A $4.5bn disruptive buying model can overturn injustice in cocoa – thinktank
By Oliver Nieburg - December 21, 2020
Post-harvest centers, such as this one from the Cacao Trace sustainability programme in Vietnam, can transform how cocoa is traded, says Center for Disruptive Innovation
A network of cocoa drying and fermentation centers covering half of global cocoa production can overturn ‘a lack of respect’ for cocoa and farmers, says the Center for Disruptive Innovation.
Such a network could be financed by $4.5 billion green bonds from the World Bank and other sources, according to the research organization formed this year.
The model will create $17 billion in added value that can be shared with farmers, says the Center.
‘Unreasonably low price’
Selene Scotton, a contributor to the thinktank, said: “The current industry is running on a fragmented dry bean buying model that’s at the backbone and all of that’s linked to the commodity market.
“And it’s relying on people producing at a unreasonably low price.”
Cocoa is typically fermented for a week and then dried in the sun on trays or the ground for another week by farmers themselves.
The thinktank says expanding wet bean buying through a network of fermentation and drying centers, while upping the retail price for chocolate can provide farmers a living income and combat deforestation.
Value creation needed
Gricha Safarian, a co-founder of the Center for Disruptive Innovation, said: “We really need to change the paradigm of this supply chain, including decommoditization of cocoa.”
Safarian, who has been working in the cocoa industry for over 30 years, said there is a “lack of respect” for the cocoa fruit, for farmers and for the forest because fermentation – one of the most important steps for chocolate flavour development and value creation – is being overlooked.
4 MILLION FARMERS AND 50% OF GLOBAL COCOA COVERED
The 10-year target for post-harvest centers set by the thinktank
He alleged the chocolate industry had built wealth over the last 30 years by keeping farmers in extreme poverty.
“Everybody wants to help farmers; everyone wants to help the forest. But nobody is trying to really create value in the supply chain. Before we share value with the farmers, we need to create value,” he said.
Gricha Safarian (left) created the sustainable sourcing program of Puratos Cacao Trace and is also the managing director of Puratos Grand Place Indochina. Lai Phan (center), an experienced consultant, is co-founder of the Center for Disruptive Innovation. Selene Scotton (right) is a contributor and separately manages Puratos’ Cacao-Trace sustainability programme in Asia Pacific.
His thinktank has set a 10-year target for 2.4 million tonnes of cocoa and 4 million farmers to be covered by post-harvest centers, representing 50% of the global cocoa supply, which would create such value.
Chocolate using cocoa sourced through this wet bean model would retail for five US cents more on top of a $1 bar of 50g, says the Center. And the added value can be shared with the farmers through premiums, it says.
Cocoa & drying fermentation centers exist at some commercial plantations and within some cocoa sustainability programmes such as Puratos’ Cacao Trace (pictured) but are not widely available for smallholder farmers globally .The thinktank is independent of Puratos and receives no financial backing from the chocolate ingredient supplier.
The Center hopes this will prevent companies buying from the London and New York exchanges, which it says subjects farmers to the uncertainty of speculative buying.
Minimum prices linked to living income
The fermentation and drying centers could be run by origin governments, industry players, a mix or even farmers themselves, they say. The thinktank does not plan to be an implementer itself.
The model includes a mandatory minimum price for wet bean purchasing that will be tied to country or region-specific living income benchmarks.
According to the thinktank, 75,000 rural jobs can be created in the post-harvest centers and the model will more easily facilitate the rollout of agroforestry.
The cocoa fermentation and drying hubs will help stakeholders roll out 6 million ha of agroforestry within 10 years, says the Center. This can be translated to 1.8 billion carbon sequestration that can be converted to carbon credits and shared with farmers.
The thinktank is already in discussions with the World Bank, the International Cocoa Organisation (ICCO), IFC and Stanford University.
The Center hopes to find a country to prototype its model and has already been approached by the Ivorian government.
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