Cocoa Coverage
Once used as a form of currency by the Mayans and Aztecs, cocoa is now a beloved staple in many households as the key ingredient for chocolate. The cocoa sector provides a livelihood for up to 50 million people, primarily in developing countries, as they transform cocoa beans into chocolate liquor, butter, or powder for use in cosmetics, chocolate, and other edibles.
Voluntary sustainability standards (VSSs) emerged in the sector over 20 years ago, providing consumers with more sustainable cocoa purchasing options while addressing the sector’s challenges.
The cocoa market experienced record-breaking growth in global supply over the last decade, but the COVID-19 pandemic, political and economic unrest, low farm gate prices, and difficult agricultural conditions are expected to reduce supplies in the coming years. Climate change is also disrupting the global cocoa value chain as regions in major producing countries become less suitable due to high temperatures or severe droughts. For instance, West Africa saw a 5.5% drop in cocoa production from 2018 to 2019.
High volatility and price drops in the international market also create risk across the cocoa value chain, causing uncertainty for farmers’ incomes. This is due to farmers facing the greatest burden among value chain actors as they cannot influence market prices or adapt their supply to price fluctuations in the short term, all while bearing the brunt of climate change and rising production costs.
Farmers selling VSS-compliant cocoa can obtain up to 30% higher prices than those growing conventional cocoa, and VSSs can also protect them from international price drops and swings. However, this doesn’t automatically translate into higher profits due to the lack of demand, rising costs of production, and certification costs. VSSs’ effectiveness is also limited by power imbalances along the value chain, global supply and demand dynamics, and the influence of cocoa’s future prices on the current cocoa economy.
Our research dives into sustainable production and consumption trends in the cocoa sector, analyzing how VSSs can enhance farmers’ livelihoods by improving farm gate prices and incomes, supporting climate resilience, promoting better trade relations, and fostering price transparency across the value chain to fuel a more sustainable global cocoa sector.
Global Market Report: Cocoa Prices and Sustainability (2022) View 2019 Report
Key Takeaways
A livelihood for 50 million people
Up to 6 million farmers work directly within the cocoa sector, underpinning the livelihoods for nearly 50 million people. About 90% of growers are smallholder farmers, cultivating cocoa on lands less than 5 hectares.
VSS production up by 34%
VSS-compliant cocoa production grew at a CAGR of 34 to 41% between 2008 and 2019 but slowed to 0% to 8% from 2014 to 2019. Decline of VSS-compliant cocoa production in this period is mainly due to a drop in UTZ certified cocoa because of implementing more stringent verification practices, and a shift from traders and manufacturers sourcing cocoa compliant with corporate sustainability programs.
85% of sustainable cocoa sourced from Africa
In 2019, about 85% of VSS-compliant cocoa came from Africa, with nearly half produced in Côte d’Ivoire. Significant quantities also came from Ghana and Indonesia. The Netherlands, Germany, Malaysia, and the United States became the largest cocoa bean importers in recent years.
USD 100 billion
While cocoa is a raw material in numerous products, it is mainly used in the chocolate industry, surpassing a retail value of USD 100 billion in 2021. The chocolate retail sector’s CAGR is expected to increase up to 5.5% until 2027.
Highlights
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VSS-compliant cocoa accounted for at Least 27% of total cocoa production in 2019
Cocoa production grew from 4.27 mt in 2009 to 5.76 mt in 2020, grown on over 12 million hectares. Global VSS-compliant cocoa production reached 27% to 47.3% in 2019, an increase from 1.5% in 2008.
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Major cocoa traders, grinders, and manufacturers continue to pursue sustainable sourcing
In 2020, 35% of the cocoa sourced by the eight largest traders and grinders was compliant with a VSS or corporate sustainability initiative, a 4% increase from 2017 representing about 226,000 mt. Additionally, 64% of cocoa purchased by five of the largest chocolate manufacturers was also sourced more sustainably, a 15% increase from 2017, representing about 288,000 mt.
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VSS-compliant cocoa production in 2019
VSS-compliant cocoa grew at a CAGR of 34% to 41% between 2008 and 2019 but may be slowing as its CAGR dropped to 0% to 8% from 2014 to 2019. Globally, demand for organic and Fairtrade cocoa beans rose at an average annual rate of 6.9% between 2015 and 2019.
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How can VSSs affect farm gate prices?
Growing and selling VSS-compliant cocoa can lead to up to 30% higher prices for farmers. However, this doesn’t automatically translate into higher profits due to the lack of demand, rising costs of production, and certifications costs. Low farm gate prices mean cocoa farmers cannot achieve a decent standard of living while bearing the rising costs of production.
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Distribution of cocoa production in the top 10 producing countries in 2019
In 2019, about 85% of VSS-compliant cocoa came from Africa, led by Côte d’Ivoire, Nigeria, and Ghana. Latin America and the Caribbean followed, with about 11% of VSS-compliant cocoa produced in the Dominican Republic, Ecuador, and Peru.