Understanding Cocoa: Sourcing

The cocoa industry is incredibly complex. To move towards a more sustainable supply chain, we must first understand the processes of the production of cocoa as well as the supply chain’s actors and stakeholders that have significant influence on the industry.

 

Processing

The Theobroma cocoa 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 Theobroma cocoa tree are harvested and split to separate the cocoa beans from the pulp. What follows is a long process of fermenting, sun drying, roasting, winnowing, grinding, pressing, and smoothening of the beans. These processes are used to produce cocoa products such as cocoa powder, cocoa butter, and cocoa liquor. 

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 usually part of an agroforestry system. This means that if a new cocoa plantation is established where a forest already exists, the existing forest should be retained. 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 and encourages pollinator habitats as well as 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. Secondly, no chemical pest control and no chemical fertilisers are used. These have proven to be harmful to the environment as well as toxic to animals and humans. Chemicals also disturb the soil biota and the balance of the ecosystem. Finally, the crops must be well tended to. Regular pruning of cocoa trees and surrounding trees as well as the tight control of pests and diseases are necessary to ensure quality. 


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.

There are about six million cocoa farmers producing cocoa across Africa, Latin America, and South-East Asia.1 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 works to ensure better trading conditions for workers and farmers in the cocoa industry so they can provide for themselves and for their families.2 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. 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.

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.3 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.3 This is due to the high costs associated with running a processing facility, and that a large amount of throughput is needed for continuous operations. As a result, the processing stage has become consolidated over time such that more than 60% of the world market for cocoa processing is under the control of two companies—Barry Callebaut and Cargill.4 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 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. 


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 and 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 2018 which “provides an overview of the current sustainability developments in the cocoa sector, and highlights critical issues”.5 Another 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.6

 

References 

  1. https://www.iisd.org/ssi/cocoa-market/
  2. https://www.fairtrade.org.uk/Farmers-and-Workers/Cocoa
  3. https://unctad.org/en/Docs/ditccom20081_en.pdf
  4. https://foreignpolicy.com/2013/11/12/the-rise-of-big-chocolate/
  5. https://www.voicenetwork.eu/wp-content/uploads/2019/07/2018-Cocoa-Barometer.pdf
  6. https://www.worldcocoafoundation.org/focus-areas/ 

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