Sustainable Impact Investments

Portfolio Manager Ted Franks and Senior Analyst Claire Jervis provide a portfolio update and insights from the reporting season.

The above webinar recording includes a question on animal welfare, specifically in the context of an article written on HelloFresh’s use of coconuts in it’s meal kits. Due to the recency of the article published in proximity to the date of the webinar, the team promised to provide an extensive response to the accusations by PETA on HelloFresh following the webinar.

The team have now met with HelloFresh to gain a greater level of clarity on four key aspects. These are summarised below:

1. The Scale of the issue: 
Coconut milk comprises a very small proportion of HelloFresh’s ingredients. It is estimated to be included in less than 5% of meals sold in the last 12 months. HelloFresh had previously been sourcing from Suree (one of the coconut wholesalers named in the PETA report), and their analysis found no evidence of monkeys being used in the harvesting process at coconut farms supplying to Suree. While this may be the case, WHEB is currently in the process of contacting PETA to discuss the evidence they have in more detail.

2. Sourcing:
Nonetheless, HelloFresh is taking this very seriously. They first became aware of the issue in late 2020 / early 2021 when PETA published reports naming US supermarkets and the coconut milk supplier Chaokoh. At that time, notwithstanding enquiries and prior analysis, HelloFresh considered the risk and, where possible, began sourcing from Sri Lanka instead. Sri Lanka is preferred over other countries in the region (e.g., Indonesia and the Philippines) as their research suggests that the use of dwarf palm trees in Sri Lanka removes the need for climbing to harvest coconuts.

By the time the PETA report naming HelloFresh was published, only 3 out of a total of 19 HelloFresh national markets were left sourcing from Thailand, and those were due to long-term contracts which they were obliged to honour. However, as soon as HelloFresh became aware of the report, this was suspended altogether.

3. Auditing:
HelloFresh requires that suppliers meet specific standards, for example through Global G.A.P or GFSI certification. Their Food Safety and Quality Assurance (FSQA) team is responsible for classifying the risk of, and conducting audits of, suppliers, as well as approving manufacturing facilities. They are helped by third party auditors for products that are not sourced locally, or for lesser used ingredients such as coconut milk. Where the risk is considered medium or above, additional measures such as unannounced site visits are used. Normally, if a breach of their sourcing policy is found in HelloFresh’s suppliers, they will enforce corrective action plans to achieve compliance. The business partnership is only severed upon failure to agree or deliver a corrective action plan. In this case, the risk to reputation is considered too large, hence the measures mentioned above.

After the PETA report naming HelloFresh, the company contacted Suree to secure affidavits that they do not utilise monkey labour and that they are subject to regularly conducted audits. As part of WHEB’s engagement with HelloFresh, they shared the example of Publix, a supermarket chain in the US that found itself in a similar position in January 2021. Publix had been through a similar process and secured similar affidavits, but PETA were still able to find evidence of monkey labour on coconut farms in Thailand at a later date. HelloFresh agreed with WHEB’s position that sourcing from Thailand seemed to be too high risk and added that they cannot envisage there being any measures that would make them comfortable to resume sourcing from Thailand.

As a result of this controversy, HelloFresh’s FSQA team is currently working to enhance the company’s Ethical Trading Policy to cover animal welfare issues more explicitly. We have requested a copy of this policy as soon as it is available. There are also talks about establishing an NGO working group to help identify issues earlier on, though these are at an earlier stage.

4. Going forward:
WHEB has scheduled a follow up call with HelloFresh for early 2023 to monitor progress. They have also asked the company for evidence of sourcing practices having changed as a result of PETA’s 2020/2021 campaign on the topic, and for more detail on how checks are carried out by the FSQA team where audit is undertaken directly by HelloFresh employees, as well as additional information regarding third party assurance where this may be more appropriate.

Independently of this follow up, WHEB are also lining up a call with PETA to discuss their evidence. The team is separately researching claims that the use of monkeys for coconut harvesting is a traditional/historic practice, and that a complete clampdown may adversely impact local communities.

5. Conclusion:
It appears that HelloFresh started putting measures in place to prepare for and mitigate the risk as soon as it became aware of it, however as coconut milk makes up a small proportion of their ingredients, it had probably not acted swiftly enough for full mitigation (i.e., moving sourcing out of Thailand at a cost and/or potentially breaching long-term supplier contracts) by the time the PETA report was published. However, they are now doing so, and are strengthening the relevant policies accordingly. WHEB will continue to monitor the company’s progress and hope to gain a more rounded picture of the situation in the coming months.