Organic Chocolate & Research in Sustainable Cacao Initiatives:An Environmental Strategy towards Tropical Rainforest Conservation and Economic DevelopmentA Thesis Submitted in Partial Fulfillment of Bachelor’s of Arts Degree Senior Thesis 202 George Pavlovic Abstract: The growth of the
organic industry has blossomed over the past two decades including the
expansion for organic chocolate products. This thesis examines the way that
organic cocoa has coalesced within a broader framework for new initiatives
towards sustainable agricultural production in the tropics. In order to do this it is
imperative to understand the connections between historical, economic,
geographical, and environmental trends with the production and consumption
of chocolate. Therefore, this
literature review incorporates a wide range of information from
chocolate’s roots among the native societies of Central and
Acknowledgments: I would first
like to give thanks to God for giving me this wonderful opportunity and
for all the people who have helped guide and direct me along the way. The list of people grows every
day, but I would specifically like to thank my parents for all their
support and my two elder sisters for their wisdom and love, and all my
extended family, without them this would not have been possible. I owe an enormous amount of
gratitude to Doug and Carol Parker of the Navigators program, Father
Michael DeForge, and Father Robert Kolakowski of the
TABLE OF
CONTENTS Forward……………………………………………………………………………………………………...5Introduction....................................................................................................................................................................
8 PART
I The Puzzle of Chocolate: A Historical Overview of Chocolate Including Its Evolution and Contemporary Adaptations The Birthplace of Chocolate....................................................................................................................................... 18 South America.....................................................................................................................................................
18 Central America................................................................................................................................................... 18 The Entomological Roots of Theobroma Cacao and Chocolate........................................................................... 22 Chocolate Enters Europe Through Spain................................................................................................................. 24 The Industrialization of Chocolate............................................................................................................................ 25 The Perception of Chocolate...................................................................................................................................... 27 The Chemistry of Chocolate....................................................................................................................................... 30 Major Organizations.................................................................................................................................................... 34 Important Terms and Definitions............................................................................................................................... 38 Part
II The Natural History of Theobroma Cacao: A Botanical and Ecological Analysis Theobroma cacao: A Tropical Tree.......................................................................................................................... 41 The Three Main Varieties of Cacao: Criollo, Forastero, & Trinitario................................................................... 42 Physical Characteristics of Cacao............................................................................................................................. 44 Pathogens of Cacao..................................................................................................................................................... 51 Cultural Practices, Biocontrol, & Trichoderma stromaticum................................................................................. 53 Genetic Diversity & Research in Genetically Modified Cacao.............................................................................. 56 Part
III A Snapshot of Cacao in the Global Marketplace: Production, Distribution, and Consumption Global Consumption of Cocoa................................................................................................................................... 61 Global Production of Cacao........................................................................................................................................ 64 Historical Shifts in the Market & the Cocoa Cycle................................................................................................. 66 Structure of Cocoa Farms........................................................................................................................................... 69 The Marketing Process............................................................................................................................................... 70 The Value and Price of Cacao.................................................................................................................................... 76 The International Cocoa Agreement & the Cocoa Council................................................................................... 78 A Growing Market for Chocolate and Organic Products....................................................................................... 79 Risks of Organic Market............................................................................................................................................. 82 Organic Commodities Products (OCP): A Case Study of the Wholesale Organic Cocoa Industry................ 83 Part
IV Major Issues in Cacao CultivationAligning Ethical/Fair Trade Standards and Cocoa Cooperatives......................................................................... 91 The Benefits of Shade Management Systems......................................................................................................... 94 Child Labor in West Africa......................................................................................................................................... 98 Certification and Organic Chocolate....................................................................................................................... 100 Post-Harvest Treatment of Cocoa........................................................................................................................... 101 The Carob Tree – An Alternative to Chocolate.................................................................................................... 103 Government Policies and Perverse Subsidies: The Case of Nigeria................................................................... 104 Byproducts of Cocoa................................................................................................................................................ 106 Secondary Cacao Forests: the Case of Costa Rica, Cameroon, and Ghana...................................................... 110 Studies in Cacao Groves as Suitable Habitat for Tropical & Migratory Bird Species..................................... 111 Part VResearch
Methodology Thesis advisors:......................................................................................................................................................... 116 Budget......................................................................................................................................................................... 116 Major Obstacles......................................................................................................................................................... 117 Final Product............................................................................................................................................................... 118 Conclusion and a Sustainable Suggestion........................................................................................................... 123 Bibliography.......................................................................................................................................................... 130 APPENDICES Appendix A:: Review of the Major Fungal Pathogens
of Cacao…………………………………..131 Appendix B: Imports/Exports of Cocoa....................................................................................................
141 Appendix C: Alternatives to Chemical Fumigation that fit Organic Standards.............................. 143 TABLE OF FIGURES Table 1: Major Chocolate Manufacturers in the World: Top Five Companies.................................................. 63 Table II: Production of Cocoa Beans, by Country, Quantity, and as Percentage of total: 1990/91-1999-00. 65 Table III: Daily Prices of
Table IV: The Aims of Fair Trade.............................................................................................................................. 91 ForwardThe story of
chocolate usually begins to take shape at an early age in our lives. I am reminded of my grandparents
who would often come visit from former
Many years later,
after my first two years in college, with an interest in sustainable
agriculture and While researching
these topics, I was also able to attend an inspiring opening of a
wonderful museum exhibit: “Chocolate” at the Field Museum of Natural
History in It is through these
types of experiences talking with professionals in the field and the
museum exhibition that have molded my interest in chocolate beyond those
early days with my grandmother and the Swiss pastry shop. I am now not only interested in
engaging in my still favorite past-time activity of scraping through every
last bit of chocolate at the bottom of a jar of Nutella, but am also
interested in chocolate’s unique position in world trade, its
environmental impacts, and the embryonic organic chocolate market. It is by bringing current
events/issues of organic chocolate up to date that I hope the reader might
walk away being a more informed producer or consumer of chocolate. Introduction“Drops of sunlight fall between the cacao tree branches”
IntroductionChocolate comes from the chocolate tree, scientifically classified as Theobroma cacao, which literally means “food of the gods cacao”. In economic terms, it is one of the most important trees grown in the tropics as it provides the fruits that are processed into cocoa, which is currently a multi-billion dollar industry. Its natural and cultural evolution over time is both fascinating and revealing. Perhaps most exciting however, is its peculiar botanical characteristics, which have placed chocolate in a unique position among conservation efforts. Growing chocolate organically or using sustainable methods can further protect and promote biological diversity while lowering the amount of potentially hazardous chemicals used on the farm to combat insects and fungal infestations. In this way, it can become a valuable resource of economic growth while contributing to the biological vitality of the worlds diminishing tropical rainforests. * * * * * The tropical rainforests of the world
embody the very essence of beauty and diversity to be found in
nature. Not only do they play
a vital role to feed and provide us with countless botanical treasures
such as chocolate, but they also are home to countless species of wildlife
and contain the secrets of vast medicinal value that many scientists only
dream to uncover. Rainforests are also home to a small number of
indigenous groups that rely on the forests for their livelihood and fear
displacement in the face of economic development and increased
deforestation. The capacity
that rainforests have on influencing global and regional climates is also
significant as it helps maintain a delicate balance for all life on
Earth. There is therefore a
real sense of urgency to protect the vast tropical forests of the world
today where between 1950 and 1983 (33 years), the area of forest and
woodland in Almost all countries within the tropical regions of the world struggle to find a balance between the forces of economic development and the need to protect and manage natural habitat. One of the main reasons for this loss is due to agricultural practices that require clearing forests for bananas, coffee, sugar, and cattle pastures. Because natural resources are often times the primary source to maintain economic growth, it becomes a constant push-pull situation between agriculture and biological conservation.[2] While this is the case, some progress is being made as many countries and global organizations are now looking at ways to revitalize the current state of our rainforests. Traditional agricultural practices are being reexamined to provide alternatives to negative patterns of resource extraction and placing a focus on resource management and sustainable agriculture techniques. The cultivation of organic chocolate is one agricultural practice in particular that is being looked at as an environmental solution to establish a balance between the maintenance of rainforest habitat and economic growth. This is by in large due to the conditions that the chocolate tree is cultivated in. Chocolate trees worldwide are often managed in small plots compared to the enormous plantations used to facilitate banana, cattle, and sugar production. It is a tree that grows best similar to its wild state integrated within the intricate biological web of the forest. It requires much individual care and attention for successful growth. The cultivation and harvesting process of cacao are mostly done by hand which means that there is little mechanization and thus little exterior capital needed to begin successfully cultivating cacao. This is partly what draws in many farmers to choose to grow cacao with its low start up costs and why cacao groves are best managed with only 15 to 50 acres of land. Large plantations of more than 400 acres do exist but this method of cultivation has proved to be a disaster both for the crop itself and for the environment. While it exposes the tree and soil to the sun in order to produce higher harvest yields in the short term, in the long term it lowers the trees long-term growth potential and leads to soil erosion and a host of other environmental problems. With this in mind,
