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Friday, 25 March 2016 08:41

Ghana and Ivory Coast want a bigger cut of world chocolate billions—why their 'CHOCPEC' tie-up could be a game changer

By Christine Mungai

ABIDJAN, Cote d’Ivoire, March 25, 2016 (AfricaCom) -- Chocolate is one of the world’s most popular sweet treats, and in 2014, the global retail sales of chocolate confectionery were nearly a staggering $100 billion.

Ivory Coast and Ghana are the world’s number one and two producers of cocoa heans, and together account for nearly 70% of the world’s cocoa production. But the two earned just over $8 billion in cocoa exports. In the global value chain for chocolate, the value is skewed heavily in favour of processors, marketers and distributor: cocoa growers receive just 6% of the price that consumers pay for chocolate. African-processed chocolate accounts for 2% of the global chocolate sales.

But Ghanaian president John Dramani Mahama, and his Ivorian counterpart Alassane Ouattara, are proposing an “OPEC for chocolate” – one delegate proposed a catchy name for it – “CHOCPEC”.

The two leaders are also looking to drive a rapid increase in investment of local processing of chocolate, so that their countries can reap a bigger chunk of the global chocolate trade.

Speaking at the ongoing Africa CEO Forum in Abidjan, Mahama said Ghana currently processes 30% of its cocoa produce, mostly into cocoa butter, liquor and powder; it aims to raise this to least 50% by 2020.

Upset order

But the real game changer will be if Ghana and Cote d’Ivoire cooperate more seriously in manufacturing and processing chocolate.

“Ghana & Côte d’Ivoire should become the chocolate hub of the world. We should have a joint development zone, and ensure that companies have the incentive to set up their processing operations here,” said Mahama.

His Ivorian counterpart Ouattara (half-jokingly) said that as a “good citizen” he always eats chocolate whenever he finds it on sale, in order to create demand for the product.

But more seriously, Ouattara noted Cote d’Ivoire is “known for its cocoa, but I want it to be known for its chocolate.”

Last May, Cote d’Ivoire took the first steps in making this a reality, when it inaugurated the first industrial-scale chocolate factory, with an investment of six million euros ($6.7 million) for a production capacity of 10,000 tonnes per year. The new factory will produce chocolate “made in Ivory Coast” for the first time on an industrial scale.


An employee of the CEMOI chocolate factory in Abidjan empties bags of cocoa beans onto a metal grate for cleaning (AFP Photo)

‘Brown gold’ in Cote d’Ivoire accounts for 22% of the country’s gross domestic product (GDP), more than half of its exports and two-thirds of people’s jobs and incomes, according to the World Bank.

Uganda, too, is expanding its acerage under cocoa – now estimated to be about 50,000 acres mostly in the west and central parts of the country. It is also processing its own chocolate too, with two companies: Good African Chocolate and Pink Food Industries, already in the retail market.

In the long view, investing in cocoa and chocolate is expected to pay off handsomely as a global shortage looms by 2020.

Part of the reason is the nature of cocoa farming – cocoa trees are notoriously sensitive to pests and diseases, and tending the crop is very labour-intensive. Along with ageing trees that yield fewer pods, younger farmers are choosing to plant rubber or maize, which give better profit margins for less hassle.

The Chinese equation

The other reason is rising demand, as domestic consumption increases in fast-growing regions like Asia and Africa. China is a key market for chocolate marketers – consumption in China is just 100g per capita, while in the UK (the world’s leading chocoholics), it is 8kg.

Lawrence Allen in his book Chocolate Fortunes describes the opportunity: “Chocolate is like cigarettes: you have lifetime consumers of the same brand. In China you had consumers with no taste profile; they were virgin.”

Allen estimates there are 350 to 400 million Chinese with the disposable income to buy chocolate once in a while, which could add up to huge global demand.

Worldwide, 90% of cocoa is grown on small family farms of two to five hectares, while just 5% comes from large plantations of 40 hectares or more. Cocoa production provides livelihoods for between 40 and 50 million farmers, rural workers and their families in the Global South.


Growers are at the bottom of the value chain. (AFP)

In the Ivory Coast and Ghana up to 90% of cocoa-producing households rely on cocoa for their primary income.

While profits of multinational chocolate companies have increased since the 1980s, the world market price for cocoa beans, when adjusted for inflation, has declined by half.

The consequences of price volatility, together with increasing production costs, are economic insecurity and impoverishment for millions of cocoa farmers.

“With limited income and lack of information on market developments, the cocoa farmers and their families are the losers in a lucrative cocoa and chocolate industry,” fair trade organisation Make Chocolate Fair argues.

An unfair distribution of value and power in the cocoa chain are part of the root causes of extreme poverty for cocoa farmers. Make Chocolate Fair also argues that mergers and takeovers have resulted in just a few companies dominating up to 80% of the whole value chain, while farmers lack a sufficiently organised voice to be strong actors.

Manufacturers such as Mars, Nestlé and Ferrero; processors such as Barry Callebaut and Cargill, and retailers – particularly the big supermarket chains like Walmart and Tesco – hog most of the profits.

The solution, it seems, is boosting Africa’s local processing and consumption of chocolate.

‘Ghanivoire’ chocolate – as delegates at the Africa CEO Forum were calling it – just  might be the next big thing. (END)

 

 
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