Performance and Legitimacy in Social EnterprisesHEC Management School, University of Liege

3-4 March 2011

‘Performance in agricultural social enterprises: confronting the productivity gap, breaking the poverty cycle and securing food sustainability’

Dr Amanda Berlan

The global chocolate market• Cocoa represents a multi-billion £ industry

US chocolate market = approx $18 billion annuallyUK chocolate market = approx £4 billion annually

• Consumption is rising and major growth in key markets e.g. India and China

• The global chocolate market is presently characterised by:

a concern for ethical practices in production more demand for quality cocoa (single origin and

‘terroir’)

GLOBAL TRENDS Consumption is rising BUT production is falling so global cocoa

market is characterised by undersupply (an estimated 1M/MT annually by 2014)

This is driving prices up (and chocolate bar sizes down)

SOCIO-ECONOMIC ISSUES Average age of farmers high; young people not interested in

cocoa farming In many countries incomes from cocoa are low

FUTURE IMPLICATIONS Impact on long-term food sustainability of abandonment of food

production

Cocoa in crisis?

The Dominican Republic

The DR: formerly had a very bad reputation for poor quality cocoa is the second largest exporter of Fairtrade cocoa has the second largest cocoa-producer cooperative globally has the largest area of cocoa-growing land certified by Rainforest Alliance is the largest exporter of organic cocoa

Cocoa in the DR

DR cocoa producer profile • Most farmers produce organic cocoa, which can fetch very high premiums

• Current cocoa producer population = 36,000 farmers

• Typical profile is: male, average age 58, and has a small plot of land (≤ 10 acres) where cocoa is grown alongside other crops

• Literacy levels are low among cocoa farmers and workers

Many farmers are abandoning production and selling their land to larger landholders. In 1980, 84% of farms were ≤5 ha. By 1998, 68% of farms ≤5 ha.

Incomes are low, producers reported having debts and bonuses spent before they are even earned

Producer housing is of poor quality

Young people are not interested in becoming cocoa farmers, and this puts the long-term future of cocoa production at risk

Farm productivity is low and has the potential to be doubled or trebled in some areas, therefore farmers earn only a small amount even when the cocoa price and/or organic premiums are high

Challenges in DR cocoa production

9,500 producers are in the cooperative CONACADO and their numbers are growing

Impact of social entrepreneurship on: Quality - switch from Sanchez to Hispaniola Productivity (hopefully) because easier to provide

agricultural extension services Producer morale and affiliation, leading to less abandonment of farming and therefore better long-term

food sustainability The national cocoa market

Social entrepreneurship and cocoa in the DR

Sales of cocoa in MT (Oct 2008-Sept 2009)

CONA

CADO

ROIG

AGR

O-CA

CAO,

CXA

RIZ

EK C

ACAO

, C. P

OR A

.

COOP

ROAG

RO, I

NC.

YACA

O, S

. A.

CORT

ES H

NOS.

& C

O., C

XA

BIOF

CACA

O

JOSE

PAI

EWON

SKY

EHIJO

S, C

XA

MUN

NE &

CO.

, CXA

GARC

IA &

MEJ

IA, S

. A.

CAFI

ESA

OKO

CARI

BE, S

. A.

CHOC

OLAT

E AN

TILL

ANO,

S. A

.M

ARAB

EL F

ARM

SPA

NCA

IDEP

ACHU

MAR

IAS,

S. A

.

COOP

. AGR

OP. R

ED G

UACO

NEJO

MSR

. INV

ESTI

MEN

TCA

CAO

RICO

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

18,000.00 17,893.33

12,808.95

12,591.39

3,58

2.82

2,97

3.25

2,82

8.50

2,29

3.20

2,07

9.00

2,00

2.90

1,83

6.45

1,159.28

287.35

176.10

136.96

26.60

25.20

24.99

24.57

19.95

1.60

“generalised perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions” (Suchman, 1995)

“the congruence, in multiple stakeholder judgements, of an organization’s perceived actions with their expectations of its performance” (Nicholls, 2010)

The growing membership of CONACADO reflects the sense of legitimacy it has acquired among farmers

Farmer discourses reflect pragmatic (“it’s good for us”), cognitive (“can’t live without CONACADO”) and moral legitimacy (“CONACADO is a good organisation”).

Legitimacy of CONACADO

No legitimacy

Farmers abandon production

No cocoa = no chocolate AND

No cocoa = threat to food sustainability

Importance of legitimacy

Adopted multiple certifications which has opened up new markets (organic, Öko garantie BCS, Demeter, Bio-Suisse, USDA organic, ‘Hand in Hand Organic Rapunzel Fairtrade’, Fairtrade, Rainforest Alliance, ISO, Kosher, ISO 9001, KOSHER and JAS)

Has grown by focusing on quality and set a new standard across the DR

CONACADO by far the largest exporter, vastly outperforming competitors and making more efficient use of resources

Performance of CONACADO

Concluding remarks • The abandonment of cocoa has implications for long-term food security and is symptomatic of broader problems in farming and food sustainability worldwide • In order for cocoa, chocolate and food production to have a sustainable future, it is necessary to drastically rethink food production and value chains

• Based on the evidence from the Dominican cocoa sector (and other countries), Social Enterprises have a vital role to play and have become social imperatives in the modern world.