A Collaborative Approach to Cocoa Sustainability...A Collaborative Approach to Cocoa Sustainability The most significant increase in value to the farmers comes from our efforts to

The Manufacturing Confectioner • May 2011 19

➤

The subject of cocoa sustainability is gar-

nering increased attention from mem-

bers of the cocoa supply chain as well as

among consumers across the world. And for

good reason; it is clear that the challenges at

origin are many, including insufficient infra-

structure, education and income levels that

challenge farmers in the cocoa sector and

also pose a threat to our industry in terms

of future cocoa availability. Today, the

increased number of sustainability programs

being developed across the cocoa origins is

encouraging. However, there is a compelling

need for a stepped-up collaborative approach

to cocoa sustainability to achieve the impact

needed across the entire cocoa-farming sec-

tor. This article is adapted from a presenta-

tion made to the Cocoa Merchants Associa-

tion of America in March 2011 and offers a

case study of one sustainability program that

demonstrates the power and scale that come

from collaboration.

THE SUPPLY CHALLENGE

There appears to be a growing consensusthat a severe cocoa-supply shortage is a dis-tinct reality in the near future. The math issimple; a mere 3 percent growth in con-sumption would require the addition ofnearly 1.8 million metric tons of cocoa by2025 (Figure 1). In other words, the cocoacrop would need to increase by nearly50 percent to meet projected demand. Theentire global agricultural sector faces scarcityissues as we brace ourselves to provide foodand energy to our rapidly growing worldpopulation. And cocoa is no exception.One of the biggest challenges to this pend-

ing agricultural supply crisis is poor cropyield. And we know this is particularly thecase with cocoa, where yields are quite poordue to lack of training and inputs. Pests anddisease pressures claim an estimated 30 to40 percent of the crop each year. The lowestyields can be found in the largest origincountries, Côte d’Ivoire and Ghana, where

A Collaborative Approachto Cocoa SustainabilityThe supply threat is real. Aggregation of farmers remains thesingle biggest challenge to overcome.

Peter BlommerBlommer Chocolate Company

Peter Blommer ispresident and chiefoperating officer atBlommer ChocolateCompany. Prior tothat he was chiefoperating officer. Hejoined the companyin 1991 as plantmanager of theUnion City facility inCalifornia.

yields average 450 to 500 kilograms perhectare. The solution cannot be land-basedexpansion because farm land is less avail-able and the environmental impact of suchexpansion is not desirable. Instead, farmingefforts must focus on intensification effortsto achieve significantly higher yields.

THE OPPORTUNITY

The good news is that we know that higheryields are possible with the right plantingmaterial and farming techniques. Plenty ofexamples abound, from the famous BALestates of Malaysia to the CCN-51 clone inEcuador, both of which have recorded yieldsin excess of 4,000kg/ha. One particularlyexciting example is the work being donetoday with an Ecuadorian “super tree”thought to be related to the National variety(producer of the flavor grade Arriba cocoa).National is a traditionally low-yielding vari-ety, yet these “super trees” have achievedyields closer to the CCN-51 clone whileretaining the more traditional Arriba flavor.

THE TOOLS

All of the tools needed to deliver higheryields are readily available. Through indi-vidual and collective actions over severaldecades, our industry has developed animpressive portfolio of farming techniquesand technologies that have proven to sig-

nificantly improve tree yields. Companieslike Nestlé and Mars have sponsoredresearch into the identification of plant-ing material that proves higher yieldingand more resistant to pests and disease.And with the recent mapping of the cocoagenome our abilities in this area of plantgenetics will only improve. Our industryhas developed a collection of best prac-tices in farm management, including prun-ing, side grafting, integrated pest manage-ment and appropriate use of chemicalinputs. And we have developed an excel-lent model of delivering this to farmersthrough farmer field schools, print mate-rial and video-viewing clubs.

THE STAKEHOLDERS

There also is a tremendous amount ofinterest and activity in cocoa sustainabilityamong many of the stakeholders in thecocoa supply chain. For several decadesbranded companies and cocoa processorsworked in partnership to fund much of theresearch and activity behind these sus-tainability efforts. Today, these efforts haveleveraged the resources of origin and West-ern governments; reshaped the on-the-ground activities of the cocoa exporters;and attracted the active interest and par-ticipation of retailers and consumers.

