Last week, a 100g bar of Divine milk chocolate sold in supermarkets for 81p, compared with 82p for a 124g bar of Cadbury Dairy Milk and £1.77 for a 100g bar of Green & Black's Organic chocolate.

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More importantly, much of the financial gain has passed to the Ghanaian producers of the cocoa from which the chocolate is made. This is thanks to the innovative structure of the Day Chocolate Company – now known as Divine Chocolate – established at the outset. The starting point for the company and the chocolate brand was not a Western business but the farmers themselves who, since the early 1990s, have organised themselves into the Kuapa Kokoo farmers' co-operative.

As Kwabena Ohemeng-Tinyase, managing director of Kuapa Kokoo, explains, the origins of the business lay in the liberalisation of Ghana's cocoa market in the 1990s. Realising that they had the opportunity to organise farmers in a company that could sell their cocoa to the Cocoa Marketing Company, the state-owned body responsible for exporting what is generally recognised as the world's finest cocoa, they set up Kuapa Kokoo – which means simply "good cocoa growers".

The venture was supported by Twin Trading, the fair trade company behind Café Direct, and a Dutch non-governmental organisation called SNV. The co-operative aims to empower farmers in their effort to gain a decent livelihood, to increase women's involvement in its activities and to develop environmentally-friendly cultivation of cocoa. Lately, it has begun to export some of its expertise to other countries. The benefits of joining mean that the co-op has grown from about 33,000 small farmers at the start to about 52,000 now.

But the benefits go beyond cocoa growing. Mr Ohemeng-Tinyase says: "The history of co-operatives in Africa is not good. Most break down within only a few years. For us to last so long means we are also a showpiece. It shows how these farmers have been committed to the tenets of fair trade."

The farmers were already attracting a fair trade premium for their cocoa from some international customers, but decided at their 1997 annual general meeting to launch their own chocolate bar.

Sophi Tranchell, managing director of Divine from the start, says this decision effectively moved the farmers "up the value chain", meaning that people who previously had no idea where their cocoa went would have a stake in an international brand.

The idea won the support of not just Kuapa's original backer Twin, but also The Body Shop, Christian Aid and Comic Relief. The company was named in memory of Richard Day, a member of the Twin team who had helped Kuapa's development. The newly-elected Labour government also played its part, with the Department for International Development under Clare Short securing the fledgling company's business loan and NatWest offered helpful banking facilities. By Christmas 1998, the first Divine Fairtrade milk chocolate bars were on the supermarket shelves.

The company is based in modest offices close to London's Tower Bridge, but has from the start been a multinational affair. The farmers' involvement is more than nominal. As shareholders in the business (thanks to The Body Shop's gift of its shares in the business in 2006, the farmers have an even more significant stake than they began with), the co-operative members can make an important contribution to how the chocolate is produced and sold and also decide on how the profits are distributed. Two representatives of the co-operative sit on the board, which sits four times a year, with one meeting each year held in Ghana. This innovative company structure was recognised in 2000, when Divine was awarded Millennium Product status.

The company has developed so well that it set up a separate company in the US in February 2007. In its first year the new business achieved $1m in sales and that figure is set to double this year. Such expansion inevitably brings new complications, not least the addition of a third continent to the structure. But Tranchell and her colleagues stress that email and mobile telephones make communication between the different parts of the business much easier than when it was launched.

The seriousness with which the farmers take their role in the company is demonstrated by the fact that Paul Celestine Kofi Buah was elected president of the Kuapa Kokoo Farmers Union in July 2006 after an extensive election campaign involving hustings in many of the thousand-plus villages involved in the co-operative. That close involvement in the community translates into the decisions over the projects on which the farmers' share of the profits is spent.

And it is the growing realisation that it is this sort of involvement on the part of the producers that is required for a product to be granted Fairtrade status that makes Western consumers particularly keen to support it – especially if they are not having to pay a premium price, says Tranchell.

She is also confident that the company will continue to prosper despite the coming downturn. For a start, a chocolate bar is a comparatively cheap indulgence and experience has shown that when times are hard consumers enjoy cheap treats. Second, she sees a distinction between organic and fair trade. "Organic is about something being good for me," she explains. "Fair trade is about it being good for somebody else."

At the same time, though, she is keen to stress that chocolate is just a good place to start. She envisages networks of fair trade so that farmers in different commodities see similar benefits in terms of better returns, a say in how their crops are sold and produced and a role in spending the proceeds. For the moment, 10 years in business suggests that the Divine model indicates a direction in which business should head. As she says, "We've certainly been the threat of a good example."