Worth $100billion globally, the chocolate industry is home to Cadbury's, Oreo & Toblerone owners Monedelez and KitKat, Smarties & Milo manufacturer Nestle. These multinationals are  just two of the many FMCG organisations making billions off the cocoa bean. With these companies recording massive profits, you would think farming core ingredients would be a lucrative business. The reality couldn't be further from the truth.

It is grown in tropical countries near the equator, where the climate is hot and humid. The bean comes from the Theobroma cacao or the cocoa tree. Initially discovered in the Amazon, production spread to around 30 countries, with west African nations Ghana and Cote D'Ivoire growing to control 90% of the world's supply.

Farmers in these countries have seen minimal benefit from the industry, with only 2% of proceeds filtering down to local farmers as the product is often shipped raw to Europe for processing. Redistributing the wealth across the value chain is a priority for many African leaders, with Ghanaian president Nana Kufo Addo speaking openly about the required investment needed to bring manufacturing back to the continent and its ability to create 1000’s of jobs within its borders. 

With proper investment, there is a huge opportunity to improve the financial outlook for farmers and workers at the bottom of the chain. 

In 2021 Ghana exported 1 million tons of cocoa beans to Europe and North America at an estimated cost of $2.5bn.  This is only a tiny fraction of the global gross domestic product. Cocoa growers' share of the final product has been reduced over the years as traders, brands, and retailers have taken a more significant cut of the profits. On average, farmers receive just 6% from the transaction price of a chocolate bar. According to Fairtrade, in the 1970s, cocoa accounted for up to 50% of the value of a chocolate bar. By the 1980s, it was 16% and it continued to fall to its current level. Pretty insane if you asked me, especially when you consider that the chocolate price has  increased 8% in the year 2022 alone. It estimated farmers with 2 hectares of arable land, a size large enough to host five football pitches, earn just $2.07 per day in Cote d'Ivoire and about $2.69 in Ghana, which often includes being subsidised by the Ghanaian government. Imagine owning and farming land of this size and still only living just above the global poverty line.

Morocco has managed to maximise the benefit from a monopolised natural resource by taking control of the whole value chain and creating a state-owned phosphorus mining company, the OCP group, which mines and processes before selling as a finalised product. What If these West African countries took the same approach? Could they control more of the value chain & gain influence on the global cocoa price to redistribute the wealth more evenly? 

Further investment is needed on the ground to enable them to capitalise on the opportunity, as these countries lack the infrastructure to handle more of the chain with a lack of cocoa processing happening on the continent.

The chocolate value chain has five major segments.

• The first stage is local farmers' production and harvest of cocoa beans.

• The next is sourcing and marketing, with local and international traders buying off the farmers before exporting cocoa beans and semi-processed products. 

• Processing is the third segment. This involves grinders and chocolate manufacturers transforming the bean into a finished product.

• Like most FMCG goods, distribution is the central stage of the value chain, involving getting the completed products to retailers.

• And then, there are the consumers, buying favourites like Snickers, mars and Cadbury from stores and supermarkets.

After export, control of the value chain and the GDP leaves the west African nations and is transferred to Europe, America and the hands of corporations who process the bean and create the products that make it to stores. As the primary buyer of the bean, confectionery companies have the power to set the price they pay for raw ingredients.

Between 2020 & 2021, both Ghana and Cote D'Ivoire introduced a living income differential programme which attempted to increase the price per tonne and pass the cost on to the million cocoa farmers within their borders. 

The expectation was that multinational companies would be compassionate and show support by accepting the increase in cost. Instead, this decreased the volume with companies diversifying their sources of cocoa to get around paying the increase.

Between 2020 & 2021, both Ghana and Cote D'Ivoire introduced a living income differential programme which attempted to increase the price per tonne and pass the cost on to the million cocoa farmers within their borders. 

The expectation was that multinational companies would be compassionate and show support by accepting the increase in cost. Instead, this decreased the volume with companies diversifying their sources of cocoa to get around paying the increase.

Further steps are being taken, but if the reliance on big brands accepting the price rises, then they are at the mercy of the will and other cocoa-producing countries increasing their output and undercutting the price per tonne. More production needs to happen in Africa. Companies should follow the lead of Madagascar's independent chocolate brand Made in Africa, which manufactures on the continent and pays up to 30% more than the benchmark price per tonne.

Ghana & Cote D'ivoire banded together in 2018 to create a joint body called the Cote d'Ivoire-Ghana Cocoa Initiative (CIGCI). They are designed to represent the interest of both nations with a mandate to improve the money reaching farmers, increasing market opportunity, harmonising production and being the source of knowledge and expertise. Cameroon & Nigeria, the other two west African cocoa-producing countries in the top 10, have requested to join the alliance in a move that will further strengthen the negotiating power.

In October 2022, the Ghana Ministry of Food and Agriculture announced a 21% increase in the wholesale cost to improve farmers' quality of life, but whether or not it is enough remains to be seen.

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