and the fact that it is a major player in the global economy, chocolate is
now being seen to have a potentially positive role in the worlds tropical
regions. The Smithsonian
Institution was one of the first organizations to acknowledge the
importance of this relationship when they organized an international
workshop on sustainable cacao cultivation in 1998. They concluded that cacao produced
in the shade plays an important role in tropical conservation and
biodiversity. This in fact is
already the case as cacao is mostly grown by However, while each
year an estimated third of the world’s cocoa crop is lost to different
forms of diseases and pests, it is debatable whether those who utilize
chemical insecticides and fungicides to combat this loss benefit from
them. The conventional
chemical insecticides and fungicides used by farmers that can afford them
are notably inefficient in a tropical environment where insect resistance
can develop quickly and rainfall will simply wash the fungicides
away. Therefore agricultural
research initiatives that examine ecologically sound cultivation
techniques (including organic methods) are an important area of research
for the future of the chocolate industry and the environment.[3] The need for alternatives to
traditional agricultural practices is also a necessary key to stimulate
economic growth and promote biological diversity and forest canopy in the
tropics. This can help secure
precious habitat for many of those wise migratory birds that fly far away
from “The ‘industrial’ paradigm for food
production has evolved and achieved wide acceptance over many
decades. This model has
farmers trying to grow as much acceptable product, as cheaply as they can,
for wholesale markets. The
industrial model keeps farmers anonymous to the consumer, pitted against
other farmers economically, and, all too often, at odds with the
environment.”[4] This paradigm and the need for
alternative economic growth can be especially seen in the state of Bahía
There is however a
new interest in organic production of chocolate in
“Production systems which avoid or largely exclude the synthetically compounded fertilizers, pesticides, growth regulators, and…rely upon crop rotations, crop residues, animal manures, green manures, off-farm organic wastes, mechanical cultivation, mineral-bearing rocks, and aspects of biological pest control to maintain soil productivity and tilth, to supply plant nutrients, and to control insects, weeds, and other pests.”[6] With specific
standards for organic certification developed within various
organizations, each certification program will provide its own rules that
must be followed in both production and processing of cocoa. When these standards are met, the
certification will be awarded to the farm or processor. This often involves a check of
documentation of farm inputs and also unscheduled inspections.[7] For organic farmers not being able to combat diseases with heavy doses of chemical inputs, they will generally spend much more time in the fields to clean weeds by hand, and closely monitor the growth of the tree for signs of pests and fungal infections. They may decide on utilizing various techniques to grow and harvest the tree that fits the criteria of the organic certification such as integrated pest management. Though each farmer’s motives of why they choose to farm organically may be different, it can be seen as an ecological choice. The organic cacao farmer must then pay particularly close attention to early signs of infections and once they are identified take care of them before they spread. Though more of the crop might be lost due to disease, there are benefits. First, the heavy dependency on agrochemicals all over the world has had serious consequences throughout entire ecosystems, of which we are inextricably linked with, making it an environmental health issue. Secondly, while having much less of an impact on the environment, organic chocolate production is a growing niche market in the tropics and offers the potential for new avenues of economic growth for many farmers. The question whether this new niche product is sustainable has yet to be seen. The term’s ‘sustainable’ and ‘organic’ agriculture may mean different things to different people. However, there are specific guidelines that separate these two terms apart even though they are often used intermittently with one another. To begin with, sustainability is a term that has gained wide spread international acceptance especially within the past decade. It is a word whose parameters are loosely defined in various settings. It generally means caring for the needs of future generations in the decisions that we make to fulfill our needs in the present. It first became widely used among agricultural circles such as the USDA, but the word has spread over to all areas of society. The two terms “sustainable” and “organic” are used interchangeably as specific organic practices often times overlap with sustainable ones. Though this is true, to grow chocolate organically does not necessarily merit it a sustainability practice. It can lead to environmental degradation in its own right. A farmer can grow cacao totally exposed to the sun on a scale that would have to deem it an unsustainable practice. It just happens that the philosophy behind organic farming is one that aims to farm in an ecologically sound manner for both the individual and the environment, which helps preserve it for the future. On the other side of the coin, sustainable cocoa farming may allow for a limited use of chemicals where organic farming strictly opposes this practice. Therefore though sustainable production works to use ecologically beneficial solutions in many times the same processes involved with organic cultivation, organic cocoa strictly prohibits the use of chemical fertilizers setting these two terms apart.[8] The evidence presented here is meant to integrate the available research conducted in the major cocoa producing countries in the world from colonial times to the present. This is done in order to examine the question of whether or not organic chocolate is a sustainable practice will be discussed throughout the remainder of the paper. Whether it is organic or conventional chocolate, one has to wonder about the long-term sustainability of the chocolate industry as a whole. With over three million tons of cacao beans are produced every year, one has to wonder if there is a limit to this growth.[9] PART IThe Puzzle of Chocolate: A Historical
Overview of Chocolate Including Its Evolution and Contemporary
Adaptations
My friends, stand
up! The princes have become
destitute, I am
Nezahualcoyotl, I am a singer, head of macaw. Grasp your flowers and your
fan. With them go out to
dance! You are my child, You are Yoyontzin. Take your
chocolate, flower of the cacao
tree, may you drink all of it! Do the
dance, do the song![10] The Birthplace of ChocolateThere are
essentially two birthplaces of chocolate. The first is tied too to its
geological past in South and
*
*
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Ingredients: Theobroma cacao: A Tropical
Tree, The Three Main Varieties of Cacao, Wild Cacao, Genetic
Diversity & Origins, Physical Characteristics of Cacao, The
Major Fungal Diseases of Cacao: Alternative Methods of Control,
Biocontrol & Trichoderma stromaticum; Improved Crop Sanitation;
Research in Genetically Modified Cacao |
Theobroma cacao: A Tropical Tree
The genus Theobroma contains approximately twenty species of small bushes and trees.[52] It is a member of the species Sterculia (named after the Roman god of dung Stercus because many of the plants in this family give off a rotten smell that is similar to dung in order to attract pollinating insects)[53]. Theobroma cacao is also related to Cola acuminata, which is the source for cola nuts used in soft drinks[54] and its geographical growing region is very limited, as is the case with many other tropical crops. The tree is grown almost exclusively between 20 degrees north latitude and 20 degrees south latitude of the equator. It does not grow well in high altitudes where temperatures fall below 60°F or 16°C and flourishes in shaded conditions of the rainforest with high levels of humidity.[55] The tree typically grows to a height of 20 to 30 feet under cultivation, while in its wild state it can grow much higher in its 20-40 year life span.[56]
Perhaps most unique about Theobroma cacao includes its unique flowering characteristics. The flowers of the tree form small cushions on its trunk and some of its larger branches in a pattern known as cauliflory. These cushions, which are about the size of a quarter, are where the flowers and pods spring forth. A few Europeans when first describing T. cacao back in Spain mistakenly depicted the pods growing off the trees branches, as they were not yet accustomed to seeing fruit stem from the trunks of trees. Though many flowers are produced on the tree, only a very small number of these become pollinated and eventually develop into pods. The flowers are around half an inch wide and are formed in small clusters around the trunk and lower main branches of the tree. They contain no nectar or perfume and the pollen is very sticky primarily pollinated by a small midge or insect called Ceratopogonidae, which resembles a small gnat or fly.[57]
Once the flower is pollinated, the fruit of the cacao tree can begin to grow. The fruit comes in the form of a pod, which takes five to six months to mature before it is ready for harvest and many pods will wilt and die before they reach that age.[58] The pod itself grows to be about 6-10 to 3-4 inches in diameter, about the size of a small football. It contains around twenty to forty seeds surrounded by a mucilaginous sticky white pulp when the pod is ripe. In its natural setting, the ripe pods do not actually open up and scatter the seed or drop off and rot. Instead it is entirely dependent on animals in the forest such as monkeys and squirrels that forage through the rainforest and can break through the rough outer layer of the pod to enjoy its sweet pulp. These animals later spit out the bitter seeds, which then fall on the forest floor to eventually produce new cacao trees and this is cacao’s main reproduction strategy in its natural state.
The Three Main Varieties of Cacao: Criollo, Forastero, & Trinitario
In much the same way that the dairy industry in America is mainly split between three different types of cows: Jerseys, Holsteins, and Brown Swiss, the chocolate tree has three main varieties with their own unique set of characteristics. These can be divided into three types of trees: Forastero, Criollo, and Trinitario (a cross between Criollo & Forastero). The forastero variety of cacao is currently the most important type of cacao for commercial purposes. Both the criollo and trinitario types are used mainly as flavor cacaos in special blends for higher quality chocolate. The criollo variety is believed to originate from northern parts of South America and the forastero from deeper within the Amazon basin.[59] The Spaniards were first exposed to the criollo variety and this was for many years the only tree known to the colonists. They had become accustomed to growing this variety and it wasn’t until much later, after their conquests throughout South America, in particular modern day Ecuador along the course of the Amazon, when the Spaniards came across a new variety. They nicknamed this new variety forastero, meaning “foreigner”, as it was foreign to them. There were obvious physical differences in the shape and taste of these new pods. The criollo pods were generally red, while the forastero pods were markedly greener. There were also notable differences in the seed: the criollo had sweet white or violet seeds while the forastero had bitter purple seeds. After being roasted, the taste of the forastero proved to be stronger and bitter with a different aroma. Despite this, it had some great advantages as it produced hardier pods and maintained a higher bean and pod count.
While chocolate was spreading in popularity around Europe during the “chocolate boom” in the 17th century, plagues were known to threaten and almost eliminate entire plantations of cacao. This inevitably posed a major problem to sustain the surge in demand for cacao occurring at the time. As a result, the Spanish had taken Central American cacao from Nicaragua to the valleys of Venezuela’s central coast and the Hispanic Caribbean Islands, including the island of Trinidad. This led to a boom in Venezuelan cacao, which began to supply both Mexico and Europe. Mexico, once one of the main producers of the crop, now became a net importer of Venezuelan cacao in the 17th century. However, by 1725, diseases that destroyed cacao crops through Central America found their way into Venezuela, wiping out entire plantations throughout the country as well as crops on the neighboring island of Trinidad by 1727. In the following years, growers began to reestablish their cacao plantations with forastero trees from eastern Venezuela around the Orinoco River Basin. The mainland trees of Venezuela were grown side by side with the remains of the old criollo trees of Trinidad. This resulted in a new crossbreed, which turned out to be hardier than criollo and tasted better than the forastero. They named this new hybrid of cacao trinitario after the island of Trinidad.[60]
Physical Characteristics of Cacao
Theobroma cacao can be recognized in both the plantation and the rainforest mostly by its distinct leaves, flowers, and pods. The leaves are especially distinguishable as the tops of the trees are often marked by new flushes of bright red foliage. The bright new flushes of red leaves stand out in contrast to the mostly dense and lush green rainforest. The red foliage color is a result of the plant pigment class referred to as anthocyanins. By definition, anthocyanins are certain flavanoid compounds complexed to sugars. How anthocyanins can assist in sugar production and affect any of the above processes has never fully been explained.[61] Anthocyanins occur naturally as chemical compounds and are responsible for the color of various fruit, vegetables, and plants, including the bright changes in the colors of leaves in autumn. In the case of the autumn leaves of temperate plants, anthocyanins are a result of the movement of sugars from leaves to other parts of the plant. In other cases, they can be produced in response to environmental stresses such as nutrient deficiency, water stress, physical damage, and fungal attack.
