Grant Reid had only been Mars Chocolate's global president for a month when the company announced it would purchase all its cocoa from sustainable sources by 2020.
For a large, family-owned company that plays it close to the vest, Mars Inc. boldly announcing what Reid calls "a big, audacious goal" signals the importance the world's eighth-largest food company is putting on sustainability. And that focus, Reid said, will be critical if the industry is to continue being a market leader with its iconic M&M and Snickers brands — demand for cocoa is expected to outpace supply as early as the end of the decade.
"If these farmers are in decline, and farmers are leaving the industry, we're not going to have cocoa to make chocolate and make those 100 million consumers smile every day," Reid said. "You could call it a calling, you could call it a business imperative, you could call it a multitude of things, but it just makes sense for them and it makes sense for us."
Mars is investing tens of millions of dollars annually to get training and materials to cocoa farmers, to research the genome of the cocoa plant and to get farmers certified under global sustainable standards. Reid travels to source nations like Ghana, Ivory Coast and Indonesia to meet with farmers and see how better farming techniques have increased yield and improved the quality of life for farmers.
"They're seeing there is a connection between having a stable as well as sustainable supply chain," said Kevin Lyons, director of the Supply Chain Management program at the Rutgers Business School. "It's securing the supply chain by making sure farmers, the quality of the product and all of the things we know about environmentally responsible are solid. By doing that, you almost automatically have a supply chain that is rock solid."
Now into its third year, the cocoa sustainability initiative already has exceeded the company's expectations. Mars announced earlier this year that 10 percent of its cocoa supply in 2011 came from certified sustainable growers, and the company should reach 20 percent by the end of 2012.
Reid has been "a very powerful advocate for what we're doing," said Barry Parkin, Mars Chocolate's global procurement and sustainability head. "Also, externally, he's been very active, he's traveled to the origins, he understands the issues — and it makes a difference when the president of the business is knowledgeable and fully engaged in the programs."
Reid was new to the role when the sustainability initiative was announced, but not new to the company. He started with Mars Inc. 24 years ago in an entry-level sales position, and attributes his rise to working for a family-owned company that takes the long view in its strategic planning.
"If I was pure private, maximizing shareholder's return on capital today, I probably couldn't do some of these things I'm doing," Reid said. "Our family takes a 20-, 30-, 50-year view of what is mutual and how the business should develop, and I think that's a real advantage for me as a global president. I can make longer-term decisions."
That's true of the sustainability effort, too, according to the company: Parkin said Mars Chocolate has "been working on the technology and research side of this for decades." Now, Parkin said, the focus is on implementation.
The company also is trying to expand its initiative to competitors, sharing the cocoa genome map and other sustainability research with other chocolate manufacturers.
"We can't do this alone," Reid said. "If we can prime the pump, then others will get on board ... we're keen to get our competitors and suppliers and anyone who is really interested on board."
Reid said he expects the industry to accept the need for a sustainable supply chain within the next year or two.
But there are caveats in opening up the company through sustainability. The initiative is the first time Mars has shared part of its strategy publicly. Reid understands why the family has remained media shy for so long — for rivals, "it's like trying to compete with a shadow" — but believes being public with the project will improve its chances for success.
Other companies trying to make public sustainability pledges have made well-known missteps that Mars is trying to avoid. One of the most well known of those, Lyons said, was the biodegradable bag Frito-Lay introduced for its Sun Chips line. The compostable bag had the drawback of being noisier than the former packaging, which led to numerous consumer complaints and, eventually, the return of the original bag.
"Most people just think of sustainability as just environmental — but it's financial, it's taking care of people and it's also a profit," Lyons said. "Are we making everybody whole?"
Reid is aware of the risks Mars assumes in its plans. "Right now, it's the investment phase," he said. "We're not going to get return maybe ever on that. The return is you've got a business. ... If you measure this as a traditional ROI or return on capital, it's quite hard to do. But it's more a return on doing the right thing and having a sustainable chocolate business for the next 30 or 40 years."
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