Cocoa: A Hot Commodity with a Cold History
Cocoa: A Hot Commodity with a Cold History

As Kraft bids on a hostile take-over of Cadbury, the chocolate world becomes even smaller and more concentrated then before.

Fueling civil wars, spurring child trafficking and child labor, and destroying rain forests, cocoa has a spotted history that unfortunately has not been fully rectified in recent years. While governments, NGOs, and industry try to right past wrongs and address the issues of child labor and sustainability, the cocoa industry seems to making progress, but has not completed the herculean task. Consumers worldwide have not yet demanded a full-fledged accounting for the sourcing of this product and until they do, we cannot expect to see major changes in the cocoa industry.

Historical Background

Cocoa beans originated in South America where they served as currency and were only eaten after they bean had worn out. Spanish explorers and colonizers learned about a drink made from the bean and introduced it to Europe. By the 1600’s, the drink became popular in France and by the 1700’s “chocolate houses” were popular in England and soon spread throughout Europe. The steam engine mechanized grinding of the bean, making it affordable to the average consumer. Today more than three million tons of cocoa beans are consumed annually in various forms of chocolate.1

Currently, the six largest cocoa-producing countries are Ivory Coast, Ghana, Indonesia, Nigeria, Brazil, and Cameroon. The world’s largest producer of cocoa is the Ivory Coast, producing 43 percent of the world’s cocoa,2 which is twice as much as the next biggest producer, Ghana.3

Cocoa Supply Chain

Cocoa beans are grown on trees in hot, shady environments. The trees bear fruit in their 5th year, reach their peak in their tenth year and can continue to fruit for another 30-40 years. The fruit grow into pods that are removed from the trees and then broken to release the beans (20-50 beans per pod). Four hundred beans are needed for one pound of chocolate.4 The beans are fermented for 3-9 days, dried for several more, packed for shipping, and sent to an exporting company where an independent grading agency grades the beans before they are shipped.5

Cocoa beans are processed either in the growing-country or elsewhere. Processing starts with roasting and shelling the beans (sometimes the beans are shelled first) to get to the cocoa nib inside. The nib is ground into a paste; the heat applied in this process causes the cocoa butter, called “cocoa liquor,” in the nib to melt; the resulting paste can be further refined and sold as unsweetened baking chocolate.

The cocoa liquor is further processed into Cocoa Butter and Cocoa Cakes and then broken down into smaller pieces and sold or further grounded. Chocolate is made from mixing cocoa liquor, cocoa butter, and sugar; milk is added for milk chocolate.6 Ninety percent of cocoa is used for chocolate, while ten percent is used for flavorings, beverages, and cosmetics.7

An estimated 40 million people are involved in the production of cocoa on more than 18 million acres of tropical land.8 Ninety percent of the people involved are small holders, laborers and employees in processing factories.9

The chocolate industry worldwide though is controlled by a few key players. Six companies account for 50 percent of world chocolate sales: Nestlé, Mars,Kraft, Cadbury, Ferrero, and Hershey. The industry may become even more concentrated if Morris/Kraft is successful in their hostile take-over of Cadbury.

Forty percent of cocoa grinding worldwide is controlled by four multinationals processors: Archer Daniels Midland (ADM), Barry Callebaut, Cargill, and the German Hosta Group. Most of the cocoa is ground in the Northern hemisphere: the U.S. and the Netherlands each process about 15 percent of the world supply.10

Fueling Ivory Coast’s Civil War

Global Witness, an NGO dedicated to exposing the exploitation of natural resources and to ending human rights and environmental abuses, released a report in 2007 entitled “Hot Chocolate: how cocoa fuelled the conflict in Côte d’Ivoire” that detailed industry and government action fueling the recent civil war.11 More than $118 million dollars derived from the cocoa industry financed both the government of the Ivory Coast and the Forces Nouvelles (FN), the rebel group controlling the northern half of the country.

Fighting between the North and South erupted in 2000. A peace agreement was signed in 2003 and a power-sharing agreement including the FN was signed in 2007. The population and its resources though remained divided between North and the government-controlled South. Tensions still remain high. Elections are set to take place in November 2009, but may be delayed again. Economic agendas have been a major obstacle to lasting peace.

The report provided evidence that:

  • the Ivory Coast Government received $58 million in cocoa levies that helped fund its war efforts;
  • Ivory Coast subsidiaries of Archer Daniels Midland (ADM) and French-owned Bolloré can be linked to the diverted government funds;
  • the FN raised $30 million a year by taxing cocoa leaving the North and by setting up a blockade preventing the movement of cocoa from the north (77,500 tonnes of cocoa are exported annually from the FN zone via Burkina Faso and Togo); and,
  • repeated intimidation and violence takes place against journalists and NGO groups trying to shed light on the phenomena.