The Fruit of Theobroma Cacao
Aside from these bright red leaves, it is the fruit of cacao that attracts attention to the tree in both an agricultural setting and in the rainforest. The fruit of the cacao tree is in the form of a large pod and contains around thirty to forty seeds, each of which are about the size of an almond. After about forty days following pollination, the new pod grows slowly from the flower where the zygote (formed as a result of the fusion of an egg nucleus with a nucleus from a pollen grain) undergoes the first cellular division. Once this occurs, the cacao seed then grows out incredibly fast over the next seventy-five days. After five or six months, the pods reach complete maturation with a total of thirty to forty seeds that are neatly arranged in rows inside the pod and centrally attached to a fibrous placenta.
The mature pods may take on a variety of different morphological characteristics being bright yellow, green, or red, with an elliptical form with either a smooth or rough-ridged surface. Though very few flowers are successfully pollinated for fruit-set, there is enough fruit grown so that a thinning process called “cherelle wilt” occurs, where immature pods shrivel up, turn black and die. The cherelle wilts do not hold however and fall off the tree. They are sometimes mistaken for young pods killed by fungal disease, especially Phytophthora, commonly called black pod disease, which will be discussed in detail later. [62] Inside the pods, the seeds are totally engulfed in a white sticky and sweet mucilaginous pulp. After the pod has been opened - chewed through by arboreal animals such as monkeys, squirrels, etc., the seeds fall to the forest floor and may begin to germinate and set forth a tiny rootlet. The stem shoot, or hypocotyl, then arches to raise the closed cotyledons an inch or so above the ground.
When the cotyledons open, four tiny leaves are exposed and grow in a spiral arrangement of new leaves on the seedling. The third phase of growth involves the growth of sideways-stems, called the jorquette (when the first whorl of primary branches will be sent out from the trunk). The jorquette is at the end of the stem where five buds grow out laterally at the same time to form side fan branches, which are at approximately 0-60 degrees angle to the horizon. These fan branches continue to grow sideways as the main stem grows vertically. If the main stem is damaged before jorquetting, then buds below the top grow upright and semi-vertical with a spiral leaf arrangement. These are chupons, or secondary roots, which grow from the base of the tree’s trunk and can replace the main trunk if the tree falls over. Cuttings can be taken from chupons to grow new chocolate trees and will grow vertically where those taken from fan branches grow horizontally. Chupons can grow to exceed the height of the tree’s original canopy. It can result in a wild tree reaching more than forty feet in height, whereas cacao in plantations usually only reaches twenty feet in height in their twenty to forty year life span. Height reduction in plantation chocolate trees is due to pruning, which makes it easier to harvest the pods.[63]
Cacao Flowers
The flowers of the cacao tree stand out amongst its blackish branches as they break through the thick mats of moss that grows on the bark. Though the fragrance of the flower is chemically complex, it emits only a weak scent.[64] With respects to the variety, cacao flowers range from pink to white with most having characteristically red lines that run down to the inner surface of the petals. They have a very subtle fragrance, which is barely detectable. It has five petals and five anthers are located outside the stigma - the point of the pistil where pollen is deposited by insects located at the center of the flower. Between the petals and the stigma are five staminoids, arranged alternatively with the petals that form a type of circular fence to enclose the stigma. This floral design reflects what botanists refer to as a fairly conservative breeding strategy that has a tendency to favor cross-fertilization between different trees within a species. The barrier or fence around the stigma makes it difficult to transfer pollen from the anthers to the stigma of the same flower. In fact, most, but not all cacao trees are genetically self-incompatible where pollen from one flower cannot fertilize the same flower or other flowers on the same tree.[65] The flowers of the cacao tree also change sexes during their life cycle. They are female first and then become male in what is termed protogeny. This is another way for cacao to help prevent self-pollination, which lowers the genetic interchange and thus diversity as more adaptive pollen from one tree is not capable to spread to another. Cross-pollination from different trees also frequently results in higher seed quality and reproductive success. Therefore protogeny ultimately contributes to the overall success of cross-pollination and ensures genetic diversity of the trees helping to ensure it ability to adapt to its environment.
One of the greatest mysteries surrounding cacao in the past is why only one to five percent of flowers each year produces fruit. However, research carried out by Allen M. Young speculate that this lack of fruit-set is mainly a result of a deficiency of cacao’s natural pollinators. The flowers generally begin to open slowly within the late afternoon and continue through the night until they are fully open at about 5:00 AM the following morning. The timing appears to be consistent with the early morning daylight activity of cecidomyiids midges, its natural pollinators.[66] At dawn, the anthers release pollen, which remains available for one or two days. Pollination has the greatest chance in the first day of flowering. The stigma of the cacao flowers are very receptive for pollination during the early morning hours coinciding with cacao’s peak flowering and release of pollen grains by the anthers.[67] If they are not pollinated, the flowers fall off the tree at the end of the second day. In fact, adult populations of midges occur at very low densities in the plantations and they usually only pollinate about ten percent of the flowers during peak bloom periods.[68] Hundreds of thousands of the small white flowers that don’t end up being pollinated to eventually form into pods can be seen covering the ground in a typical cacao plantation.[69]
Pollination
Up until Young’s extensive research into the pollination strategy of Theobroma cacao, very little was known of cacao’s natural pollinators, tiny little midges or gnats, that are barely visible to the eye and whom the tree has an intimate relationship with. Young actually began his research looking at bees as potential pollinators of cacao as they have been noted to visit cacao flowers in the past. However, he quickly found that though the bees visited the flowers, they did not effectively pollinate them.[70] He then moved onto a more believable theory, which was that it was the tiny flies, or midges, mainly in the dipteran family Ceratopogonidae (biting midges) and Cecidomyids (gall midges) that were the chief pollinators of cacao. Pollination of cacao occurs when these midges brush up against the pollen onto the pistil or stigma after entering the flower. Young observed that the structure of the cacao flower is highly supportive of a specialized relationship with one or more different kinds of midges. However, while the cacao may be dependent on these midges, midges on the other hand are not dependent on cacao as they may extract pollen from flowers of many different plant species.[71] The rate of midges to cacao flowers is often exceptionally low. For example, a low range of only 0-63 midges might be found for every 1000 flowers.[72] Interestingly, Young’s observations also indicated that there was a female midge preference to cacao flowers. On or inside the cocoa flowers the females were found more abundantly for the genera and species most commonly associated with the flower.[73] While the birth rate between male and female populations is even being 1:1, Young attributes this pattern due to their reproductive physiology. They’re need for certain kinds of nourishment, possible from certain amino acids from high-protein pollen grains, is similar to the way that only female mosquito’s are found to feed on blood for egg-building amino-acids.[74]
While the general rate of midge population to flowers is low around the world, the numbers of pollinators may vary based on location. In another series of studies, the total number of pollinated flowers per tree in Guatemala’s Pacific coast was found to be 14 times greater than that of the Atlantic Coast of Turrialba, Costa Rica with one midge to 10 flowers. In Mexico (Pacific), Mexico (Atlantic), and Nicaragua (Pacific), the rate was shown to be 12, 1.5, and 0.5 times greater than that of Turrialba respectively. The research based around Turrialba, Costa Rica, showed peaks of rainfall at different times
with no well-defined dry
period. On the other hand,
there is one wet season per year and one prolonged dry season on the
Pacific zones, which can be attributed to its climatic conditions with its
total amount of annual precipitation.[75] In these studies it was shown that
midges were much more predominant on the Pacific coasts rather than the
Atlantic and a direct correlation was found between rainfall and
pollination in these locations.
The agronomic benefits to find ways to increase natural pollinators to induce and increase pollination and thus pod-set have made this an important area of research. Young began his work by identifying the different midge populations found in cacao groves in Costa Rica to look for ways to ultimately build up populations around the farms. He gathered samples of distinctive looking larvae and pupae of the midges while looking at spatial relationships between midge populations in heavily shaded cacao and those in less shaded thinned-out rainforests.[76] It was found that cocoa trees covered with epiphytic mosses and shade cover generally had more adult cecidomyiids midges present during the morning hours. Also, as most cocoa pollinating midge’s breed close to the ground, the presence of rotting organic materials such as epiphytes or rotting cocoa pods become important to help maintain their lifecycle. In one case, a total of six large cocoa pods in various stages of rotting with large woodpecker cavities yielded up to 158 cecidomyiid larvae. In shaded areas of cocoa, it is more common to have rotting cherelle's, which fall of the tree and form suitable habitat for several larvae that live inside the pods. This is especially important during drier months, when the midges may accumulate easier in more shaded areas to live through thermal and moisture stress within cocoa farms.[77]
Pathogens of Cacao
“After the efforts of the agronomists,
soil scientists, plant breeders, and entomologists to improve cocoa
production, there is one final enemy to overcome before harvesting the
crop and risking all in the minefields of the commodity market: pod
disease.”[78]
Most of the pod diseases that affect cacao are an array of fungal pathogens.[79] The estimated global losses reach anywhere from 10 to 30 percent of total cocoa yields. There are serious ecological implications tied to controlling the spread of fungal disease of cocoa, especially in the Amazonian ecosystem. In the last decade, the Comissiao Executiva do Plano da Lavoura Cacaueria (CEPLAC), a government institute in Brazil, show that several hundred thousand trees are affected among Brazil’s estimated 300 million cocoa trees.[80] Nevertheless, in the Amazon, cocoa is seen as a stabilizing force reducing the impact of other exploitative methods of subsistence farming and cattle ranching. If cocoa is severely affected, abandoned groves could provide not only more grounds for the spread of the disease to run rampant, but also the likelihood that the farm would be cut down and left for poor pasture.
