Cocoa output has nearly tripled since the 1960s.
Much of this extra production has come from the intensive production in West Africa. In the case of the Ivory Coast, cocoa production represents ⅔ of the national income. Being too dependent on a single product makes a country vulnerable to strong destabilization if the prices were to violently drop.
In 2016, the overproduction of cocoa in the West African region largely exceeded the appetite of worldwide chocolate lovers. The price for the delicious brown gold fell sharply. This might sound like a good bargain for chocolate makers, but on the other side of the supply chain, the effects were deplorable. For a country that relies on cocoa such as the Ivory Coast, it resulted in large-scale social movements, impactful strikes, and mutinies.
As the following graph depicts, the price of cocoa is subject to volatility.
Cocoa prices 2012-2021:
Today, the cocoa farming industry cannot guarantee that it will be able to supply the world’s demand.
The aging trees and increasingly unpredictable weather conditions negatively impact the crop’s yields. Farmers are frustrated with their lot. Some consider switching crops. The chocolate industry is losing its suppliers.
Now, more than ever, it is essential to encourage smallholders to stand by cocoa. It is time to value sustainability among the cocoa supply chain. We need to look at farmer’s lives and offer a fair price for their hard work. We must ensure smallholders make enough to live and to invest in the crops and their future.
Addressing poverty among farmers is the key to a thriving cocoa industry. It would promote sustainability, well-being, and eradicate inhumane conditions such as child trafficking and labour.
Fairtrade hopes to create a real incentive for the farmers to grow certified cocoa to get a higher market price as well as a bonus premium on top.
In Dr. Kristy Leissle’s series published in confectionerynews.com called “I am a cocoa farmer”, Fairtrade’s impact is mentioned:
In John Narh Adamnor’s interview, the farmer “sounded genuinely pleased with the [fairtrade bonus], but still described it as “small money”, and emphasized that it doesn’t make his life luxurious.” He says: “If you get the premium, you are not going to use it to […] enjoy yourself.” The money is used to prepare his farmland for the upcoming main harvest.
Fairtrade is a first step in the right direction, but the measures are still incomplete. Although it is a rising trend, it is important to note that less than 20% of cocoa beans are currently sold as certified.
In addition, Fairtrade lacks the resources to monitor farmer’s compliance with its standards. It is a flawed system that has potential, but won’t be the solution to the current vicious cycle in which the cocoa industry is stuck.
In 2019, the Ivorian Conseil du Cafe-Cacao (CCC) and the Ghana Cocoa Board (Cocobod) announced they would charge an extra fee of USD$400 per ton of cocoa on top of the Free On Board price as of 2020/2021. This premium, meant to pay the farmers more for their beans, is called the “living income differential” (LID).
This initiative is led by the two biggest cocoa producing countries, and is a necessary first step towards a truly sustainable industry that respects farmers’ human rights. Still, it is simply not enough.
The name “Living Income Differential” is misleading. According to Fairtrade, the estimated Adjusted Living Income Reference Prices of 2019 should be USD$2.20/kg at farm gate for Côte d’Ivoire, and USD$2.10/kg for Ghana. The current price of cocoa is set at USD$1.80/kg. The LID guarantees a minimum farm gate price of US$2.00/kg. The LID must be considered a starting point towards achieving a living income, not a destination.
For the measures undertaken to be effective, governments must build a coherent overall strategy to respect the human rights of farmers, protect and transform West-African agriculture. These price interventions should be a tactic, but not the strategy.
Moreover, for this measure to succeed, the governance of these funds requires total transparency. Protecting the forests, addressing human rights and child labor, empowering agricultural reforms and proper supply management are all at stake.
If this initiative fails, other cocoa producing countries like Indonesia, Ecuador, Brazil, Nigeria, and Cameroon won’t have any incentive to follow the movement. They will be forced to go look for solutions on their own.
Direct Trade refers to a stronger value chain with less intermediaries. Direct Trade connects suppliers (farmers) with buyers (manufacturing companies), without any intermediaries, in a way that they become dependent on each other’s success, ethics, and professionalism.
Direct trade allows farmers and companies to retain the intermediaries fees paid in other circumstances and reinvest those funds into their respective businesses. This inclusive business model relies on transparency, equal opportunity, and corporate social responsibility. Actors among the supply chain share the created economic value and invest into societal value, i.e. what is good for the community is good for business and vice versa.
There is no single set of direct trade standards, but the model relies on a mutually-beneficial relationship. The specifics of this relationship vary as a reflexion of business and ethical priorities among the supply chain.
Unfortunately, since Direct Trade doesn’t comply with a single set of standards, it can be used for greenwashing. The lack of third-party accountability may inspire companies to mislead the consumer by omitting a clear definition of its practices and eluding evidence of those practices.
There is an ongoing debate on how to ensure the integrity of direct trade practices. Honest companies should emphasize transparency in their system and its reports. It is also possible to have the direct trade practices audited by an independent third-party.
Obviously, it is not suitable for every business, yet many could benefit from it. In industries where there is an imbalance of power throughout the supply chain, it is an imperfect solution worth considering.
In the chocolate industry, the traditional route of cocoa beans from the cocoa farmer to the chocolate manufacturer looks like this:
Direct trade in the chocolate industry would look like:
This process is beneficial for traceability, worker’s rights, and overall sustainability.
Rosie’s Confections aims at developing a strong network of direct trade suppliers. We see a future where the simple act of purchasing a product can serve as a way to advocate for a better world. Being mindful about our suppliers and their practices is at the core of our values. We believe that direct trade is the new fair trade. We wish to be a source of decadent treats that are good for you and the planet. Small businesses hold the key to true sustainability. Don’t trust those words, look at our actions.
In many ways, business is about power and who wields it.
In the cocoa industry, farmers lack a voice at home and producing countries lack one globally. Smallholders need education, scientific support and land reform to be empowered. To achieve that, they need political leadership and negotiating muscle.
Intermediaries, chocolate companies and consumers are the ones holding this power back. The industry lacks transparency. The business of cocoa farming needs to change. The popularization of chocolate this last century was possible by the ready availability of land and labour, not the advances in productivity or technology. Producers may earn little from cocoa, but it was their best opportunity to make any cash at all. The current system is not sustainable. For smallholders to enjoy a better standard of living, chocolate consumers must get used to paying more for their favorite treat.