THE CHALLENGE

The challenge is to bring it all togetherin an efficient and effective manner (Fig-ure 2). The question is how to engage thenumber of global stakeholders to deliverthe vast array of best-practice techniquesand technologies to the 6.5 million farm-ers around the globe. The scale and com-plexity make this a daunting task, to saythe least.The solution can only come from highly

organized, collaborative efforts that engageall stakeholders in the supply chain. Indi-vidual private and public efforts are great

A Collaborative Approach to Cocoa Sustainability

All of the toolsneeded to deliverhigher yields arereadily available.Our industry has

developed farmingtechniques and

technologies thathave proven to

significantlyimprove tree

yields.

20 May 2011 • The Manufacturing Confectioner

➤Figure 1

Cocoa Supply/Demand (Projected at 3% Growth)

0

0

500

1000

1500

2000

2500

3000

3500

4000

-500

-1000

-1500

-2000

50010001500200025003000350040004500500055006000

Net Crop Grind

Surplus

De!cit

-500197819791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022202320242025

Met

ric T

ons (

’000

)

Surp

lus/

Defi

cit T

ons (

’000

)

incubators of new technologies, techniquesand entrepreneurial efforts. But, given thescale and fragmentation of the 6.5 millionfarmers in developing countries lackingbasic infrastructure, success can only beachieved through an open, broad and col-laborative multistakeholder approach.

A CASE STUDY

The following case study shows the powerand scale that come from engaging as manystakeholders as possible in a coordinatedmanner. In 2004, shortly after the conclu-sion of the 3-year Success Alliance pro-gram in Indonesia (sponsored by the indus-try through the World Cocoa Foundation),the industry found the quality of cocoacoming out of Indonesia was actually dete-riorating severely and negatively impactingbean yields, fat content and factorythroughput.At Blommer Chocolate we faced a

dilemma: we found ourselves on the onehand committed to supporting Indone-sian farmer programs and on the otherhand actively minimizing our purchasesgiven the negative impact on plant effi-ciencies and yields. We knew somethingwas not working if we had just spent threeyears training farmers on farming andpostharvest practices and were receivingsome of the worst cocoa we had ever seenfrom the region.As we investigated with multiple trips

and conversations with farmers and ourtrading partners, we came to several impor-tant conclusions. Many of the farmers whohad trained in the Success Alliance pro-grams were still practicing what they hadbeen taught but they were receiving noadded value from the local buying networkfor the improved quality they produced.And the local buyers were blending theirgood-quality cocoa with poorer quality.Clearly an essential link in the supply chainwas broken — the commercial link — and

without it farmers were not getting the mar-ket signals regarding quality and value fromend users. So we partnered with OlamInternational, a Singapore-based cocoaexporter, to create that link and also con-tinue the training of farmers.

Sulawesi Alliance of Farmers, Olamand Blommer (SAFOB)

The program is called SAFOB, or SulawesiAlliance of Farmers, Olam and Blommer.It began in 2005 with just over 2,000 farm-ers and grew within a year to 12,000 farm-ers. The program consists of the followingcomponents: farmer training, qualityimprovement, market access and trans-parency, and quality premiums.The farmer training focuses on good

farm-management practices, such as prun-ing, sanitation, fertilizer application, har-vest techniques and identification of pestsand diseases. It also includes training inrehabilitation and rejuvenation throughuse of grafting techniques and nurserydevelopment.There is a very strong quality focus to

this program where farmers are trained onquality specifications and postharvest prac-tices to produce export-quality cocoa atthe farm level. This includes sorting ofwaste, particularly the exclusion of beans


The mostsignificant increasein value to thefarmers comesfrom our efforts toteach the farmersto understand andcapture the fullvalue of theirexport-qualitycocoa.


➤Figure 2

The Challenge

and material from pods infested by thecocoa pod borer. It also includes the useof solar dryers to achieve lower moisturelevels closer to the farm and reduce moldlevels in the beans.We have improved market access and

transparency through 11 buying stationsthroughout Sulawesi which provide directaccess between farmer and exporter. Theprogram also includes premiums paid tothe farmer in several forms: an upfrontquality premium paid by Blommer/Olambased on meeting quality specifications,and an end-of-season bonus if certainquantity targets are achieved. But the mostsignificant increase in value to the farm-ers comes from the efforts to teach thefarmers to understand and capture the fullvalue of their export-quality cocoa. Thecombination of export quality, an under-standing of the value of this improved qual-ity and access to exporters and end userswilling to pay the correct value for thiscocoa greatly improves the negotiatingleverage and, therefore, the price paid tofarmers versus the typical collector system. What we created was a sustainable com-

mercial system, linking the end buyer withthe farmer, to drive value for both farm-ers and end users. It is our belief that truecocoa sustainability can only be achievedif there is value to all parties through thiscommercial link — commercial sustain-ability (Figure 3).

