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Cocoa farming models and markets
2 February 2017
Netherlands Embassy Cocoa Seminar
University of the West Indies, St Augustine, Trinidad
Dr. Verina Ingram
Wageningen University & Research
Mission ‘To explore the potential of nature to improve the quality of life’
Research and education in the domain of healthy food and living environment for governments and the business community-at-large, since 1876
Staff 6,500
77 active in cocoa
10,000 students from over 100 countries
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Cocoa farming models
Cocoa farming models
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Different models in use: more variations in South American and Asia than in West Africa - small-holder model predominates
Demonstration - seeing is believing with training - important for adoption of successful models
Importance of access to credit, return on investment and risk when promoting changes to models
Critical role of technical assistance and follow up in supporting farmers to change models, also selection criteria of farmers in trials (youth and entrepreneurs)
Importance of appropriate polices and incentives t0 use of cocoa varieties, expanding into new areas, shade tree and input use.
Land ownership can form barrier to adopt new models
Need to make farm models climate smart, incorporating current farm profiling and conditions into new models.
Knowledge gaps
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Basket of models, which are site and
climate specific
Transfer techniques for new models:
what information do farmers need to
make choices to actually change and
what support?
Use of technical assistance,
government policies, financial
incentives?
Shade tree combinations : agroforest
and intercropping models
Climate resistant pest and disease
farm management techniques
Options
Cultivars/hybrids
Intercropping: breadfruit, banana/plantain, maize, cassava, citrus, cocoyam, okra, melon, rubber, coconut, oil palm, durian, avocado, rice, areca nut etc → profit and pest management, weeding implications
Bean processing & fermentation
Different planting high densities: 1.3m X 1.3m
Mechanisation of high labour cost activities on large farms e.g. Haciendas La Chola and Victoria - Ecuador, Ritter - Nicaragua, Brazil
Soil and nutrient site specific approaches: hydroponics and irrigation e.g. Netafim- Isreal, Victoria- Ecuador, Queensland – Australia,
Innovative Agro Industries (IAI) Ltd - Papua NG, TechnoServe Peru
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Climate change
Predicted temperature increases, decreased annual rainfall, increased risk of natural hazards by 2050, wet seasons becoming drier and dry periods even drier - significantly affecting agriculture and already vulnerable rural livelihoods
15% loss of suitable conditions in drier, lower areas and less rainfall - lead to declining yields
possible indirect on pollination and diseases
Precautions: ensure access to irrigation during infrequent, severe dry periods
7 Source: Eitzinger et al CIAT 2015
Climate
change
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Source: Eitzinger et al CIAT 2015
Climate smart?
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Site climate specific models
Assess future suitability for cocoa
cultivation including new “escape”
areas
Shade tree combinations (agroforest
and intercropping) models
Climate resistant varieties, pest and
disease farm management techniques
Steps: Changing cocoa farm models
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1. Evaluate farm model: size, climate
zone, species variety, nutrient levels
and soil fertility, shade, management
and pruning, and inputs
2. Farmer’s review and evaluate
possible farming models: including
costs, benefits and risks
3. Availability of external assistance
and supporting policies, possibilities for
transfer of technologies
5. Availability of access to credit,
inputs, technologies & planting
materials to enable change to farming
models
ICCO WCC’16 recommendations
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Develop and share costs benefits of different farm models that integrate and take account of technical support, economics, environment, climate change, available planting materials and land availability, which incorporate both intensification (better use of existing land) and diverse farming systems. Seeing is believing to promote change: We need to facilitate farmer to farmer exchanges on farming models so that farmers can choose optimum model suited to their needs, situation and capacities. Physical and exchanges and facilitating ICT are strongly recommended.
Exporting to Dutch & European markets
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Map!