“Cocoa, at least, has some merit as a substitute for the rain forest because there is within the cocoa plantation a cycling of nutrients which mimics in part that of the forest ecosystem.” [81]
The main diseases that affect cacao plantations are included here with a special emphasis on witches broom disease as it provides a good example to highlight the severe consequences that rampant fungal disease can have on a cocoa farm:[82]
¨ Black Pod - Phytopthora palmivora
¨ Monilia Pod Rot: Moniliophthora roreri
¨ Witches Broom: Crinipellis perniciosa
¨
Cacao Swollen Shoot Virus
(CSSV)
¨ Vascular-Streak Dieback: Oncobasidium theobromae,
(See APPPENDIX A: Review of the Major Fungal Pathogens of Cacao, for a detailed description of each of the major fungal pathogens of cacao including their main characteristics, severity of infection, and methods of control)
These
diseases geographically occur in almost all the major cocoa producing
countries in Central & South America, West Africa, and Asia. They are the major constituents
behind both decreasing the amount of value of cocoa and making it an
unstable crop due to the ruinous effects of the diseases. To complicate matter further, the
diseases Black pod, Monilia, and Witches Broom can even concurrently
affect areas of South America making early stages of development of
disease difficult to detect as symptoms can be confused with one
another.[83] Ironically, while researchers
around the world are working to solve this problem, the losses from these
diseases are so significant that if they were completely wiped out, it
might have a tremendous negative impact on farmers. The sudden influx of cocoa on the
world market would shoot down prices so drastically that it would probably
ruin many growers and lead them to altogether reevaluate their cocoa as
oil rather than a beverage/food crop. However, because of the complexity
of fungal diseases that affect cocoa, this is not likely to occur.[84]
Cultural Practices, Biocontrol, & Trichoderma stromaticum
There are many considerations that affect the spread of fungal disease, which often include cultural practices used by the farmer. Basic knowledge of the complex ecological interactions between the fungal pathogen in rainforest environments can be very useful. In the rainforest for instance, fungi act as an important way to balance the complex web of life where interdependent networks of specialized relationships form between species. This balance helps control the tendency for one species to dominate over another in a predator-prey type scenario. Outside of this balanced environment however, with large-scale plantations of cacao, the trees are much more prone to infestations of fungi.[85]
The control of fungal disease is one of the major constraints affecting the successful cultivation of cocoa for many farmers.[86] It seems that some of the most efficient cultural methods used to control the disease are good crop sanitation, making this an essential practice, especially among organic producers.[87] In Colombia, for example, a complete cultural control package involves regular harvesting, which can greatly reduce the rate of disease. By frequent harvesting alone, there have been reports of losses from fungal disease to fall from 53% to 22% and an almost three-fold increase in yield. In terms of spraying crops, when growers do spray, in many circumstances they will not spray consistently and will stop altogether when prices are low. This can lead to a build up of the fungal disease and reduces the tree’s vigor. In addition, common high volume or low-volume sprays can be extremely inefficient. For example, frequent intervals of spraying miss most of the target as the fungicide drips from the target.[88]
Recently, an international effort funded by the United States Department of Agriculture (USDA) involved several different cocoa research organizations including the American Cocoa Research Institute (ACRI), the Smithsonian Tropical Research Institute, Pennsylvania State University, Agricultural Research Services (ARS), and M&M Mars. Significant advances were made towards helping control the rampant fungal sieges of cocoa with the development of biocontrol. This is a form of Integrated Pest Management to help prevent the spread of disease. In fact, biocontrol products are already currently being marketed to control several pathogens of greenhouse fruit and vegetable crops. Prospects in biocontrol have emerged largely as a result of decades of unsatisfactory results from spraying fungicides, which have had major shortcomings mainly that the practice is costly, the results are poor, and the available products are not fitted or formulated effectively for the actual targets.
Microbiologist Prakash K. Hebbar, working with M&M Mars, explains: “chemical controls for the fungi don’t work very well and are expensive. But, cultivars tolerant of the fungal diseases are largely unidentified or have not been propagated in sufficient quantities.”[89] This makes looking at biocontrol an attractive alternative. In fact, the new research has already piloted the discovery of beneficial Trichoderma fungi, which can help control crop destroying pathogenic fungi. Trichoderma is one of the most often used biofungicides used to control diseases caused by the Phytopthera species. This newly discovered fungus, which parasitizes witches’-broom, has been named Trichoderma stromaticum.[90] This fungus occurs naturally in the Amazonian forests growing over the unwanted mushrooms effectively preventing spore dispersal. While its distribution of the Trichoderma is erratic, it can be increased artificially. Through initial field and lab tests conducted in Brazil, the T. stromaticum could reduce formation of fruiting bodies, called basidiocarps, of the witches’ broom fungus by 99% when the brooms were in contact with the soil, 56% in brooms on trees, and 31% on pods.[91] The problem with this method is that hitting the target broom on pods in the canopy can be difficult as there are many.[92]
Though these new developments in biocontrol are encouraging, there has not yet been a sufficient amount of research in biological control as an alternative to battling fungal diseases and this practice is yet to experimented on in a commercial scale. However, there is work in progress to determine the commercial potential of T. stromaticum though right now the successful application is doubtful. It was found also that combinations of biocontrol agents were more effective than a single strain and that time of application and shade conditions are important conditions for biocontrol to be most effective. In the words of Prakash K. Hebbar: “Biocontrol is not a magic bullet that will suppress all three major fungal diseases. Applying biocontrol sprays along with pruning, proper plant nutrition, and use of disease-tolerant cultivars should improve yields by lessening the incidence of disease.”[93]
Genetic Diversity & Research in Genetically Modified Cacao
With an ancient history of cultivation by natives in Central and South America all the way through colonial and modern times, cacao as a species has inevitably gone through innumerous crossings and back-crossings between its criollo and forastero varieties. Because the trees pollinate by themselves, when growers began to plant both the criollo and forastero genotypes together in the same plantations, they mixed together even more. Now, only analysis of DNA samples taken from the trees can help to distinguish different genotypes. However, after the mass commercialization of the crop, there have been three main varieties grown distinguished as criollo, forastero, and trinitario trees. Of these three varieties, forastero trees currently produce more than 90% of cacao in the world market today.[94] Therefore, the potential to discover new wild species in the rainforests can be a valuable storehouse of genetic diversity. Scientists are interested in looking for trees with certain advantageous genetic characteristics such as better environmental adaptations, increased disease and pest resistance, higher yields, or improved taste. In fact, there have already been reported findings of wild Theobroma cacao, or non-cultivated species, detected in the past within secluded and isolated clusters of the Amazon rainforest.
Expeditions in the upper Amazon in Peru and Ecuador date back to the 1930’s when trips were taken deep into the tropical rainforests in an attempt to trace wild relatives of cacao to find plants resistant to fungal pathogens.[95] In these expeditions and others, the most basic way to determine a unique variation is to look for any differences in physical characteristics of the tree, which is a good sign of genetic variation. Phenotypical differences can also result from local environmental conditions. Because trees will evolve to better adapt to their environment, spatial separation between populations within a species can often times determine the amount of morphological genetic variation found in the seeds and fruit.[96] These variations are molded by the differences in habitat found throughout the tropical regions of the world including the possible birthplace of cacao in the Orinoco and Amazon River systems.