The report recommends that:

  • companies should audit their supply chain to know the originating source of their cocoa
  • an independent financial audit of the cocoa sector from 2003-2006 should be carried out
  • greater transparency and accountability for BNI, which holds almost all of the cocoa-generated revenue
  • the FN should lift the cocoa blockade and allow cocoa profits to be channeled through the national government
  • journalists should be able to investigate fraud and other charges without intimidation and fear for their safety.

Child Labor

In 2001, reports emerged of rampant child labor in African cocoa farms. The International Institute of Tropical Agriculture (IITA) found that an estimated 284,000 children were working on cocoa farm in the Ivory Coast, Ghana, Nigeria and Cameroon. About 12,500 of those children had no immediate relatives nearby, hinting that they may have been trafficked.12 The IITA study found that 66 percent of the children working in Ivory Coast cocoa farms did not attend school and that 64 percent of the children working on cocoa farms were under the age of 14.13

After much outrage, industry members, governments, unions and civil-society groups developed the voluntary, non-binding Cocoa Protocol to ensure that cocoa beans are grown, processed, and sold without violating international labor standards. Forty-two countries signed the protocol, promising to implement a transparent certification process.14

In 2007, the Ivory Coast and Ghana released their first certification reports, based upon visits by trained supervisors who visited o hundreds of farms. Certification processes for at least 50 percent of these countries’ cocoa farms will have taken place by 2008.15 The certification process for both countries includes: 1) Data collection at the community- and farm-level; 2) Transparent reporting of those findings; 3) Remediation: programs to help rehabilitate children; and, 4) Independent verification by FAFO AIS from Norway and Khulisa Management Services from South Africa.16

The Ghana Certification report notes that Ghana has created a community-based monitoring system that interface between monitoring and intervention activities; while the Ivory Coast has provided assistance to its farmers and disseminated information to help farmers master growing techniques and become aware of schooling opportunities and health-related issues.17

The Ghana Certification Report also highlights the weaknesses of the current certification process: 1) Inappropriate sample weights, making it difficult to generalize the results to the larger population under consideration; and 2) Use of household-based sample surveys that does not provide information on seasonal workers, illegal immigrants, child trafficking, forced child labor, and commercial sexual exploitation of children. No cases of child trafficking were reported in either of the certification reports.18

The World Cocoa Foundation notes that the reports “provide a thorough, transparent view of labor conditions on cocoa farms” and include a “robust, independent verification component.”19 

International Labor Rights Forum Response to the Government Reports

The International Labor Rights Forum (ILRF) produced a report “The Cocoa Protocol: Success or Failure?” that disagrees with the WCF assessment.20 ILRF believes that the cocoa industry itself has not done anything to implement the Cocoa Protocols, only governments and NGOs have taken steps. The ILRF mention two major problems with the government reports: the government monitoring system is not up-to-par with other industry certifications systems and the lack of detail on the government remediation activities.

In 2008, an investigative journalist visited the Ivory Coast and was not able to find any evidence of remediation programs; the World Cocoa Foundation publicly debated the journalist’s findings.

The ILRF does note that the ECHOES program run by USAID, the World Cocoa Foundation and chocolate companies, has provided education benefits to more than 340,000 children in the area.

The ILRF recommends that industry:

  1. Establish traceability within their supply chains to the farm level or cooperative level
  2. Establish “accountability amongst the middlemen in their supply chains to the trading corporation and between the trading corporation and the manufacturer/brand/retailer
  3. Use existing initiatives (such as the Rainforest Alliance program) to develop labor standards monitoring linked to an incentive/sanction system
  4. Develop “comprehensive rescue, remediation and rehabilitation programs
  5. Develop “joint positions with regional governments on international commodity policy
  6. Support “development programs in labor supply countries” that addresses the root causes of the problem.

Combating the Underlying Causes of Child Labor

Child labor will continue on cocoa farms until the underlying causes are addressed. Consider the economic principle of supply and demand: when there is an oversupply of cocoa beans, farmers have little leverage to bargain for better prices and so they try to gain efficiencies through cheaper labor, even the labor of their own children. Parents in poor parts of Africa need to be convinced that schooling will provide a better long-term investment than child labor.21

Some believe that chocolate and cocoa processing companies have not taken enough steps to ensure a stable and sufficient price for cocoa producers. Deregulation of agriculture in West Africa abolished commodity boards, truly leaving the producers to the whims of the market.22 When the Ivory Coast producer’s price of cocoa increased in 2003, major cocoa exporters started looking for new cocoa producers; since then the WCF has been investigating new sources and technologies to increase farm yields.23

In the past, efforts like these lead to overproduction, dropping the price of cocoa, benefiting exporters, but not the producers. The WCF claims that farmer participating in training programs have seen an income rise, but these claims have not been substantiated by independent evaluators. To address the pricing problems, the ILRF recommends a global supply management agreement, an International Secretariat, the introduction of production controls such as quotas, raising Farm-Gate prices, conservation programs, and diversification zones.24 To truly curtail child labor, some suggest that an industry-specific approach is not enough.25

