chocolate for many of us in the west it's usually one of life's more affordable luxuries but the people who grow cocoa beans in poorer parts of the world are being squeezed by climate change and Rising costs so just how bad could the Coco Crisis get [Music] hello and welcome to Roundtable I'm Ender Brady now the world's chocolate industry is facing a crisis Coco Farmers around the world just can't produce enough beans to meet growing demand for The Confectionary Coco prices have surged big companies have benefited while the people who grow the crops have not what's driving this unprecedented change everywhere we go our favorite chocolate bars have become more expensive makers are either putting up their prices or shrinking packages experts argue that climate change is at the Forefront of the Coco crisis causing lower yield and falling income for Farmers Sam tar Khan senior sustainable sourcing manager for the fair trade Foundation says the causes are quite worrying the reasons we have high prices is because of a drop in Supply from crop loss which has caused primarily by climate change and disease Ghana the Ivory Coast Nigeria and Cameroon account for around 34 of the world's cocoa Supply the majority of the chocolate we consume in Europe is from Ghana and the Ivory Coast the global cost have surged to record highs in January 2021 cocoa bean prices were around $2,700 per metric ton by January 2024 they rocketed to 9,700 per metric ton a 29% increase but the people who grow the crops aren't benefiting from the rises in prices oxam International found that many African farmers are unable to support themselves and their families and are abandoning cocoa for other crops or selling the land to Illegal miners my toil my livelihood was destroyed and it's not easy it's hurting my daughter has completed High School there's also a boy home after completing high school I have a younger son my late sister's child is also with me and we were all surviving on this is livelihood it's not as if there's another livelihood anywhere that I can rely on no I've no source of income anywhere but the rise in prices is helping the bottom lines of many of the world's biggest chocolate makers profits at companies like lint and Nestle have been surging with little to no sign of the Coco crisis abating do we need to start consuming less chocolate let's meet our guests joining us from the GH in capital Acra is Dr Christy Leslie she's the founder and CEO of Africa Coco Marketplace it's a digital platform that connects buyers Sellers and investors in African Coco in Amsterdam is ANUK Frank she's a policy adviser on business and human rights for oxam noi and in viten Housen Germany is Evans AP aissi he is a lecturer and researcher for sustainability management at the University of Castle and I'm delighted to say that here in the studio with me is Ted George he's an Africa focused Commodities expert and the founder and chief narrative officer of the consultancy firm Clos advisory Evans I'll come to you first I've been reading that despite the massive profits some of the chocolate companies are making farmers in a country like Ghana working all day are making $2 a day is that correct can that be right well thank you very much um I think that that that is correct and it's also partly because of the price setting mechanism that we have right and so you probably would even commend the government for increasing the prices H at at the later stage when the prices increased because usually and that even raises questions because usually the prices are set a year before the Coco season is closed and so in one breath yes they have increase the prices to about 60% based on the release that they they they brought out in April Pro during the price hies but it's still not enough if you look at the current prices compared to what farmers are supposed to earn Christie I think a lot of people will be shocked that the people who are producing the core ingredient of chocolate are making so very little compared to the vast profits of these multinational food companies yeah absolutely it's always a surprise when you look at the distribution of um wealth I think along the value chain the farmers really are earning the least compared certainly to the labor that they have to put in you know Coco has two harvests they have a main it has a main harvest in West Africa for a few months between October and let's say January and then it has a light crop over the summer but that doesn't mean that Coco Farmers don't work all year round and the labor is really tough agricultural uh labor within the tropical rainforest environment environment of West Africa is very very difficult and it's all manual labor so when you look at these very low income levels of the farmers yes it's it is a it is a big surprise ANUK there seems to be a lot of middleman middle companies making an awful lot of money in between the the core ingredient the Coco in West Africa and the multinationals is is that a fair assessment well I think yeah many make a lot of profits uh only not the farmers the Coco Farmers uh that's for sure um I think the brands and the retailers who who finally uh put the products on their shelves uh earn a lot they have the highest margins and in between our traders who have high quantities lower margins but because of all these quantities of course they also earn a good deal it's the farmers who don't have any mechanism to increase uh the price or to increase um yeah their incomes so I think there the ones who are particularly squeezed in this value chain well Coco farmers in West Africa are increasingly demotivated as they battle extreme weather coupled with small earnings from profit making chocolateers new Oxfam analysis from April found that lint mandes and Nestle together raked in nearly $4 billion dollar in profits from chocolate sales in 20123 her's confectionary profits total $2 billion dollar last year and the frero and Mars families who own the two biggest private chocolate corporations their profits surg to 1609 billion dollars during the same period And this is more than the combined