Scaleup

In late 2006 Blommer and Olam wereapproached by the U.S. Agency for Inter-national Development (USAID) to act asthe implementation partner for cocoa aspart of their Agribusiness Market and Sup-port Activity (AMARTA) agricultural-development project in Indonesia. And byFebruary 2007 Blommer and Olam signeda memorandum of understanding to createthe Amarta Sulawesi Kakao Alliance with

a combined investment of $2.5 million ininfrastructure and training (this figure doesnot include the premium structure paid tofarmers for their cocoa). As USAID described this cooperative

venture, “AMARTA has facilitated thedevelopment of a unique public-privatepartnership providing an alternative modelwhere market pull and price incentivesbased on quality will serve to provide anincentive for farmers to produce export-quality cocoa.” Further, they state that “thisnew partnership will send a signal to cocoafarmers that the market needs good-qual-ity beans and is willing to pay a premium.” The exciting aspect of this program is

that we are leveraging our activities withgovernment and nongovernment organi-zations to drive scale (Figure 3). This scaleis well represented in Figure 4, which showsthe growth to nearly 27,000 trained farm-ers participating in the program inSulawesi; nearly 30,000 hectares under


What we createdwas a sustainable

commercial system,linking the endbuyer with the

farmer, to drivevalue for bothfarmers and end users.


➤Figure 3

Case Study: SAFOB IndonesiaFarmers

Middlemen

CocoaTrade

Retailers

Governments

NGO’s

ConsumersCocoa

Processors

BrandedCompanies

Farmers

Middlemen

CocoaTrade

Retailers

Governments

NGO’s

ConsumersCocoa

Processors

BrandedCompanies

CommercialLinkage

DrivingScale

improved technology; and nearly 25,000metric tons of good-quality cocoa pur-chased annually through this program.

THE RESULTS

A detailed survey of the AMARTA pro-gram published in January 2011 shows somevery encouraging results. As the chart in Fig-ure 5 indicates, there was a significantincrease in farmer’s yields with over 35 per-cent of farmers achieving yields in excess of800kg/ha, many well in excess of 1,000kg/ha,up from less than 8 percent prior to the pro-gram. Additionally, the methodology of podselection during harvest season significantlyimproved, as has knowledge in recognizingpests and diseases, helping to improve bothyield and quality. Over 99 percent of thefarmers learned about propagation throughgrafting techniques such as side grafting.Thirty-one new technologies and manage-ment practices were made available. Andequally important, over 90 percent of farm-

ers gained greater understanding of the qual-ity standards required by end users, up from31 percent prior to the program. This aware-ness, and the production of export-qualitycocoa, dramatically improved bean yieldsand factory output, thus providing signifi-cant value to Blommer Chocolate.And farmers have much greater access

to exporters to market their good cocoathrough the 11 Blommer/Olam buying cen-ters upcountry as well as buying centersof other exporters. In fact, over 67 percentof farmers reported having direct accessto exporters versus just over 15 percentprior to the program. It is important topoint out that farmers are free to sell theircocoa to the highest bidder and do nothave any obligation to Blommer/Olam.With improved yields, improved qual-

ity, a better understanding of the value oftheir cocoa and greater access to the mar-ket to sell their cocoa, farmers saw a sub-stantial increase in their incomes (Fig-ure 6). SAFOB farmers get a pricepremium of nearly $200/MT higher thanwhat they could have received from a localcollector. This is the price passed on at thefarm gate by Olam, including a quality pre-mium and adjusted for transportation to


With improvedyields, improvedquality, a betterunderstanding ofthe value of theircocoa and greateraccess to themarket to sell theircocoa, farmers sawa substantialincrease in theirincomes.


➤Figure 5 AMARTA Jan. 2011 survey results

Results: Yield Improvement

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0-300kgs/ha

301-500kgs/ha

501-800kgs/ha

801-1000kgs/ha

>1000kgs/ha

Notanswered

Postline (N:1094)Baseline (N:1080)

Annual Cocoa Production45.5%

36.8%

29.6%

8.2%

17.0%

15.4%

4.7%

15.1%

3.2%

20.2%

0%4.3%

Figure 6 Olam International

Results: Increased Income

3500

3000

2500

2000

1500

1000

500

02005 2006 2007 2008 2009 2010

Average collector price Average SAFOB price Average NY Term

Improving farmer income

{

Incremental Incometo farmersparticipating inSAFOB program

Figure 4

Growth of SAFOB Over the Years

30,000

25,000

20,000

15,000

10,000

5,000

02005 2006 2007 2008 2009 2010

No. of Farmers No. of hectares in program Total produce (MT)

the port city. Over the past six years, theSAFOB program has procured nearly80,000MT of cocoa, improving farmerincomes by nearly $16.1 million in com-parison to the price they would havereceived selling into the local supply chain.Today SAFOB has also expanded into

Sumatra, providing improved training andmarket access to nearly 5,000 farmers inthis region.