There is continued interest to search back to this region in the depths of the rainforests to collect genes and hopefully uncover new genetic varieties. This is yet another reason why it is important to preserve rainforests as it maintains a diverse gene pool. There might be wild relatives with beneficial characteristics yet to be found. As for now, the wild types that have been collected are kept at two major centers including one that specializes in Central American cocoa varieties located in Costa Rica, and the International Cocoa Genebank located in Trinidad, which specializes in cocoa varieties from South America. As the seeds inside cocoa pods die in just weeks after separation from the tree, the only way to preserve genetic diversity is to grow entire trees. At the Genebank in Trinidad for example, 16 trees each of around 2500 types of cocoa are grown.[97] Though this can be a daunting task, it may prove to be an important storehouse of genetic diversity for the future. However, looking deeper into the Amazon to detect different varieties of wild cacao may open up the door for another new variety of chocolate that has yet to be experienced.[98]
Looking at indigenous knowledge throughout the Amazon to learn about previously unknown varieties of cacao, if they exist, may also unveil hidden genetic varieties of cacao. It is interesting to note that without any understanding of modern day genetics, the ancient peoples of Amazonia were able to selectively propagate plant species of cacao. They did not have a dire need to grow the cacao tree thousands of years ago out of necessity for survival. They simply had the time to live in and explore the various fruits of the forest and enjoyed the pulp of the cacao pod and thus chose to experiment and propagate species of wild cacao. In modern day Amazonia for example, the Arawate and Asurini Indians who occupy the Terra Firma rainforest region, cultivate Theobroma speciosum. This tree is mainly used for its sweet pulp, but the seeds are sometimes ground to make a crude low-quality chocolate.[99]
Genetically Modified Cocoa
Within the past three decades, scientists have been trying to understand the genetics of T. cacao in hopes to breed a more productive and disease-resistant tree. Because of the high cost and minimal success of using chemicals to protect cacao trees from disease, genetically resistant trees are seen to be the best way to yield better harvests. A research project in South America and the Caribbean conducted by the International Cocoa Organization (ICCO) is currently spending millions of dollars to create a breeding program that utilizes biotechnology for cocoa varieties. Molecular markers can be used to speed up the breeding process to select certain traits that are economically beneficial such as having a high yield of beans or resistance to witches broom disease.[100]
Raymond
J. Schnell of the U.S. Horticultural Research Laboratory in Miami, Florida
has worked extensively to find resistant trees to deadly fungal diseases
and increase overall production of trees. He has traveled throughout Central
and South America to find resistant cacao trees. In these experiments, germplasm is
first sampled to study the trees genetic makeup including protein and DNA
structure. Resistant strains
are then cross-pollinated with trees growing at the research station in
Miami. These experiments can
be a very time consuming process as it can take up to five years for the
tree to grow from seedling to its first harvest and larger harvests
require five to eight years.[101]
However, while the field of biotechnology is growing in popularity, it should not be looked at as the end of all problems for cocoa producers. Traditional research in agricultural practices, plant pathology, and government funded education projects all play significant roles in disease control.[102] What might be most important in improving the economic output of the cacao tree is to better understand the tree’s relationship with the environment. The low pollination rates found in cacao plantations reflect the lack of adaptability of cacao as a plantation crop, which has been an issue for cacao cultivators since colonial times. It is evident that cacao is well adapted to the rainforest and less so to the agricultural setting that it has been limited to over the last five hundred years.[103]
Part III
A Snapshot of Cacao in the Global
Marketplace: Production, Distribution, and Consumption
|
Ingredients:
Global
Consumption of Cocoa, Global Production of Cacao, Historical Shifts
in the Market & the Cocoa Cycle, Structure of Cocoa Farm, The
Marketing Process, International Cocoa Agreement, A Growing Market
for Chocolate and Organic Products, The Value and Price of Cocoa,
& Major Organic Chocolate Companies, Organic Commodities
Products: A Case Study |
Global Consumption of
Cocoa
“Chocolate consumption
and import demand in each country group is expressed as a function of both
population and income growth; the increase in demand for cocoa and
intermediate products is a function of the changing demand for
chocolate.”[104]
The
bulk of increased demand and consumption for cocoa is concentrated within
the countries of North America and Western Europe. In the US for instance, the
average American consumes 11.7 pounds of chocolate per person per
year. In terms of production,
approximately three million tons of cacao beans are produced every year
generating more than three billion dollars worth of exports, 90% of which
are used to make the raw material for chocolate.[105] Giant chocolate companies such as
Hershey’s in the US dominate both local and international markets. Hershey’s alone produces the
leading chocolate bar of the world selling 2.808 billion dollars worth
annually followed closely by Mars Inc. with 2.691 billion dollars in
annual sales.[106] According to the USDA’s Foreign
Agriculture Service (FAS), the US imported over one billion dollars worth
of cocoa beans and cocoa products in 1990 and it is estimated that the
retail value made from finished cocoa products amounted to more than eight
billion dollars.[107]
According
to the US Census Bureau and its Annual Survey of Manufacturers (ASM)
conducted every four years, cocoa also plays an important role in the
workforce and influences other areas of the agriculture sector. In the US, there are approximately
164 companies with over 10,509 employees accounting for over 405 million
in payroll.[108]
Another important facet of the chocolate industry that deserves mention is its impact on other agricultural sectors of the economy. For instance, only 20-30 percent of the ingredients that make up the average milk chocolate bar includes cocoa beans. Milk solids constitute another 20-30 percent, and sucrose (sugar) 40-50%. Therefore converting cacao beans to chocolate is one of the largest industries supporting agricultural business worldwide. In the US, for every dollar of cacao imports, $1.50 in other agricultural commodities will be used to produce chocolate confections. Manufacturers in the US will use around 250,000 tons of dry milk, 400,000 tons of sugar and 350,000 tons of peanuts in chocolate products annually. In the year 1997, the chocolate industry in the US used more than three billion dollars worth of other agricultural products aside from cacao beans in chocolate products. Not surprisingly, the US is also a significant exporter of chocolate with 600 million worth of chocolate exported each year.[109]
In
Europe, both imports and exports of chocolate products are increasing as
large companies are beginning to grow in size by merging with one another
and are expanding out past traditional markets. In Switzerland for instance, a
major cocoa processing company was formed in 1996 when Callebeaut A.G., a
unit of the Swiss company Klaus J. Jacobs Holding, bought out the French
cocoa processor Cacao Barry.
A new company was formed, based in Zurich, Switzerland known as
Barry Callebaut, which now processes approximately 15% of the world market
for cocoa beans.[110] These types of trends for major
chocolate manufacturers and processors to merge or takeover other
companies has escalated within recent years resulting in an increased
concentration of wealth within the industry.[111]
|
Table 1: Major Chocolate Manufacturers in the World: Top Five Companies[112] International
Nestle Rowntree, Mars, Jacobs Suchard, Hershey, Cadbury UK Cadbury, Nestle, Mars, Suchard, Ferrero Rocher European
Market Nestle, Mars, Suchard, Cadbury Shweppes, Ferrero Rocher United
States Hershey,
Nestle, Mars, Cargill, Grace |
Though the predominance of chocolate manufacturing has been centered in Western Europe and the United States for more than a century now, the market for cocoa has recently been expanding to new areas. According research conducted by International Trade Center, the international market for cocoa and cocoa products countries in Eastern Europe might offer potential increased markets in the future for both importing beans and exporting chocolate products. There is currently a low per capita consumption of cocoa based products and projected room for growth according to the Trade Centre. Poland in particular, with its large population and low consumption has good potential for becoming a major chocolate-consuming country in the future.[113]
On the producing end of chocolate, it is interesting to note that the majority of cocoa is not consumed anywhere near the amount where it is grown as it is in Western Europe and North America. For instance, statistics from the International Cocoa Organization (ICCO) in 1993/94 show consumption figures in Western Europe to be 962,000 tons. In Africa, where the majority of the worlds’ cocoa is actually produced, only 30,000 tons are consumed. In fact, Africa consumes only 3% of the cocoa it produces, Latin America 7%, and Asia 9% and it is believed that these are some of the markets that have the most potential for future growth.[114] In terms of finished chocolate products, Switzerland is considered to be the worlds leading chocolate consuming country with an average of nineteen pounds of chocolate consumption per person annually (though this total is skewed by the total purchases of visiting tourists).
Global Production of Cacao
The global production of cacao has changed drastically over the past century in both quantity and geographical location. In 1900, approximately 100,000 tons of beans were produced every year and this figure grew dramatically to 1,500,000 tons in just seventy years in the 1970s. In the last thirty years alone, production then doubled to 3 million tons of cacao beans produced annually.[115] Another remarkable change in the industry involves the major global geographical shift of cacao production around the world since the early 1900’s. In 1900 for instance, only around 15% of the worlds cocoa came from West Africa. However, in just fifty years, the geographical heart center of the cacao trade completely shifted so that by 1970, West Africa produced more than 80% of the world’s crop. West Africa is now the largest producer followed by South and Central America.[116] The largest producers in West Africa today are Ivory Coast, Ghana, and Nigeria. The bulk of cocoa grown in these countries is a variety of the Forastero tree known as Amelonado (meaning melon-shaped). This variety now accounts for approximately eighty percent of the world’s cocoa.[117]
Though there has been a steady increase in production over the years, this in reality does not reflect the wide fluctuations in production that can occur during any given growing season. Large outbreaks of diseases can affect the leaves, pods, or the entire tree and can greatly diminish production. In order to guard against such outbreaks and other hazards that may affect the tree, governments within major cocoa producing countries in West Africa have developed extensive measures to research, monitor, and protect their valuable cocoa crops.[118] The following table highlights the trends of major producing countries in the last decade (See Appendix A for a complete table of the amount of imports/exports of cocoa products by country and quantity from 1989-1999).
Table II: Production of Cocoa Beans, by Country, Quantity, and as Percentage of total:
|
|
1990/91 |
1995/96 |
1989/99 |
1999/00 | ||||
|
Country |
% |
000
tons |
% |
000
tons |
% |
000
tons |
% | |
|
32 |
1200 |
41 |
1163 |
41 |
1325 |
44 | ||
|
Ghana |
12 |
404 |
14 |
398 |
14 |
440 |
15 | |
|
Indonesia |
6 |
285 |
10 |
390 |
14 |
410 |
14 | |
|
Nigeria |
7 |
158 |
5 |
198 |
7 |
165 |
5 | |
|
Cameroon |
4 |
135 |
5 |
124 |
4 |
120 |
4 | |
|
Ecuador |
4 |
103 |
4 |
75 |
3 |
95 |
3 | |
|
9 |
115 |
4 |
75 |
3 |
60 |
2 | ||
|
The
Eight |
89 |
2631 |
90 |
2561 |
91 |
2740 |
91 | |
|
Other
Countries |
11 |
282 |
10 |
237 |
9 |
263 |
9 | |
WORLD |
100 |
2913 |
100 |
2808 |
100 |
3003 |
100 | |
Source: International Trade Centre UNCTAD/WTO
2001
Historical Shifts in the Market &
the Cocoa Cycle
Though there has been enormous growth in cocoa production in the twentieth century, it has not been at a steady rate. Cocoa is typically characterized as having periods of stagnation followed by strong rates of production in what is known as the cocoa cycle. The cycle might begin with producing countries experiencing enormous increases in output in short periods of times, which gives way to more stable production followed by an either steep or gradual decline/crises. This in part explains the reasons for such a wide and inconsistent geographical distribution of cocoa on a global scale. The cocoa cycle can also occur within a national level. For instance, 80% of Ghana’s cocoa was produced in its Eastern and Central Region’s in the 1940s, but then shifted so that 60% of the national production occurred in the Western Region by the 1990’s. Therefore when there is a cocoa boom, it is almost always a result of a shift in geographical production.