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Source: Voice Network Cocoa Barometer 2015
Cocoa production & consumption
NL: 4.7 kg per capita
CZ: 9 kg per capita
DE: 7.9 kg per capita US: 8 kg per capita
C: 1.2 kg per capita
IN: 0.3 kg per capita
Ru: 5.2 kg per capita
Br: 3.4 kg per capita
The Netherlands: No 1 importer, 2nd largest grinder
2nd
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Netherlands: 37% European bean imports
Global imports to the Netherlands
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Increased demand fine and speciality cocoa → imports from Latin America of beans to Netherlands grew 5.4% 2013-2014
Increased volumes of exports by Netherlands of beans, paste, powder
The Netherlands: Major re-exporter cocoa products
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Increased demand fine and speciality cocoa → imports from Latin America of beans to Netherlands grew 5.4% 2013-2014
Re-export to Europe, especially due to presence of major companies Mars, Nestle, Mondelez and traders & grinders ADM, Cargill, Dutch Cocoa (Ecom), Crown of Holland etc
Quality
European Union labelling cocoa and chocolate directive (Directive 2000/36/EC): higher cocoa content, higher quality
Chocolate not less than 35 % total dry cocoa solids, not less than 18 % cocoa butter and not less than 14 % of dry non-fat cocoa solids. Vermicelli, Gianduja and couverture included
Milk chocolate not less than 25 % total dry cocoa solids, not less than 14 % dry milk solids from dehydrated whole milk, semi- or full-skimmed milk
Family milk chocolate not less than 20 %total dry cocoa solids, not less than 20 % dry milk solids from dehydrated whole milk, semi- or full-skimmed milk.
White chocolate not less than 20 % cocoa butter and not less than 14 % dry milk solids from dehydrated whole milk, semi- or full-skimmed milk
Others less than 20% cocoa butter
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Quality
Physical: Moisture, consistency, yield edible material, bean size, shell %, fat %, foreign matter, residue, damage, cut * Food safety But also Flavour Colour Aroma Wholesomeness Origin / terroir Price Production process Sustainability Impact ..........
Cultivation context and/or production, processing dependent
Lack of standard definitions!
Different perceptions quality attributes in fine flavour/speciality and conventional markets and market research
Role for fine flavour origin countries, research and trade associations....
18 End & Dand CAOBISCO/ECA/FCC Cocoa beans : Chocolate & cocoa industry quality requirements 2015n countries
New markets?
How did we find this out?
Extensive literature review
Interviews 2015 & 2016: 5 chocolate makers, 5 civil society and NGOs, 2 retailers, 1 cocoa trader
Analysis using business canvas model
Quantitative statistical analysis of Eurostat and Innova databases Dutch chocolate retail market (2,743 chocolate products in period 2009 to 2015)
Source: Abulmallik, Ingram & Laven 2016
Global consumers changing preferences.......
• “Midorexia” 50+ consumer acting younger, prioritising
wellness and health, consumer voice
• Kids as consumers, earlier and earlier
• Mass consumption vs “extraordinary’’
• Faster shopping.....online
• Allure of authenticity, naturalness and product source
• Eat yourself better i.e. raw chocolate
• Identity in flux.. global ↔ local, national, and more....
• Personalisation i.e. Cocoa Runners tailor made (single
estate and single origin)
• Post-purchase follow up
•
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Source: Euromonitor 2017
Trends: European chocolate market
1.Increasing differentiation by conventional and speciality manufacturers and newcomers - produces a ripple effect along whole chain.
2.Farmers encouraged to plant different varieties to produce high, differentiated quality beans.
3.Traders increasingly seeking certified cocoa and quality beans.
4.Manufacturers buying from an increasing number of specialized traders.
5.Consumers becoming more demanding and sophisticated, more conscious chocolate consumption habits.
6.New and different brands are introduced in market. Differentiation on
● tangible characteristics: taste and cocoa content
● intangible characteristics: quality and processes used to grow, produce and transport
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7. Increasing commitment to certification: in NL 100% “sustainable”
by 2025
8. Over supply- need to ensure long term commitment of buyer to
buy certified @ premium price
9. Transparency in chain (certification, zero deforestation, audits)
10.Cocoa origin flavour attributes
11.Healthy end product (low/zero sugar)
12.Living income and fair (true) price: “honest’’ not “bitter chocolate”
13.Metabolomics
Trends: European chocolate market
Metabolomics
Technique to analyse substances (metabolites) in plants, using mass spectrometry to investigate the aroma and taste substances in cocoa beans
Can determine influence of geographical and varietal origin, growth conditions, post-harvest processing and shelf-life.