NEXT STEPS

Given the success of the AMARTA pro-gram, with SAFOB as the implementationpartner, USAID is proposing to expand theoriginal program with AMARTA II. Thiseffort promises even broader participationamong stakeholders, including branded com-panies, more ngo participation and theinclusion of a microcredit component. Thismomentum will continue to drive the scaleneeded in cocoa sustainability.With the commercial link firmly in place,

and the programs leveraged for scalethrough government and ngo participa-tion, Blommer and Olam are also in themidst of certification of these programs. Thebranded companies’ commitment to certi-fication links their sustainability aspirationswith our programs on the ground. Thispromises further leverage for scale. And thiscommitment by the branded companies is aninvitation to retailers and consumers, whoare increasingly interested in sustainabilityin the supply chain, to support sustainabilitythrough their purchase decisions.

CERTIFICATION

There can be no doubt that certificationcreates added impetus for real actiontoward cocoa sustainability. The publiccommitments to certification have raisedawareness and accelerated the pace of sus-tainability activity. But we must remem-ber that certification is not the end goal,

but rather a useful tool to help achieve the

real goal — a healthy, sustainable cocoa

supply chain (Figure 7).

While certification can be a helpful tool

to drive cocoa sustainability, the competi-

tive elements of certification can threaten

the collaborative approach that has been

the sustainability model to date. Competi-

tion exists at many levels, from competi-

tion among certifying “brands” to the com-

petitive positioning among branded

manufacturers in the market place. Simi-

larly, competition exists among the proces-

sors and traders given the lack of avail-

ability of certified cocoa as we rush to fill

an acute new need for our most important

customers at a time when they are redefin-

ing the supply chain and those who will

play a roll in it. It would be an unfortunate

paradox if the efforts to certify cocoa sus-

tainability actually undermine the collab-

orative approach necessary for success.

Fortunately, there are efforts underway

to harmonize around industry standard cri-

teria for certification. And a program to

expand the certification infrastructure will

help improve availability of certified cocoa.

Also, there are alternative models to cer-

tification. Not all brands are looking to

communicate their sustainability commit-

ment on pack. Yet they want to build sus-

tainability into their own supply chains. A


There are effortsunderway to

harmonize aroundindustry standard

criteria forcertification. And aprogram to expand

the certificationinfrastructure will

help improveavailability of

certified cocoa.


➤Figure 7

Certification

Farmers

Middlemen

CocoaTrade

Retailers

Consumers

NGO’s

GovernmentsCocoa

Processors

BrandedCompanies

good example of this can be found in a

program Blommer Chocolate and Olam

have developed in partnership with Costco

in the Côte d’Ivoire. This is a fully audited,

traceable sustainability program with all

components of farmer training, quality pre-

miums and a social component. It also

includes other key stakeholders, such as

the World Cocoa Foundation, the shipping

line Safmarine and the Ivorian Govern-

ment (to provide long-term support for

social programs). This is another collabo-

rative sustainability example that includes

active involvement of a major retailer.

OTHER COLLABORATIVE MODELS

Our industry has built its sustainability

activities on a strong foundation of global

collaboration. A good example of this can

be seen in the World Cocoa Foundation,

founded by the industry in 2000 and

today numbering over 80 member com-

panies across most segments of the cocoa

supply chain.

It is the World Cocoa Foundation that

facilitated an exciting new sustainability

partnership called the Cocoa Livelihoods

Program. This is a $40 million program in

West Africa that is funded in partnership

with the Bill and Melinda Gates Founda-

tion. This program builds on the success

of previous government initiatives and

cocoa-sector-development programs, like

the Sustainable Tree Crops Program

funded by the cocoa industry and the U.S.

Agency for International Development.