This shift can be seen historically from colonial times. As cacao was cultivated in Mexico and Central America throughout the 15th century, in the 16th century, production began to decline already and shifted to Guayaquil and Venezuela in the 17th century. In Venezuela, the wealth created through cacao in transatlantic freights was enormous as regular shipments were being carried to Spain consistently during the period of 1701-1777.[120] When the growing demand for chocolate spread throughout Europe, production moved further south to Brazil where it was collected along the banks of the Amazon.[121] Then in the 20th century, cacao made its major leap across the Atlantic and began to be produced in Ghana, which soon became the world’s largest producer. After a relatively stagnant period of global cocoa production in the 1970s, the next boom came from Ivory Coast, which replaced Ghana as the world’s largest cocoa producer when Ghana’s production began to fall.
While
geographical location plays an important role in the cocoa cycle, there
are also other factors at work that include such as land, labor, and price
of cocoa on the international market. Most cocoa booms in the past have
required a significant supply of land such as tropical rainforests for
cultivation. Countries or
regions that can supply the cheap land needed for extensive cultivation in
the right climate are at an advantage. At first, the soils are rich in
nutrients and diseases are scarce.
However, the decline of sufficient nutrients in the soil might be
significant and attempts at maintenance strategies and fertilization
become increasingly important.
If too burdensome, farmers may choose to move from their old farms
and go to other forests as is done in Ivory Coast and Ghana. After several successions, this
can lead to widespread deforestation if cocoa is grown heavily within a
region. Therefore the
availability of cheap and available land plays an important role of
whether farmers want to pursue cocoa as a crop. In the context of labor, the
availability of cheap labor is another factor that helps initiate a new
shift in the cocoa cycle. For
instance, the cheap available labor in Ghana and later Ivory Coast make it
more competitive against other countries such as Brazil where labor is
more expensive and. In Ivory
Coast and Ghana, labor is generally provided by a large migrant working
pool from Burkina Faso that often cross borders to work and this is how
most of the cocoa is produced in those countries.[122]
After
the initial boom phase when these three factors- land, labor, and price,
seem to be at the producing countries advantage for several years,
problems begin to occur leading to the decline of cocoa in its crisis
stage of the cycle. This can
occur for a variety of reasons such as increasing susceptibility to pest
and fungal infections, which often advances rapidly in monoculture
settings. When the farmer’s
trees are declining, they can either choose to invest in more disease
control or simply risk lower levels of production. If the crisis is particularly
devastating, they may abandon their cacao groves altogether.
In
Costa Rica for example, the cycle permeated as a result of the fall of the
banana industry, which led to heavy investments in cocoa in the
country. In 1916, the
Atlantic seaport of Limón was for a time the most important banana port in
the world exporting a yearly average of 11 million stems. However, by the 1920s, due to the
notorious Panama Disease caused by Fusarium wilt, exports to Limón
dropped to under a million stems.
Bananas were replaced by substitute crops, of which cocoa was the
principal choice. In the
1950’s, 1960’s, and 1970’s, prices were high and cacao was the dominant
perennial crop with more than 247,000 acres of trees planted. However, this drastically changed
in the 1980’s when prices began to drop. Added to this, the deadly Monilia disease plummeted through
many regions of Central America.
Many farmers simply abandoned their farms and production then fell
by as much as 80%, from 35 million pounds in 1978 to 4.5 million.[123] As a result, farmers began to grow
bananas again and other alternatives such as timber and cattle
pastures. The few growers
that stayed in their cacao groves in Costa Rica began to rely heavily on
the use of fungicides and fertilizers to help fight disease and increase
production.[124]
Structure of Cocoa Farms
The
farmer that decides to plant cocoa is making a long-term investment, as it
requires a relatively long development period to produce new trees. The cocoa trees are carefully
grown and many times are the main capital assets from which a farmer makes
an annual income for 30 to 40 years.
Investment in cocoa farms attracts farmers because of the relative
ease of maintenance, management, and the economic return from the sale of
the output. In major cacao
producing regions such as Ghana, farmers will consider the stability of
their investment not only within their own lifetime, but also the lifetime
of their children. Given
relatively stable growing conditions the children are likely to continue
with the cocoa farm after their parents. In the worst case scenario, if the
market for cocoa in the farmers country has been particularly unstable or
unprofitable for various reasons, this may result in converting the old
cocoa farms to other food crops rather than replanting them.[125]
The
size of cacao farms and the way they are maintained varies greatly
throughout the world. A
farmer may have anywhere from 20 acres to more than 400 acres of land,
though the former is more common.[126] This holds true especially for
West Africa where cocoa is grown almost entirely by farmers who hold
usually less than 20 acres of land.
As mentioned cacao does not require heavy capital expenditure for
processing equipment and having the skills and the finance for expensive
processing technology is not necessary for farmers to gain a higher price
for their cocoa. It then
becomes more cost efficient for farmers to produce the crop and process it
through their own means and sell to the market than it is for
manufacturers to grow their own cacao through large plantations.[127]
The Marketing
Process
As
mentioned earlier, since the turn of the century, cocoa production has
increased from 100,000 tons to 3 million tons per year. Over the years, a
highly complex and sophisticated marketing system has evolved to make the
transactions between farmers to the manufacturer a smooth one.
Flavor & Bulk Cocoa’s and Marketing Boards
To
better understand this complex system and the way it functions, it is
first important to differentiate between bulk cocoa, which accounts for 90
to 95 percent of total cocoa production, and fine or flavor cocoas. The market for Fine or Flavor
cocoa is a highly specialized one that generally secures a higher premium
than for Bulk cocoa. Flavor
cocoa has a unique and distinct flavor and is grown mostly from Criollo
and Trinitario trees. It is
generally available in small quantities used by manufacturers to blend
with bulk cocoas. As a
premium quality cocoa, it is a highly specialized market that is a
miniscule and diminishing percentage of the industry today. Flavor cocoas are generally
marketed in a very individualized manner where buyers will purchase a
sample directly from a plantation or from shippers who take great care to
guard their reputation. As
these cocoas make up only 2% of the market, there are direct relationships
between manufacturer as planting material, production practices, and
quality is of great concern.
On
the other hand, bulk cocoas make up over 95 per cent of the total tonnage
of cocoa produced annually on the global market and they’re marketing
process is much more complex with a different set of grading standards and
quality control.[128] Bulk cocoa is mainly grown from
the Forastero variety trees found throughout West Africa and Brazil by
farmers that sell their cacao beans to commercial businesses or government
agencies that control the bagging, grading, and ultimate sale of the crop
to the manufacturers. Cacao
beans from Ghana for instance are considered to be the premier grade in
the bulk market because of its consistent quality control and flavor
preferred in milk chocolate, which is a result of the countries grading
and inspection system that ensures farmers sell well-fermented, dry
beans. In countries such as
Cameroon, Nigeria, and Ivory Coast, there are less stringent grading
standards and beans from these countries are considered to be of lower and
less consistent quality.[129]
Marketing Boards
In
many of the larger producer countries of West Africa such as Ghana and
Nigeria, marketing boards are established in order to monitor the sale of
all cocoa and ensure the quality and consistency of production. In Nigeria for instance, the Cocoa
Marketing Board of Nigeria has been a major component in the successful
marketing of cacao in the country.
A few of its roles might include helping to strategically plant
cacao, using its reserves to support prices through periods of depression,
and maintaining favorable terms of trade over time.[130] In order to do this; the farmers
are insulated from the markets by being paid a fixed price for their
cocoa, which meets the minimum grading standards set up by the Marketing
Board. The Marketing Boards
then arrange for the sale of cocoa on world markets through subsidiary
marketing companies situated in major cities such as London (England),
Accra, (Ghana), and Lagos (Nigeria).
Aside
from the case of Nigeria, most countries have their own individual
marketing structure with policies and regulations to help control the
level of protection offered to farmers in commercial markets. Depending on the market situation,
this can range from total government intervention such as the example with
the Marketing Boards set up in Ghana and Nigeria, to having no regulations
or protection at all, where the producers are free to complete
commercialization. In Brazil,
for example, the marketing tactic used borrows from both ends of the
spectrum. On the one hand,
the selling arrangements of bulk cocoa are controlled by the governments
foreign trade department through the Bank of Brazil, known by the
Portuguese abbreviation of CACEX.
Its main purpose is to control when the shippers are selling. However at the same time, they do
not offer farmers complete protection from world prices and the price they
pay the farmers varies from day to day.[131] This is just one example of the
possibility for different marketing strategies used by countries to
monitor their bulk cocoa production.
Actuals & Terminal Market
The
actuals market involves the buying and selling of cacao beans. Because small shareholders produce
the majority of the world’s crop, most of the selling of cacao is done by
a small number of marketing companies or shippers through government or
commercial contracts. These
marketing companies and shippers are centered in major cities of cocoa
producing or importing countries such as Accra (Ghana), Lagos (Nigeria),
Abidjan (Ivory Coast), Douala (Cameroon), and Salvador (Brazil). Each center sells a standard type
of cocoa that is sold for shipment for a present or future date. Buyers can purchase cocoa from the
shippers or marketing companies through the actuals market, though there
is usually a minimum quantity of cocoa they are prepared to sell. For example, the marketing
companies in Ghana and Nigeria, this minimum amount is usually around 200
tons.
Manufacturers, Dealers, & Brokers
Dealers,
brokers, and agents will operate mostly in the United States and Western
Europe.[132] The market demand for the cacao
are split between the manufacturers who want the beans for their own use,
dealers who want to resell the beans or fulfill a sale they already made,
and brokers who make contracts between the two. To begin with, dealers will first
buy cacao either in store, on a ship, or awaiting shipment, and then sell
the beans even before they physically have it in their possession. Brokers on the other hand play a
key role in bringing the buyer together with the dealer. Buyers use brokers for a variety
of reasons. In some
occasions, they may not be fully invested in the industry and need the
broker’s expertise of the market.