Fair Trade

Some believe that the fair trade system will be able to help alleviate some of the underlying problems in the cocoa industry. The Fair Trade system gives a minimum of $.80/pound for non-organic cocoa and $0.89/pound for organic cocoa (unless market price are higher, then producers receive $150 per metric ton above the world price.) Additionally fair trade certification requires that producers prohibit child labor and forced labor; farms are monitored annually.26

Fair Trade products also try to address sustainability, as many farmers cut forests to farm the cocoa plant, rather than using shaded areas, which better protect the local ecosystems. Cocoa trees grown in sunny areas need pesticides and chemicals, whose run-off can further damage the environment as well. The Rain Forest Alliance certifies cocoa around the world at a premium price and ensures sustainability.27

Demand for higher quality chocolate has helped with the promotion of sustainably produced cocoa. TransFair USA certifies 19 fair trade chocolate manufacturers in the U.S. Most of the organic cocoa is grown in Latin America and the Caribbean. Five exporters account for half of the world’s organic cocoa, with CONACADO the largest supplier. Latin American countries process more of their own cocoa crops than African countries because they have higher quality facilities.

The United States does not have any certified processors of organic or fair trade cocoa and mainly used certified processors in Europe and some in producer countries. This lack of processors increases the price of the product, which has to be sent to Europe first before coming to the U.S.28

Moving Forward

Outside of the Cocoa Protocols, Kraft Foods has partnered with the Rainforest Alliance to certify cocoa produced in Cote d’Ivoire. Mars has worked with the Rainforest Alliance for over ten years and plans to make sure its chocolate products are made from sustainable sources by 2020. Cargill also plans for some of its products to contain the Rainforest Alliance Fairtrade certification as well.29 Starbucks’ has implemented new COCOA standards to address sustainability and labor concerns. The International Labor Rights Forum though notes that these efforts do not have sufficient expertise needed to monitor labor rights violations and rehabilitate children.30

Some farmers are stepping up on their own to make sure they get equitable prices. In late 2008, Nigerian farmers refused to sell cocoa when commodity prices dropped dramatically; only farmers with previous contracts honored them.31

It seems as though there are many efforts percolating around the world to try to address the myriad of problems in the cocoa industry. Some efforts are being lead by industry, other by non-profits, and some by the farmers themselves. While it would be helpful if these efforts were all coordinated by an international secretariat, as recommended by the ILRF, it is hopeful to know that in the absence, steps are be taken. As with many other industries, only when the public galvanizes its purchasing power to influence the sourcing of their products, will there be significant changes to the current system.

1 History of Cocoa. World Cocoa Foundation.
2 The Chocolate Industry: Poverty Behind the Sweetness. Global Exchange. September 22, 2009.
3 Ibid.
4 Growing The Cocoa Bean. World Cocoa Foundation.
5 Handling the Harvest. World Cocoa Foundation.
6 How Chocolate is made. World Cocoa Foundation.
7 Menter, Lora. “The Sustainable Cocoa Trade.” 2005.
8 Cocoa. Rain Forest Alliance.
9 Ibid.
10 Menter, Lora. “The Sustainable Cocoa Trade.” 2005.
11 “Hot Chocolate: how cocoa fuelled the conflict in Côte d’Ivoire.” Global Witness. June 2007.
12 The Chocolate Industry: Poverty Behind the Sweetness. Global Exchange. September 22, 2009.
13 Ibid.
14 Aaronson, Susan Ariel. “Globalization and Child Labor: The Cause Can Also be a Cure.” YaleGlobal. March 13, 2007.
15 ”Addressing Child Labor.“ World Cocoa Foundation.
16 Ghana Certification. June 27, 2008.
17 Ibid.
18 Strategy Report. January 2009.
19 ”Addressing Child Labor.“ World Cocoa Foundation.
20 “The Cocoa Protocol: Success or Failure?” International labor Rights Forum. June 30, 2008.
21 Aaronson, Susan Ariel. “Globalization and Child Labor: The Cause Can Also be a Cure.” YaleGlobal. March 13, 2007.
22 The Chocolate Industry: Poverty Behind the Sweetness. Global Exchange. September 22, 2009.
23 “The Cocoa Protocol: Success or Failure?” International labor Rights Forum. June 30, 2008.
24 Ibid.
25 Aaronson, Susan Ariel. “Globalization and Child Labor: The Cause Can Also be a Cure.” YaleGlobal. March 13, 2007.
26 The Chocolate Industry: Poverty Behind the Sweetness. Global Exchange. September 22, 2009.
27 Cocoa. Rain Forest Alliance.
28 Menter, Lora. “The Sustainable Cocoa Trade.” 2005.
29 Cocoa. Rain Forest Alliance.
30 “The Cocoa Protocol: Success or Failure?” International labor Rights Forum. June 30, 2008.
31 “Global financial crisis hits Nigeria’s cocoa industry.” Business Day. December 31, 2008.

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