WEST AFRICA – Ivory Coast and Ghana, the West African nations who together produce more than 60% of the world’s cocoa are planning to re-examine the cocoa industry’s ethical branding schemes following chocolate makers slowing to pay them a “living income” premium for their beans.
This poses a major risk to chocolate makers operating in Western markets where consumer demand for sustainably sourced products is rising.
Ivory Coast and Ghana introduced a $400 a tonne living income differential (LID) in July on cocoa sales for the 2020/21 season In a bid to ease pervasive farmer poverty. The move was a major overhaul in how global cocoa is priced.
They have since sold around 150,000 tonnes of 2020/21 cocoa, trade and government sources said, versus about 450,000 tonnes this time last year.
There are still some 2.35 million tonnes left to sell, but while the current marketing campaign is still in its early stages, Ivory Coast and Ghana need faster, large-volume sales to chocolate makers for the LID to work.
“The two countries have resolved to make the (LID) work whatever it takes,” said a source at Cocobod, Ghana’s cocoa regulator. This includes halting sustainability schemes, used for ethical branding, within the next few weeks if chocolate makers don’t comply.
Under pressure from Western consumers for ethically sourced products, chocolate makers such as Mars Wrigley, Mondelez, Barry Callebaut, Hershey’s and Nestle have spent millions on sustainability schemes.
According to ETRetail, the programmes which include audits from certifiers such as Fair Trade, are key to chocolate makers’ branding, which could be hit if they are seen as hesitant to part with cash ear-marked to alleviate poverty.
Ivory Coast and Ghana plan to use the LID income to guarantee farmers 70% of a $2,600 a tonne target price. If global prices rise above $2,900, LID proceeds will be placed in a fund that would guarantee farmers the target price when market prices fall.
For the scheme to work, the two nations need money upfront. They have already raised the guaranteed price they will pay farmers for this season’s crop.
The source added that halting sustainability schemes would hurt farmers, not just chocolate makers.
About 500,000 tonnes of Ivory Coast and Ghana cocoa are certified per year, according to industry sources. The cocoa can fetch farmers a premium of up to $200 per tonne.
The cocoa industry’s efforts to source sustainably have been around for nearly two decades, though little has changed on the ground for farmers, with poverty widespread and West African forest cover all but decimated.