The Cocoa Value Chain

The cocoa value chain starts with the fruit of the tropical cacao, or cocoa tree. Farmers within 25 degrees of the equator grow cacao, often as part of a variety of seasonal crops, and harvest the fruits weekly. In West Africa, where most of the world’s cacao is grown, the cocoa value chain often goes from farmers to middlemen collectors to local buyers (in some cases, this is the government) to local processors or large international buyers who distribute it to chocolate makers and cosmetics companies

Cocoa In Ghana

To illustrate this, let’s look at the cocoa value chain in the world’s 2nd-largest cacao producer: Ghana. The cocoa value chain in Ghana starts with a base of around 800,000 cocoa farmers, most of whom have 2-5 hectares of land planted with cocoa. Because cocoa prices paid to farmers are quite low in Ghana — around $100USD per 62.5 kg bag — most farmers can’t afford to buy fertilizers, pesticides, and equipment needed to increase yields. Additionally, cocoa prices in Ghana are set by the government via the Ghana Cocoa Board (COCOBOD). Almost all Ghanaian cocoa is bought for the same price, no matter how high the quality nor how far the farmers traveled to reach the buying center.

Some farmers are members of a cooperative which processes their cacao, lowering how much money goes to farmers, but also lowering transportation costs. There are a few organizations working with the government to buy higher quality cocoa at higher prices, notably Kuapa Kokoo Limited, but they represent a small portion of buying activities. The cocoa value chain in Ghana starts with farmers, continues with government or government-certified buyers, and is then processed domestically or sent abroad. The cocoa processed domestically is turned into cocoa mass, cocoa butter, and cocoa powder, and then largely sent to international markets.

World Cocoa Market

Of the cocoa beans shipped abroad, most are purchased by international distributors via the world cocoa market. Buyers store those beans in warehouses, some of the largest being in New York and Amsterdam, and then distribute cacao regionally from there. Cocoa can remain in warehouses for months until it’s sold. Once it reaches a chocolate factory, it goes through a complex process to turn it into the product we know and love.

Shortening the Cocoa Value Chain with Direct Trade

Recently there’s been a movement towards more directly-sourced cocoa, shortening the cocoa value chain to go from farmers to distributors to factories. This shortens the transit time for cocoa and allows more of the final cost of cocoa to go back to the farmers, honoring cocoa quality over quantity. Buying cocoa directly from farmers is one of the characteristics of the craft chocolate movement, which aims to make the cocoa value chain more transparent and beneficial for all parties.