The Cacao Industry Explained

Cacao is one of the world’s most valuable crops with the global cacao and chocolate industry being worth billions of dollars per year1,2. As of 2019, Cote D’Ivoire produces the most cacao beans in the world at over 2 million metric tons, followed by Ghana, Indonesia, Nigeria and Cameroon3. Together, Africa makes up more than 60% of cacao production with over 80% of the world’s cacao produced being the hardier Forastero cacao3–5. The biggest importers of cacao are the Netherlands, Germany, the U.S., Malaysia and Belgium, some of whom are also the greatest exporters of chocolate5.

Cacao can also be distinguished into two broad categories, which are “bulk” and “fine or flavour.” The International Cocoa Organization (ICCO) loosely defines bulk cacao beans as produced from the Forastero cacao variety and fine or flavour cacao beans produced from Criollo or Trinitario cacao varieties6. Fine or flavour cacao makes up only 12% of the world’s cacao bean export, with 90% of fine or flavour cacao being produced in Latin America6. This type of cacao is in high demand by countries better known to produce artisan chocolate products, which includes much of Western Europe, the UK and Japan. The US, by contrast, imports smaller proportions of fine or flavour cacao6

The problems in the industry

While the retailers and manufacturers of chocolate receive more than 70% of the final earnings of chocolate sales, worth billions of dollars each year, the farmers receive less than 7% of the final earnings5. As the cacao and chocolate industry continues to grow, the demand for cheaper cacao increases and works to drive down the price of labour. Cacao farmers typically earn less than US$1 per day, which is lower than the threshold for extreme poverty as defined by the World Bank at US$1.90 per day5,7,8. Furthermore, a huge portion of the workers on cacao plantations are children to keep prices competitive so the use of child labour continues to increase, with 2.1 million children working in West Africa alone5,7,8.


Children often begin working on cacao plantations to help support their families with the promise of good pay, while others are trafficked and sold into forced labour or even abducted from small African villages by traffickers8–10. Majority of these children are within the ages of 12 and 16 but children as young as 5 years old have been found to work on these farms9. These children are usually unable to attend school as a result of poverty and working and remain illiterate. This prevents them from truly understanding the severity of their situation as well as hindering their ability to negotiate their work conditions and pay9,10.


For these workers, the day begins at around 6am and ends in the late evening. The work itself is dangerous and physically taxing, requiring the use machetes and other tools, heavy lifting, climbing trees without support, and clearing land with chainsaws. They can also be exposed to hazardous chemicals used as part of the agricultural process. The nature of this work violates many international labour laws and United Nations (UN) conventions regarding the use of child labour9. However, attempts to be stricter on labour policies and conducting random audits can be counterproductive and result in child labour becoming better hidden8,10. There have even been cases where journalists investigating the cacao industry have been kidnapped or arrested by local authorities for doing so11,12.

Our cacao is shade grown surrounded by fruits like pineapple that enhance its fruity flavour.

So what has been done to address these issues?

With rising reports of exploitation of cacao farmers and child labour since the 1990s, several initiatives were developed to raise the standards of cacao farming. The Fairtrade Foundation and Rainforest Alliance, for example, outline strict guidelines around workers conditions, sustainability standards and require companies to pay a premium price intended to support farmers13–16. Despite this, no companies that have made pledges to pay farmers better, end child labour and improve workers’ conditions have made any significant changes5,8.


In 2009, Nestlé announced they would source Fairtrade certified cacao for its chocolate bars in the UK and Ireland, while launching their own scheme called the “Cocoa Plan”17. Despite this, Nestlé continues to source cacao through child labour, alongside major companies like Hershey and Mars18. In a similar fashion, Cadbury decided to drop their Fairtrade certification for their own scheme called “Cocoa Life”20. With large companies such as these abandoning these certifications for their own in-house schemes, people are concerned that more companies will opt for to create their own schemes and work in partnerships with NGOs, which could see a loss of consistent universal standards that was being developed with third-party certifications like Fairtrade. With these kinds of separate partnerships between companies and NGOs, there are also concerns of less transparency and accountability.

Are co-operatives the answer to the Fairtrade Process? 

With the rise of some larger co-operatives, there inevitably comes the issue of supply versus demand. At the start of the supply chain, much of the production is “unorganised” and allows informal trading to occur between farmers and middlemen, usually at the expense of the farmers10,23. These middlemen are called “pisteurs” who go directly to cacao farmers and informally buy cacao upfront in cash at prices lower than the actual market value10,23. The pisteurs can then go on to sell their cacao to traitants, who are licensed by the government to trade cacao. The traitants then go on to sell the cacao to large co-operative groups10. This type of trading system is common in the cacao industry in places such as Cote D’Ivoire, where up to 85% of cacao production is “unorganised” in this way10.


Our own experience in Peru has shown co-operatives to have their own unique pros and cons. Larger co-operatives often become brokers themselves and sell more cacao than they are able to produce within their own farming area. To get around this, they source cacao from outside of their established co-operative and buy cacao beans from other farmers or co-operatives. We encountered many small scale farms that were unable to sell their beans and ended up selling almost 80% of what they produced to larger co-operatives just to survive. These larger co-operatives had established a monopoly within the exporting industry buying beans at prices almost 3-4 times lower than the actual market rate. With such an imbalance in the ability for most farmers to secure large exporting contracts, these farmers are forced to sell their cacao beans far below market value. The larger brokered co-operatives can then mark up prices and accumulate requirements for export.