In other situations, large suppliers, users, or dealers may want to
use a broker as an intermediary to keep their identity anonymous. The broker then plays the
important role of making contracts for the transaction and will even go so
far as to advise both the buyer and seller and arrange contract
details. For this, the broker
is paid a commission which is in some cases is half a percent of the
contract value.
The Secondhand Market
The ‘second-hand’ market consists of mostly manufacturers that are too small to go directly to the source of the actuals markets. In the secondhand market, dealers will buy cacao beans to resell to manufacturers and other dealers. They will also sell cacao that they have not yet physically purchased. Even larger manufacturers sometimes find it convenient to use the secondhand market, as the actuals market may not be offering the shipping period they need. The principal secondhand markets are London (England), New York (USA), Amsterdam (Netherlands), Hamburg (Germany), and Paris (France), with London being the largest.[133]
Terminal ‘Futures’ Market
Traders
who prefer to use the terminals market (commonly referred to futures
markets) choose to do so mainly for financial risk management or
speculation.[134] The terminal market deals with
future shipment or delivery of cocoa and allows for contracts to be bought
back or resold before it is physically delivered. A cash settlement is given to
cover for any changes in price that may have occurred between the time
when the contract was signed and when the cacao was actually
delivered. There are two
principal terminal markets: The London Cocoa Terminal Market and the New
York Cocoa Exchange, both formed in the 1920’s to provide a selling floor
for trade of cacao. Using the
terminal market, cacao can be traded for delivery up to eighteen months in
advance.
Cocoa Contracts
Most sales in cacao
beans are made on standards contract forms that are drawn up and
controlled by a small number of respected trade associations that have
developed as trade expanded.
In the United States, there is the Cocoa Merchants Association,
which consists of dealers, brokers, manufacturers, producers and
shippers and regulates disputes and
looks after the interests of those involved in the trade. There are usually three types of
contracts that can be issued:
1. FOB: Free On Board. The buyer accepts responsibility for all charges from the point where the beans are loaded into the ship from the producing country.
2. CIF: Cost, Insurance, and Freight. The seller is responsible for all charges involved until the beans reach its final port destination.[135]
3. EX STORE: The sale of cacao in a warehouse normally confined to the secondhand market in consuming countries. The cacao may be immediately available for the buyer.[136]
Shipping
After cacao is harvested, it must be shipped. It is usually the exporter’s responsibility to make an arrangement for the shipment.[137] All beans shipped from major producing countries are placed in bags ranging in weight depending on the country’s standards. The market requires that the bags are marked to indicate the country of origin, the grade, and the time of year the crop was harvested, whether it was a main crop or light, mid or summer crop. Both cacao and coffee beans are known to be two of the most difficult commodities to ship as thermal shock and condensation can occur, two of the most severe problems for shippers. Thermal shock occurs when the beans pass from tropical to temperate zones, for example from West Africa to Europe, which is an intense shift from the main cocoa harvest in November coinciding with Europe’s winter. These are important considerations when shipping and there are many different methods of packaging along with technology that can be used to minimize potential losses as a result of thermal shock and condensation.[138] (See Appendix B: Alternatives to Chemical Fumigation that fit Organic Standards).
The Value and Price of Cacao
The international market for cacao beans is known to be a volatile one. Because of rampant fungal infections, attacks from pests, and the extreme weather conditions that can occur in the tropics, the size of the harvest can vary greatly from year to year.[139] This can greatly affect the price when it is traded. Three of the other major factors that affect the overall value before the beans are traded include:
1. Quality:
This is determined by a sample taken from a group of bulk cacao beans to derive statistics about the physical characteristics of the beans that helps determine its value.
2. Demand:
The demand for cocoa can greatly affect its price. For instance, if there is an oversupply of cocoa in the marketplace, this may bring the price down as supply as exceeded demand. Likewise, if there is an increase in the amount of demand for cocoa, but a lack of supply, this will inevitably bring prices up.
3. Period:
The price is also affected by the period of shipment. A buyer will generally have to pay more for the beans the further ahead the shipment period requested. This is mostly to cover the cost of storage and finance to carry the surplus beans, which would be much higher than if they were to simply purchase the cacao for later shipment.
With all these factors combined, the daily prices of cocoa beans can shift dramatically from day to day, week to week, and year to year. For example, in the past thirty years, the market prices for cocoa peaked in the late seventies, and then gradually dipped down to their present cost.
Table III: Daily Prices of Cocoa 1971-2001
Source: International Cocoa Organization
(Note: graph created from statistical data from the International Cocoa Organization (ICCO).
Calculating the daily price of cocoa beans is done through averaging the quotations of the nearest three active future trading months on the London Cocoa Terminal Market and the New York Coffee, Sugar, and Cocoa Exchange at the time of the London close (ICCO). The London prices are converted to US dollars by using the current six-month forward rate of exchange in London at closing time. The time of shift to the next three-month period is the fifteenth of the month before the nearest active maturing month).[140]
According to the United Nations Cocoa Conference held in 2000, there was a general shared view among producer and consumer members that the current world market prices were too low. This type of situation has the most impact on farmers who depend on cocoa for their livelihood. Organizations such as the World Bank Task Force on Price Risk Management, the United Nations, and The International Cocoa Organization, are all beginning to implement several projects designed to provide better price guarantees to aid farmers.[141]
The International Cocoa Agreement & the Cocoa Council
The goal of the International Cocoa Agreement (ICA) is to stabilize import/export prices for cocoa. The Agreement took sixteen years of negotiation to complete and was signed into effect on October 1, 1973 and is continually renewed every 8 to 12 years to adapt to significant changes occurring within the industry.[142] The time elapsed to form the negotiation in itself implies the complexity and careful deliberation that was needed to control the export and price of cocoa in the global marketplace. One of the main purposes of the agreement was to establish a minimum price for cacao beans to control the wide fluctuations of the price for cacao in global markets. In order to do so, the ICA has the power to restrict exports if prices fall and hold the surplus in buffer stocks that will eventually be sold when prices rise up again. While the ICA can help prices from falling below the minimum, it can do nothing to prevent the price from rising once cocoa from the buffer stock is sold. In other words, there is not a maximum price range nor can the top end of the price range be controlled.[143] By doing this, the ICA helps to reduce wide fluctuations in price of cocoa and establishes a minimum price by restricting cocoa exports as prices fall holding buffer stocks when they rise.[144]
The newest International Cocoa Agreement at the United Nations Conference was signed in March 2001. It highlighted issues such as farmer’s needs, environmental concerns, creation of a new role for the private sector, and the replacement of market intervention mechanisms. Eliminating interventionist mechanisms means that it will no longer use production quotas and buffer stocks, but rather use a new Market Committee to monitor developments and ensure a healthy balance between supply and demand.[145]
All major producers and consumers, except for the United States, are members of the ICA. Trade of cocoa in the United States is controlled through a separate organization known as the Cocoa Council. Before the start of each crop year, October 1st – September, the Cocoa Council will decide on the level of total world exports needed to keep prices around the middle range based upon predicted levels of demand. The Council maintains alliances with member and non-member countries and even has a quota system set up based upon production in past years in order to control the amount of beans imported. Generally speaking, there are no restrictions for flavor cacao and for countries that export less than 10,000 tons a year. If a country produces more than its quota, it can sell its surplus to the buffer stock, but the buffer stock also has an annual limit. If that annual limit is exceeded, beans will be bought by the buffer stock and sold to vegetable oil processors. In this way, the supply can be controlled to prevent loss in profits due to oversupply.[146]
A Growing Market for Chocolate and Organic Products
Organic chocolate is currently only a miniscule portion of the total chocolate industry, consisting of less than one percent of the global market. Though it is such a small percentage, organic chocolate is part of a much larger movement of the organic foods industry, the fastest growing niche within the agricultural sector today. The organic foods industry has been growing steadily throughout the past three decades and is expected to increase by approximately 1-10% percent in the next five years. The increase in demand has especially taken root in European countries within the past two decades and Germany currently leads the world in consuming organic foods, accounting for one third of the total European market.
Countries that are located within the tropics are important exporters of many organic foods such as coffee, tea, and cocoa along with other tropical fruits and vegetables. Some have even begun to adopt government policies that support organic farming initiatives. This may include assistance in important processing techniques and marketing. Therefore, an overall increase in demand for organic foods has opened up new opportunities for expanded production including organic chocolate.[147]
Currently, the International Cocoa Organization (ICCO) does not have exact figures of the amount of organic cocoa produced worldwide and so it is difficult to detect what type of impact organic cocoa might have on other industries, though the percentage is likely to be small. However, as a whole the organic cocoa industry is expected to grow in upcoming years. Many organic chocolate products have already found their way into mainstream supermarkets and health food stores around the world. A brief description of these products and their missions will be overviewed here.