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100s compounds identified and linked to flaovur differences
lets manufacturers screen beans faster and more accurately, and helps breeders develop varieties
with specific flavours
Contact: prof Robert Hall De Vos et al. 2013, Diomande food Chemistry 2015, Hori et al. 2016
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Dutch supermarkets = 71% of chocolate sales (conventional, certified and some speciality)
Other shops = 7% (mainly speciality) – number increased 36% from 2005-2013
Price: average distribution
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Gradual increase in retail prices
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and a matter of price....
Market Positioning
N % € mean price/kg & std. dev.
Highest quality 219 19 40.77 ±25.43
High 483 42 20.18 ±15.12
Medium 330 29 16.19 ±12.28
Low 120 10 10.66 ±5.33
Total 1152 100 21.96 ±18.86
No difference* average prices re cocoa content (quality content) Quality Categories
N % € mean price/kg & std. dev.
Dark 256 22 23.96 ±16.93
Milk 225 20 22.53 ±22.54
Family 74 6 26.31 ±28.16
White 344 30 18.10 ±11.92
Others 253 22 23.40 ±20.68 Total 1152 100 21.96 ±18.86
Retail price differentiation Prices differ* between market segments
Certified and non-certified product prices differ slightly* Certification N % € mean price/kg & Std.
dev. Certified 430 37% 24.88 ±19.32 Non-certified 722 73% 20.22 ±18.38 Total 1152 100% 21.96 ±18.86
*statistically significant difference
Fine flavour
& speciality
Price* High
2600€
500€
120€
Market size/ product value
high
Market size/ product value
low
Price Low
Chocolate markets in the Netherlands
1€
Certified
Middle
3€
2.65€
2€
Conventional
Certified
*Indicative- price per product- should be comparable e.g. per kg
Average prices Dutch market 14.2 €/kg Conventional 47.07 €/kg Middle 152.52 €/kg Speciality
Fine flavour
& speciality
Price* High
Price Low
Chocolate markets globally
Certified
Conventional
Certified
*Indicative- price per product- should be comparable e.g. per kg
Fine flavour/speciality = 5% global bean volume
Bulk/conventional = 95% global bean volume
Middle-Market, a matter of size?
Dutch journalist Teun van de Keuken launched 2005
Aim: 100% slave-free chocolate - creating awareness, leading by example & inspiring other companies to act responsibility.
In 2012, claimed bean2bar partnership model - buys from 2 Fairtrade certified cocoa cooperatives Ghana and Ivory Coast + Fairtrade ingredients
Aim monitor all bean2bar processes & ensure sustainable 6 key partners: international trader (CocoaSource), liquor makers (Barry Callebaut), tabletmaker (Althaea), supermarkets & consumers
Campaign, fair price, traceability & environmental sustainability recycled paper wrappers
Targeted 1st conscious consumers, then all chocolate lovers
Example: Tony’s Chocolonley
Dutch chocolate pioneer Kees Raat began bean2bar company 2009 - ice creams and cakes, and chocolate in 2011
Sustainability & traceability: organic from Dominican Republic
Values of skills, flavour, and high quality products
Invests in sustainability e.g. low energy machines and LED lights
Wide product range: cocoa beer, cocoa powder, tea gelato, dark chocolate (70%) with chili / sea salt in different shapes and sizes
Direct consumer sales = good consumers relations
Hosts chocolate tasting events to explain process
Targets tourists, adults and luxury orientated consumers
Example: Metropolitan Chocolate
Example: Chocolate Explorers
Bean to bar model 2014 started by non-chocolate makers
“Mesjokke, Mulate and Naïve chocolate bars” strong
branding with package tells stories: beans (most
Madagascar and Nicaragua), other ingredients, roasting
level, production date origin and a big thank you to
farmers and customers, + guidance on consumption e.g.
musical playlist of
Delivers quality, sustainability, taste and fun
Specific roasting method and techniques used
Sells at 4.95 € 80g, 3.29 € 40g bar
Target adults, curious & high-end consumers, culture and
fun lovers.