Despite being classified as co-operatives on paper, these groups are really broker monopolies and middlemen that make money off the back of smaller scale farmers. While they have farms and farmers, they exploit smaller farms in order to export much more cacao than they can produce on their own. Audits of these types of co-operatives have, in some cases, shown non-existent farmers listed in order to falsify production capabilities. So, although they may hold a Fairtrade certificate it isn’t exactly fair trade at all.


While the global cacao industry thrives to meet the world’s huge demands for chocolate, cacao farmers are being massively exploited for profit. We believe that as consumers, suppliers and retailers, we have a responsibility to give back to the communities whose products we benefit from and to ensure they are made ethically and sustainably. Peruvian cacao possesses a rich history, heritage and culture that we can help to protect and preserve. Those of us with the privilege of choice should choose to buy ethically. Choose to support people, not profits. We choose to source our cacao direct from farm to table, no middlemen, no brokers and pay above a living wage to our farmer. To learn more about choosing ethical and sustainable cacao see our story.

What about the environmental impact of cacao?

The harsh reality is that due to the global demand for chocolate and the potential yields for cacao trees, the jungle in which cacao grows is being put under immense pressure. Just like the palm oil industry many cacao farmers choose to deforest in order to make room for mass production. Burning out the jungle or logging it to make space for mono-cropped cacao has become a popular choice for many farmers. If you are receiving a minimum wage for your cacao then the only way to earn a living is to produce more. Some varieties like the criollo cacao can only produce 2-4 kg of cacao per year per tree. So if you think about the worlds population, the demand for chocolate and the fact that anything that tastes of chocolate contains cacao the numbers don't look good for sustainable production.


This kind of deforestation and lack of sustainable practice is leading to a destruction of the rainforest, an increase in carbon and a loss of precious flora and fauna. This is why many farmers have taken to artisanal cacao cultivation and promote agro-forestry "shade-grown" production as a higher paid alternative. Learn more about our efforts to rescue cacao and the environment and culture in which it grows in Peru.


Learn About Cacao

References

(1) Cocoa and Chocolate Market Size, Trends, Share | Global Report [2027] https://www.fortunebusinessinsights.com/industry-reports/cocoa-and-chocolate-market-100075 (accessed May 28, 2021).

(2) The Top Cocoa-Producing Countries https://www.worldatlas.com/articles/top-10-cocoa-producing-countries.html (accessed May 28, 2021).

(3) FAOSTAT http://www.fao.org/faostat/en/#data/QC (accessed Mar 2, 2021).

(4) Cacao Beans Market Analysis and Review 2019 - 2029 | Future Market Insights (FMI) https://www.futuremarketinsights.com/reports/cacao-beans-market (accessed May 28, 2021).

(5) Bhutada, G. Cocoa: A Bittersweet Supply Chain. Visual Capitalist, 2020.

(6) Fine or Flavor Cocoa. International Cocoa Organization.

(7) Cocoa has a poverty problem. You can help by eating more dark chocolate https://thecounter.org/chocolate-farmers-ivory-coast-ghana/ (accessed May 16, 2021).

(8) The Cocoa Barometer 2018. ICI Cocoa Initiative.

(9) Child Labor and Slavery in the Chocolate Industry - Food Empowerment Project https://foodispower.org/human-labor-slavery/slavery-chocolate/ (accessed May 28, 2021).

(10) The Fairness Gap: Farmer Incomes & Solutions to Child Labor in Cocoa https://laborrights.org/publications/fairness-gap (accessed May 16, 2021).

(11) Ivory Coast Detains Three Journalists over Sources. Committee to Protect Journalists, 2010.

(12) RFI - Franco-Canadian journalist killed by first lady’s security guards, says French TV http://www1.rfi.fr/actuen/articles/115/article_4453.asp (accessed May 28, 2021).

(13) Can you really buy “ethical” chocolate? https://www.consumer.org.nz/articles/ethical-cocoa-can-you-really-buy-guilt-free-chocolate (accessed May 16, 2021).

(14) Cocoa https://www.fairtrade.net/product/cocoa (accessed May 16, 2021).

(15) Cocoa farmers https://www.fairtrade.org.uk/farmers-and-workers/cocoa/ (accessed May 16, 2021).

(16) Rainforest Alliance Certified Cocoa https://www.rainforest-alliance.org/articles/rainforest-alliance-certified-cocoa (accessed May 16, 2021).

(17) Organizations Question Nestlé’s Commitment to Fair Trade Cocoa https://laborrights.org/blog/200912/organizations-question-nestl%C3%A9%E2%80%99s-commitment-fair-trade-cocoa (accessed May 16, 2021).

(18) confectionerynews.com. Mars, Hershey and others settle heavy metal chocolate lawsuit https://www.confectionerynews.com/Article/2018/03/08/California-Superior-Court-settles-heavy-metal-chocolate-lawsuit (accessed May 28, 2021).

(19) Child labour on Nestlé farms: chocolate giant’s problems continue http://www.theguardian.com/global-development-professionals-network/2015/sep/02/child-labour-on-nestle-farms-chocolate-giants-problems-continue (accessed May 16, 2021).

(20) Is Cadbury’s Move the End for Fairtrade? BBC News. November 28, 2016.

(21) Chocolate: The Journey From Beans to Bar https://www.rainforest-alliance.org/kids/chocolate-from-bean-to-bar (accessed Apr 23, 2021).

(22) Parkins, K. Nestle co-defendants in child slavery class action https://medium.com/dark-mountain/nestle-co-defendants-in-child-slavery-class-action-268fff71a6e6 (accessed May 16, 2021).

(23) The Cocoa Accountability Map. Mighty Earth.