Products · 15min read
Understanding Cocoa: Sourcing
The cocoa industry is incredibly complex. To move towards a more sustainable supply chain, we must first understand the cocoa production processes as well as actors and stakeholders that have significant influence on the industry.
Contents
- Cultivating & Processing Cocoa
- Processing Organic Cocoa
- Farmers in the Cocoa Supply Chain
- Cocoa Trading
- Other Cocoa Industry Stakeholders
Cultivating & Processing Cocoa
The Theobroma cacao tree grows best in humid tropical climates in Africa, Latin America and South-East Asia where there are favourable weather conditions, such as regular rains and short dry seasons. The seeds of the tree are harvested and split to separate the cocoa beans from the pulp. What follows is a long process which entails:
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Fermenting
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Sun drying
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Roasting
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Winnowing
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Grinding
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Pressing
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Smoothening
These processes are used to produce cocoa products, such as cocoa powder, cocoa butter, and cocoa liquor. At foodcircle, we exclusively source organic cocoa derivatives as we firmly believe that organic is the most sustainable and thus conscionable form of agriculture today.
Processing Organic Cocoa
While the basic principles remain the same for the production of organic cocoa, there are some fundamental differences that distinguish organic cocoa from conventional cocoa.
Firstly, organic cocoa plantations are often part of a larger agroforestry system. This means that if a new cocoa plantation is established where a forest already exists, the existing forest should be retained. As a result, this low-impact solution is a sustainable approach to merging natural ecosystems with agricultural practices. If no forest exists on the site, cocoa trees should be planted along with other trees, including other food sources, to create an agroforestry system. This increases soil fertility, encourages pollinator habitats and promotes environmental and microclimate buffering. It also improves cocoa yields and means that farmers are not only reliant on cocoa yields, as they can sell other food products from their mixed-crop system. Other common natural techniques applied in organic cocoa farming include crop rotation, use of green manure and composting.
Secondly, no chemical pest control and no chemical fertilisers are used in organic cocoa processing. Pesticides, herbicides and fungicides have proven to be detrimental to the environment as well as toxic to animals and humans. Chemicals also disturb the soil biota and the balance of the ecosystem. As a result, conventional agriculture is one of the biggest perpetrators of environmental pollution and waste generation today. Regardless of where cocoa is farmed or processed, it must comply with the EU’s organic regulations and be audited by an accredited organic certifier to be sold in the EU.
Farmers in the Cocoa Supply Chain
The supply chain of cocoa is extremely complex, and there are a range of intermediate processing and manufacturing stages that occur before the cocoa is consumed by the end-user.
About six million cocoa farmers produce cocoa across Africa, Latin America, and South-East Asia. Many of these farmers depend on the production of cocoa for their living. But cocoa farmers gain very little compared to the overall profit of the global cocoa industry (the Fairtrade Foundation estimates that only 6% of the price of a chocolate bar ends up in farmers’ pockets). In fact, in some areas, cocoa farmers don’t even earn enough to ensure that their basic needs, such as education, housing or food, are met. The Fairtrade Foundation works to ensure better trading conditions for workers and farmers in the cocoa industry so they can provide for themselves and for their families.
Cocoa farmers will usually take care of the harvesting, fermenting, and drying of the cocoa beans before selling them to local traders or buying stations. In many communities, this work is handled by women. At this stage of cocoa procurement, the supply chain can be pretty unsteady, due to traders selling and buying from multiple farms. Some cocoa farms may be part of a cooperative. Cooperatives buy the cocoa beans directly from their farmers. In this sense, they are able to skip a sometimes very long chain of local traders and will directly sell to larger local traders, exporters, international traders, cocoa processors, and chocolate manufacturers. Some cooperatives may also provide training and bring other economic and social benefits to the local communities where cocoa is farmed. While being part of a cooperative doesn’t guarantee sustainability, it tends to increase the overall supply chain transparency. Local farming cooperatives have also proven highly beneficial in tackling child labour.
Cocoa Trading
Moving along the supply chain, local exporting companies and international traders exist to transport the cocoa beans around the world. While some international traders may purchase directly from farmers, others have set up their own purchasing logistics in the producing countries. The overseas transportation of cocoa has evolved towards bulk shipment due to increased demand and cost savings. Cocoa beans are then stored in warehouses at the destination port until requested by processors or manufacturers.
While traditionally, cocoa processing facilities were located in the consuming countries, there is an increasing trend towards companies establishing these facilities in the countries where cocoa is produced. This is because operating costs are often cheaper in the producing countries and through grinding, the volume of cocoa significantly decreases maximising the amount of cocoa that can be shipped in one load.
The United Nations Conference on Trade and Development (UNCTAD) reported that market concentration at the cocoa processing stage—the process of turning raw cocoa beans into powder, liquor, and butter—is high. This is due to the high costs associated with running a processing facility, and that a large amount of turnout is needed for continuous operations. Leading players today include, Olam International, Cargill Inc., Barry Callebaut, Cemoi Group, Cocoa Processing Company Limited, and Nestle S.A.
Nevertheless, various trends are emerging that are helping to increase transparency and traceability within the supply chain of cocoa. One such trend is known as ‘bean-to-bar’, a chocolate trade production model in which the chocolate manufacturer is involved throughout the entire process. The manufacturer buys cocoa beans directly from the farmer, roasting, refining, and processing the mass into the final chocolate product. This allows them to control the taste and quality of the chocolate right from the start. Another trend is to embrace blockchain technology as it has been proved that there is great potential to provide real-time insights into every link in the supply for traceability and transparency.
Other Cocoa Industry Stakeholders
Other important stakeholders involved in global cocoa sourcing include certifying organisations. Certifying organisations aim at improving the livelihoods of farmers in developing countries by improving the social, environmental, and economic conditions in global food production. Certification schemes commonly used to certify cocoa include Fairtrade International, UTZ Certified, Rainforest Alliance, and Organic.
For a more detailed analysis of these certification schemes, please refer to our article on Three Certifications for Food Manufacturers.
A long list of organisations, national as well as international NGOs, and trade unions are also involved in the cocoa supply chain. These civil society actors tend to be contractual partners of the chocolate companies. They often strive to implement sustainability programmes, boost productivity at cocoa farms, as well as foster community action and develop farmers’ skills and knowledge.
Other civil society actors conduct research into the cocoa supply chain, for example the Cocoa Barometer 2020 which provides an overview of the current sustainability developments in the cocoa sector, and highlights critical issues. Another key stakeholder is the World Cocoa Foundation, an organisation that aims to ensure a sustainable supply of quality cocoa, to empower farmers and farming communities and to promote sustainable production practices that maintain and increase crop diversification and biodiversity.
Looking for more cocoa industry insights? Delve into our Understanding Cocoa: Trends and Cocoa Pricing articles.
Imagery: (1) via unsplash.com, (2-4) via foodcircle.com | Video: DR Congo: Can Farming Co-Ops Help Cocoa Farmers? by France 24