Sells locally in main cities & speciality shops.
Since 2013, small Amsterdam factory, 2 owners using bean2bar model
Organic certified beans & ingredients delivered by sailing boat
Value proposition: highly skilled craftsmanship, quality and healthy bar at a reasonable price.
Key principles: traceability, transparency and sustainability (energy use, waste, reuse and delivering by electric bikes).
Origin named products : Gorilla bars - Congo (37% and 68% cocoa); Awajùn - Peru (80% cocoa), Tres Hombres - Dominican Republic(40% cocoa).
Claim contributes to sustainability projects in origin countries.
Targeted at healthy chocolate lovers, organic & high-end consumers.
Example: Chocolate Makers
Differences between markets & products
Conventional chocolate
Middle-market chocolate
Specialty & fine flavour
Quality Low Medium High
Price Low Medium High
Sustainable cocoa
Certification Certification, story telling & branding
Story-telling, bean2bar, traceability
Origin Important for blending
Important for marketing
Important for taste
Region Focus West Africa & Asia
All regions Focus Latin America
Company size Large Medium-large Small-medium
Examples: Companies
Nestle, Mondelez, Mars, Hershey, Ferrero
Tony Chocolonely, Lindt, Mondelez, Chocolate makers
Pacari, Marou, Original Beans, Duffy, Akkessons
Examples: Products
All chocolate products
Bars, chocolate milk Bars, bonbons
Examples: Retailers
Albert Heijn, Coop, Jumbo, Plus
Marqt, Ekoplaza, Ahold, chocolatiers
Marqt, coffee shops, Online, Trade fairs
A new differentiated middle market emerging.......
A “middle market” between conventional and conventional certified - low and high price, fine flavour chocolate products
Characterised by high quality, often certified, higher prices and a focus on origin sustainability, involves:
● Upscaling speciality and certification
● Mainstreaming - conventional chocolate companies introduced speciality, origin and quality products.
Strategies similar to speciality market:
● Integration of different activities into business models → more control and higher quality - allowing significantly higher prices charged to consumers
● Reducing production costs
● Focus on taste via cocoa variety, fermentation or adding flavours
Similar trend to other (luxury) consumer products.......
New forms of value proposition........
Companies build & back value propositions and business models using stories and marketing
Most stories revolve around the bean origin, quality, flavour and higher prices (claim) paid to farmers
Some manufacturers and retailers in Dutch cocoa sector use certified sustainability as marketing story - degree, extent of commitment and third party verification of practices varies widely
Consumers sometimes confused as a result e.g. raw, certified, fair
• .
The Ministry of Agriculture, Nature and Food Quality signed a letter of intent with 30 supermarkets, industry associations, companies, government agencies, NGO’s and certification agencies in the cocoa sector.
Committed to;
Produce 100% of ‘Chocolade letters’ in the Dutch market from 100% guaranteed sustainable cocoa by 2012 √ 98%
50% of all cocoa beans used in cocoa products in the Dutch market sourced from guaranteed sustainable cocoa by 2015 x 40%
80% of all cocoa beans used in cocoa products in the Dutch market sourced from guaranteed sustainable cocoa by 2020
100% consumption in the Netherlands sourced from guaranteed sustainable cocoa by 2025
Sustainable cocoa in the Netherlands
Guaranteed certified cocoa:
What does it mean ?
*no other such systems were found or used to provide data
Visible, measurable, third party schemes, independent auditing and monitoring of cocoa in the chain from producer to retailer with a traceable system.
Sustainable cocoa globally
Certified cocoa 20% global production (2,000,000 ha)
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Sources: Cocoa Barometer 2015, ITC 2015
Middle market and sustainability?
Certification has led to some unexpected advantages: social capital, grouping, training,
professionalization but not always yield & income increases
Risk management strategy for farmers, companies and governments
Provides more choice for consumers: requires transparency and traceability
Creates space for alternative business models
Higher price end product does not always mean higher producer profit...... cost benefit
analysis important!