Green & Blacks: Maya Gold
Green & Black’s Organic Chocolate launched Maya gold in 1994 in collaboration with the Fairtrade Foundation and Mayan farmers from Belize. Added to the Fair Trade mark, the Soil Association has certified the line Maya Gold as organic with organic cocoa beans, organic sugar, and organic vanilla. The Maya Growers Organization from which the beans are grown is a cooperative system of 350 farmers that receive a contract extended beyond five years, which guarantees them a higher price. Green & Blacks chocolate bars are popular throughout Europe where it is found in supermarkets, health foods stores, and co-ops. It has also been introduced into US and Japanese markets.[148]
Mascao Chocolate Bars
A chocolate bar endorsed by the European Fair Trade Association, Mascao chocolate bars can be found in Oxfam shops, whose stores promote the organization based in England dedicated to finding solutions to poverty and suffering around the world. The beans are produced in Bolivia organically and are purchased in direct trade from a confederation of cocoa farmer cooperatives. Unrefined muscovado sugar is used in the bars, which is grown in the Philippines by small farmers. Manufacturing is done in Switzerland.[149]
Cloud Nine Chocolates
This is the largest manufacturer of chocolate bars and chocolate chips in the natural foods industry and distributes products under four different brand names including: Cloud Nine, Tropical Source, Environments, and Enchantments. It was the first company in North America to manufacture and market organic chocolate and its suppliers for organic cocoa are mainly from Costa Rica and Panama. The company will pay a 30% premium over market prices to local co-op growers to support organic initiatives. It has a few innovative environmental policies, which include using only flavor oils that are made without propylene glycol (which can be environmentally hazardous), and its bar wrappers are printed from recycled paper with post-consumer waste. As a socially responsible business, it is a member of the Social Venture Network and donates 10% of its profits towards ecologically and sustainable tropical food products.[150]
Rapunzel Chocolates
This company was originally founded in Germany in 1975 and has since opened up a US branch in California. The ingredients comes from socially responsible and organic sources which is certified by the company’s trademarks “Eco-Trade” with the claim that:
“The
environment is best protected when farmers who grow our ingredients are
paid a premium to tend their land organically and become
self-sufficient…Eco-trade means that the World environment is actively
protected and that farmers are paid more money.”
Some of the farmers come from the unique El Ceibo cooperative in Bolivia where they may receive up to twice the international price. The cooperative has been very innovative having developed an independent transport system, processing facility, and warehouse for storage. The milk used in the chocolate comes from free ranging cows that eat organic grasses and grains. However, even though the chocolate is in accordance with The California Organic Foods Act of 1990 and is certified by Farm Verified Organic (FVO) certifiers, the Eco-Trade program is a company trademark and not an independent certification program.[151]
Risks of Organic Market
Is it too idealistic to consider that reciprocal situations can exist between commerce gaining a profit through organic products while at the same time eliminating the amount of chemicals released into the environment? While there might be examples that could be highlighted here that would illustrate both successful and unsuccessful applications, the potential risks focused on here in order to consider important risks before converting or initiating an organic cocoa farm or organic chocolate brand. In some cases it is argued that: “win-win opportunities become insignificant in the face of enormous environmental expenditures that will never generate a positive financial return.”[152]
Another significant risk especially relevant to the organic chocolate industry is market saturation of organic cocoa beans and chocolate products. The oversupply of organic cocoa can outpace demand, which is good for the consumer in the short term as the prices will drop, sometimes even dramatically, but at the same time it can put the people who produce the food or beverages out of business. Increasing numbers of organic foods such as organic chocolate products have already led to a certain degree of market saturation where small companies are struggling to compete with each other and larger companies such as Barry Callebaut are beginning to enter into the market developing new lines of organic chocolate.
Organic Commodities Products (OCP): A Case Study of the Wholesale Organic Cocoa Industry
Organic Commodities Products (OCP) was recently the largest US buyer and marketer of organic cacao beans. Based in Boston, the head of the OCP operation, Joe Whinney once stated: “what the embryonic organic chocolate market needs most, is a stable, expanding supply from tropical growers”[153] The following case study is based on conversations with two employees of OCP before and after the company filed for bankruptcy.
Interview with David Barash
I was able to speak with David Barash, one of the chief business consultants for OCP, to find out more details about the situation. As a very successful small business in their first years of operation, I was initially surprised to find out that early in 2003 they had filed for Chapter 11 bankruptcy. They’re main suppliers of cocoa were from Central and South America which provided the organic beans which were processed into cocoa and sold as powder to different companies. They also had partnered with companies such as Newman’s Own, which is a non-profit company that sells a variety of organic products in health food stores around the country. They supplied cocoa to 2nd and 3rd tier companies such as Stonyfield and Keefer and others in the natural foods industry that use organic cocoa in their yogurt, milk, cookies, and chocolate products, which was roughly 80% of the market. As a first tier chocolate company, they processed the raw beans into powder. 2nd tier companies generally process the powder into bulk chocolate while 3rd tier molds the bulk chocolate into specialty products such as yogurt, milk, cookies, truffles, chocolate bars. While some major chocolate manufacturers such as Hershey’s have the capacity to incorporate all three processes, many smaller companies do not. They fall into one of the above categories such as Lake Champlain Chocolates in Burlington, VT which is an exclusive 3rd tier chocolate company producing high quality chocolates and candies such as truffles, chocolate bars, and other specialty chocolate products.
As a first tier chocolate company, Organic Commodities Products was unique in the sense that they made a tremendous effort to initially create the demand for processed organic cocoa and then the supply to match it. This is what David described to me as the business model of a new category emerging on the supply demand chain that of innovation as at first there was no supply and no demand for organic chocolate. David described that anytime you go out and try to build an organic business it is out of balance, you have to create the demand, or “leverage the demand” to bring more of a balance so that the demand and supply are in close proximity. On the other hand, if there is a demand for something and not a supply than this creates a business opportunity. Organic chocolate simply did not exist seven years ago in the US. The demand for organic chocolate created by OCP was forged out of the growing demand for organic foods, which is one of the fastest growing niches within the agricultural sector and is continually expanding to introduce new organic commodities to consumers. Therefore the company both met and created a business opportunity in the sense that demand for organic commodities are expanding for new products every year and at the same time they created a demand for purchasing processed organic cocoa powder. They built strategic business partnerships with 2nd and 3rd tier manufacturers and convinced them there was a demand for organic chocolate while they then provided the supply for wholesale organic cocoa powder they could use in their products. One of the company’s biggest challenges was to establish a steady supply of the beans that they imported from an extensive network of small farmers and cooperatives from around the world that they had very close relationships with. They had to build both trust among the farmers so that they could receive better wages for growing organic and also be able uphold organic standards while constantly expanding to different cocoa regions to provide for more cocoa as the business was expanding. Originally focusing on farmers from Central and South America mainly in Brazil, Trinidad/Tobago, Costa Rica, and Panama, they expanded to West Africa, which is the predominant cocoa growing region in the world, to obtain cocoa from more than 3,000 small growers. They had to work through government regulations and deal with issues such as transport and processing, refining, packages, and chemical fumigation, integrated pest management, and many other issues.
After talking to David about the some of the reasons for the companies folding, I realized that my initial presumptions were wrong. I believed that it was due to market saturation (where demand outweighs supply creating an imbalance which often drives out companies) for organic chocolate products. This was an educated guess considering the timing of the introduction of organic cocoa from major giants in the chocolate industry such as Barry-Callebeut, which recently began to produce bulk organic cocoa for the first time only a few months before OCP filed for bankruptcy. Therefore, with Barry-Callebeut being one of the world’s largest cocoa processors selling processed cocoa powder and products around the world, it would essentially have flushed out its smaller competitors, mainly Organic Commodities Products. However, David explained to me that this was not the case. One of the major lessons learned from the business venture of OCP was not necessarily the introduction of new competitors, but rather that without bringing a value added product directly into the supply chain, a company is vulnerable to competitive threats. OCP was an intermediary in the sense that it bought the cocoa beans, processed them, and then sold them to manufacturers. They bought the beans, shipped them into the US, and processed them at a processing plant that they rented out in Boston. They were only one step up the marketing chain and were vulnerable in the sense that manufacturers could choose to import the beans on their own therefore bypassing their position on the supply chain. Therefore without developing and manufacturing their own brand of organic chocolate, OCP became vulnerable because much of the value and profit gained from cocoa comes from manufacturing process to make finished chocolate products. Drawing on his previous experiences as a business consultant for Ben & Jerry’s and other natural foods/ environmental businesses, David explained that the case of OCP wasn’t explicit to organic cocoa, but served as a good microcosm in the natural foods industry.
It was evident after my phone conversation with David that I was only scratching the surface, but David did his best to generalize the details for me so that I could write a brief overview on the topic. However, it helped being able to talk with one of the companies chief business consultants as this was a fairly recent event and any information or reviews in the media are limited or non-existent. David Barash now works for start-up businesses in Vermont to help with operations and finance. He is currently involved with Vermont Apple Pie, providing ready to bake apple pies distributed all over the US. Though no longer in business, the following interview conducted with Stephanie Daniels, who worked with research and development for OCP, highlights important and revealing trends within the industry:
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Personal Interview with Stephanie Daniels of Organic Commodities Products Question #1: How did you get involved with OCP? Random fate! I was working in Central America for a few years and was given Joe Whinney’s name when I moved back to MA. All was history from there. Because I spoke Spanish and had a background both in environmental issues and Latin America it was a good fit. Question #2: What are some of the biggest challenges that you are confronted with in terms of maintaining your environmental mission and holding a successful business? The cost and competitive market issues. We are unique in the amount of development work we do with farmers and it is a constant struggle to maintain those investments and stay competitive in the marketplace. Cost pressures are unrelenting for manufacturers to lower their cost of goods and be more competitive, this is especially true as the number of companies getting into organic is increasing. Most of them do not have programs with farmers so this is an additional cost we have that others don’t. Also we don’t have a market brand so we cannot communicate our mission and message to consumers directly. We have to educate manufacturers that investments in sustainability and fair trade will indeed bring them increased supply security and quality guarantees. Question #3: What are some future issues that
you see in the organic chocolate industry? (e.g. market
saturation, labeling standards, etc.). The oversupply of low quality organic cocoa is a big issue now. It is driving prices for farmers down as competition grows. It will be a struggle for organic chocolate companies to regain a position in the market as suppliers of high quality products, not only products with environmental value. Fairtrade is also sure to be a subject in the future. Organic certification equivalency between countries (Japan, European Union, USA, others) continues to be a challenge although standardization is slowly making headway. Question #4: In the next five years, do you plan on creating your own organic chocolate brand? Perhaps, although as our core competency is the development of organic programs in the field and supply chain security would probably focus more on an industrial, ingredient brand rather than a retail one. |