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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
A Collaborative Approach to Cocoa Sustainability
The mostsignificant increasein value to thefarmers comesfrom our efforts toteach the farmersto understand andcapture the fullvalue of theirexport-qualitycocoa.
The Manufacturing Confectioner • May 2011 21
➤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
A Collaborative Approach to Cocoa Sustainability
What we createdwas a sustainable
commercial system,linking the endbuyer with the
farmer, to drivevalue for bothfarmers and end users.
22 May 2011 • The Manufacturing Confectioner
➤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
A Collaborative Approach to Cocoa Sustainability
With improvedyields, improvedquality, a betterunderstanding ofthe value of theircocoa and greateraccess to themarket to sell theircocoa, farmers sawa substantialincrease in theirincomes.
The Manufacturing Confectioner • May 2011 23
➤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
A Collaborative Approach to Cocoa Sustainability
There are effortsunderway to
harmonize aroundindustry standard
criteria forcertification. And aprogram to expand
the certificationinfrastructure will
help improveavailability of
certified cocoa.
24 May 2011 • The Manufacturing Confectioner
➤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-
A Collaborative Approach to Cocoa Sustainability
There is still somuch morecoordination andcooperation neededamong the manypublic and privatesustainabilityprograms at origin.Too many programsoperate in silos.
The Manufacturing Confectioner • May 2011 25
➤
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
A Collaborative Approach to Cocoa Sustainability
We will achievesuccess only bybuilding on the
strong foundationof collaboration
that has been thehallmark of ourindustry for the
last decade.
26 May 2011 • The Manufacturing Confectioner
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