Closer collaboration with value chain actors, including farmer and trader organizations
Beware of captive relations in the value chain
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The story behind your brands?
Issues for Trinidadian cocoa
Labour costs ; best use of expensive labour ?
Mechanisation – costs vs farm size efficiency
Specific organoleptic attributes: depending on buyer
● Raisin, ripe fruit, tobacco, spice & camphor
● moderate –mild acidity & bitterness
● robust cocoa flavour
● balance between fruity & citrus notes
Fermentation and drying- client based approach
Since CCIBTT was dismantled, the reliability of shipments from Trinidad has seriously deteriorated
Prices increased while quality (moisture, bean weight , cut test) has deteriorated.
Exporters are less reliable than before.
Importers report recent poor drying practices
Price USD 5,800 to 7,000, 7,400 (RA certified) per MT
Balance ease of selling vs price
● direct to chocolate makers: higher price but quality requirements (flavour) higher - highcompetition
● brokers lower price but quality requirements maybe easier
Middle market strategies
1.Upscaling niche product/brand Revenues Tony’s Chocolonley 2011- 2014
Middle market strategies
2. Product differentiation by conventional multinational
chocolate companies, introducing origin products and
adding value
and/or
Taking over smaller brands
3. Stronger positioning of large-scale companies as quality brand. Towards value chain integration: establishing
director/closer ties with producers
• Selling origin
• Use of international chocolate awards
• Direct trade → short chains
• Origin chocolatiers - manufacture chocolate into bonbons, truffles, bars etc “an art”
• Bean-to-bar → unique tastes
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http://elsauco.biz/over-origine-chocolade.html
Marketing strategies for
origin chocolate
Strategies for market differentiation
Quality
Improving bean quality at source
Innovations in post-harvest practices, processing and transport
Securing high quality bean sources (varieties)
Strategies for market differentiation
Marketing
Branding and stories
Informing consumers
Awards to increase consumer recognition
Engaging in chocolate tourism
E-branding
Origin indication
Label packaging
Verifying sustainability claims – certification or other means
Strategies for market differentiation
Profitability
Decrease production costs
Pricing
Target market
Value adding
Homann Xoco WCC 2016
Strategies for market differentiation
Trading
Adding value
Make (direct) relations with retail/distribution/buying partners further down the value chain
Daarhouwer – regular T&T cocoa buyers via 2 exporters, interest in
high quality cacao with interesting organoleptic characteristics and stories. Maria Jiménez Rojas <[email protected]>
Get to know (potential) consumers: trade fairs e.g. Chocoa, Origin Chocolate
Use industry associations to find buyers
Strategies
Bulk, standard grade beans? → numerous, conventional opportunities in Dutch market
Small scale, ‘quality’ beans? → Dutch, Swiss, Belgium fine flavour traders – even common grade beans may have quality suitable for premium market sales
Value added products? → Newer outlets and traders growing across Europe
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Contacts & information sources
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Connections
• Chocoa Festival Trade Fair & Conference
• CocoaConnect
• European Cocoa Association (ECA)
• Dutch Centre Promotion of Exports (CBI)
• Netherlands Senior Experts (PUM)
• Initiative for Sustainable Trade (IDH)
• World Cocoa Farmers Organisation (WCFO)
• Direct Cacao
• Dutch Association for Bakery & Confectionery Industry VBZ
• Daarnhouwer B.V. – fine flavour beans
• El Sauco – fine flavour, origin products
• Crown of Holland (Tradin Organic) - organic & speciality
chocolate
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makers, chocolatiers, independent tasters and other in the chocolate industry
Price data
• Online supermarket prices e.g. Albert Hein, Jumbo, Aldi
• Chocoweb
• Chocoladeverkopers
• Confectionary News
• ICCOs Monthly review of the market
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makers, chocolatiers, independent tasters and other in the chocolate industry
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More information ?
Contact:
Wageningen UR
Verina Ingram
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Queen Máxima learns about origin of cacao beans, Wageningen UR 2012