The Cocoa Livelihoods Program pro-

vides an exciting model for the collabora-

tion and scale needed in cocoa sustain-

ability. The program is managed by the

World Cocoa Foundation and imple-

mented through a consortium of five

organizations including Agribusiness Serv-

ices International (ASI), an ACDI/VOCA

affiliate; Deutsche Gesellschaft für Tech-

nische Zusammenarbeit (GTZ) GmbH;

the International Institute of Tropical Agri-

culture (IITA)/Sustainable Tree Crops Pro-

gram (STCP); SOCODEVI; and Tech-

noServe. Funding for the program comes

from the Bill & Melinda Gates Founda-

tion and the private sector, including major

branded manufacturers the Hershey Com-

pany, Kraft Foods and Mars, Incorporated;

cocoa processors Archer Daniels Midland

Company, Barry Callebaut, Blommer

Chocolate Company and Cargill; and sup-

ply chain managers and allied industries

Armajaro, Ecom-Agrocacao, Noble Group

(Noble Cocoa), Olam International Ltd.

and Starbucks Coffee Company. Addi-

tional support is provided by the German

Federal Ministry for Economic Coopera-

tion and Development (BMZ). Each coun-

try government has a representative on

the steering committee.

But there is still so much more coordina-

tion and cooperation needed among the

many public and private sustainability pro-

grams at origin. Too many programs operate

in silos. Farming “best practices” and tech-

nology are not consistently and broadly

applied. And while they are excellent efforts,

they are not driving the scale we need.

THE MISSING LINKS

There are also several major impediments

to scale which we must find a way to solve:

lack of farmer aggregation, insufficient

infrastructure and limited governmental

policy/involvement. The resources applied

to reaching the disaggregated farmer pale

in comparison to the sophistication and

technology applied at the other end of the

value chain, where branded manufactur-

ers partner with retailers to aggregate the

end consumer.

Regarding farmer aggregation, the mid-


There is still somuch morecoordination andcooperation neededamong the manypublic and privatesustainabilityprograms at origin.Too many programsoperate in silos.


➤

dleman is the missing link (Figure 8). Yetthis middleman — the collectors, pisteursand traitants — provides aggregation todayfor 80 percent of the cocoa supply chain.They “own” the last mile, yet they are strik-ingly absent from sustainability efforts. Theindustry must find a way to engage them inour efforts while simultaneously develop-ing stronger farmer groups such as coop-eratives or buying centers. Farmer access tocredit is critical if these efforts are to suc-ceed, necessitating inclusion of microcre-dit programs in sustainability efforts. Andthe application of technology should bevigorously explored as a vehicle for reach-ing a dispersed farmer population. Onesuch example is the Hershey Cocoalinkprogram in Ghana, distributing mobiledevices to farmers through which criticalfarming information can be disseminated.Similarly, while governments are

involved in selected projects, there are norobust, comprehensive government pro-grams in cocoa today. One must recall thatthe only reason we have not suffered themassive cocoa shortfall that our industryfears today is due to several strong gov-ernmental programs to develop cocoa inthe last few decades. The legendary sup-port for cocoa development in Côted’Ivoire by President Houphouet Boignyand the more recent push into the west-ern part of that country, combined withthe Indonesian transmigration policy whichsupported cocoa growing in Sulawesi,Indonesia, were land-based cocoa expan-sion programs that helped meet growingworld demand for cocoa. With the excep-tion of Ghana, today there is no compre-hensive government program such as wehave seen in the past. And tax policy inCôte d’Ivoire reduces farmer incomeswithout providing the extension servicesand other promised benefits.

What we need is an intensive, yield-based governmental program akin to pre-vious decades’ efforts. Perhaps one candebate the role of the government, butpolicies should at least be in support of theprivate/public efforts and should preservethe economic rewards that create an incen-tive to the farmer.

CONCLUSION

The supply threat is real. And while indus-try sustainability efforts to date are impres-sive, they are insufficient to reach the scalerequired to positively impact the millionsof cocoa farmers. While the tools and tech-nology are readily available and a major-ity of the cocoa stakeholders are commit-ted to sustainability, aggregation of farmersremains the single biggest challenge toovercome. We must solve the missing linkof the middleman. And we must convinceorigin governments of the acute need andopportunity to develop more comprehen-sive yield-based programs in partnershipwith industry efforts. Finally, we willachieve success only by building on thestrong foundation of collaboration that hasbeen the hallmark of our industry for thelast decade. n


We will achievesuccess only bybuilding on the

strong foundationof collaboration

that has been thehallmark of ourindustry for the

last decade.


Presented at the Cocoa Merchants’ Association of Amer-ica (CMAA)

Figure 8

The Missing Links

Middlemen

CocoaTrade

Farmers

Governments

NGO’s

Consumers

Retailers BrandedCompanies

CocoaProcessors

Documents

A Collaborative Approach to Cocoa Sustainability...A Collaborative Approach to Cocoa Sustainability The most significant increase in value to the farmers comes from our efforts to