Do you know what’s inside your chocolate wrapper? Millions of hands spanning multiple continents are responsible for the production of the key ingredient in this beloved food: cacao. But most consumers don’t have a sense of the complex intricacies of the supply chains involved in chocolate and the economic realities of the farmers who grow the crop.
If you care about global development or the future of chocolate, here are the three most important things you need to know about cacao supply chains:
Read more Devex coverage:
1. The majority of the world’s 6 million smallholder cacao farmers live on less than $2 per day — but it doesn't have to be this way.
When you walk into a supermarket to buy a chocolate bar, how can you find out how much farmers earn? The traditional cacao supply chain is opaque, creating information asymmetry and keeping farmers in a cycle of poverty. Although the premium chocolate industry is growing at four times the rate of regular chocolate (dark chocolate uses seven times more cacao than milk chocolate), farmers aren’t seeing the financial benefit. In fact, in most cases, the prices paid to farmers have been declining.
Certification models appear to have given chocolate makers and consumers an easy way to act ethically, but they don’t address the root problem of cacao farmer poverty because they do not focus on increasing farm gate price (the price a farmer actually receives). Sustainability models have been largely focused on increasing production yields; but in the context of today’s enduring global oversupply, increasing yields is not a solution for farmers who are struggling to sell their crop.
Farmers must earn more money from producing cacao, or they will turn to other crops and smallholder cacao farming will become a historical relic while industrial-scale, environmentally destructive farming methods grow. Alleviating poverty across these millions of smallholder families requires bold pricing transparency available to farmers, chocolate makers, and consumers, to inform better decision-making and a more equal playing field across the supply chain.
“If we want delicious chocolate, we need to create better business models in which farmers can succeed producing high-quality cacao.”— Maya Granit, co-founder and managing director, Uncommon Cacao
2. Intermediaries are powerful, and they can do more.
Supply chain intermediaries are often distrusted, presumed to squeeze margins and extract value rather than add. Modern day intermediaries have an opportunity to redirect their power. As actors working across supply chains, intermediaries have unique access and influence to both raw material producers and manufacturers. Intermediaries can connect the dots in innovative ways between farmers, makers, and consumers, helping build trust for consumers in the brands they love and the ethical supply chains behind them. For intermediaries to be authentic actors, they need to actively work to overhaul opaque supply chain systems and open up trading models. They can be the driving force supporting transparency, creating more just systems of global trade.
3. Quality creates value.
In the past 10 years, the chocolate industry has been undergoing a quality revolution, a “reawakening” of sorts. Chocolate makers are beginning to understand that consumers are excited about chocolate that uses high-quality ingredients and tastes more interesting than the typical sugary confection. At the same time, consumers are showing they are willing to pay more for a better product. As a result, the industry is developing new quality standards and getting serious about quality and flavor evaluation processes in the field and in the lab.
Through this work, an important theme is emerging: if we want delicious chocolate, we need to create better business models in which farmers can succeed producing high-quality cacao. When we leverage consumer-driven market incentives in this way, we can create a better world where chocolate tastes delicious and farmers finally earn livable wages producing cacao.
Supply chain actors need to wake up. We can and should create systems that reflect consumers’ demands for more ethical products. We’ve shown that inclusive prosperity works in the ultra-premium cacao supply chain. Now the biggest actors need to champion transparency to change the industry at-large. If we want farmers to continue growing cacao, they need to make a living. It’s capitalism, at it’s finest: constructive.
Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.