gdps of Ghana and Ivory Coast which Supply most of the cocoa beans Ted these two countries in particular are massive players are you surprised by those numbers that their GDP is dwarfed by you know what the chocolate companies are making well really because um if you look at cocoa as well that is part of what the confection has actually produced chocolate is a very large part of that as well but in terms of prices I mean it's not just the chocolate companies it's the trading houses if you look at Carill LDC Olam as well Tuton Barry Kaio all of them have made huge profits as well and so the thing is there seems to be a real disconnect between the international price and the price paid to Farmers we have seen this increase in the fix price they've done for both kivo and Ghana and the fact is farmers who have beans they are making a better income if you look at some of the research that has recently been done um certainly fair trade looking at the living income if they're part of a scheme we've seen actually really decent incomes for farmers in the communities but there's so many farmers who are not and that's the kind of $2 a day or worse and that's the real problem which has to be addressed is there a concern that some young farmers will simply look at the amount of hard work that goes in how little they're getting out and think you know what we can grow something else here I mean completely and I think this is a real problem because if there are no coco farmers in the future there's no cocoa and it's not just also about the fact that they want to grow something else do they even want to go into agriculture you have climate change we've seen the degrading of the crop and if it's an offer of like do you want to go and work the rest of your life back breaking work no but if it can be sold as a business agry business do you want to develop your own brand do you want to be part of an international supply chain do you want to diversify your production that's interesting that's a business and that's what the good Farms that have run well they're Diversified it's not just about cocoa it's a big ask Evans is there potential here for Coco farmers in countries like Ivory Coast and Ghana they've got the ingredient they've got the core product that all these multinational companies want do you think there's potential for farmers in these countries to say we're in charge here we'll start setting prices and you know leveraging their power from West Africa at the moment I don't see that potential yet because of the price setting mechan me isms that that we still have for example cot is assigned to to most of these uh International organizations and treaties and even if you are a buyer in Ghana in theory you cannot buy Coco Farms unless unless you are part of certain International bodies before you can get access to the Coco farm and so farmers in in in future and currently do not have that right to be able to set set prices in any case we cannot really blame the chocolateers entirely because this is demand and Supply except that it's interesting that this year when prices shot up they wanted all to come together to realize that demand and Supply no longer really works and so perhaps until we begin to diversify more and I mean diversifying here not necessarily also moving away from growing cocoa beans but also thinking about adding value to Coco Beyond even chocolate until we are able to control the narratives when it comes to the the transformation of the sector then the small holder farmer would continue to be powerless Christie can I just ask the issues the farmers face in West Africa they've got climate change prevalence of disease attacking crops crop yields getting smaller I mean this is an industry facing huge challenge yeah absolutely and I think um the climate change issue is real and present for Coco Farmers they see it particularly in the changing rainfall patterns so Coco has a need for rain and it's a specific to the times of year when the crop is maturing and when those rains don't come or when they come at the wrong time or in the wrong amount then you know there's every possibility that the cocoa trees don't produce the fruits to the expected levels and that's exactly the situation that we're seeing this this season where the the crop is so dramatically lower than it has been in the past but you know we also need to remember that we're in an alino cycle and that is causing drought and dry conditions in general across West Africa and when the trees are subjected to Drought like they are now they are more susceptible to disease they're less able to fend off attacks from Pest and fungi and whatnot so you know the trees face multiple threats from the environment itself so ANUK we're hearing a lot about the problems in the industry do you think we're getting to the stage where in not that many years from now chocolate will be a completely luxury item that only some people can afford I mean the pricing is only going in One Direction yeah well I think I mean companies are complaining a lot about it it's partially also because they never invested enough in the farmers they didn't invest like if farmers were would have been able to earn a living income they could have better uh done their pruning their agricultural practices they of course climate change is an uh extra Factor but already in the essence I think there's a lack of investment in Farmers so that needs to happen first and then the other options will become less interesting now they're more interesting because the farmers don't earn enough uh by Coco farming um the fact that the prices go up I mean there are still very cheap chocolate bars to be to be um um gotten in a supermarket for example so I don't think that's the immediate problem uh I think uh if they start if the companies start to invest more in the farmers by paying them more um a lot can still be averted um yeah so I think that's the first I'll just come to Ted on that point it's a great Point Ted isn't it have the companies let down these farmers terms of you know promoting people educating them giving them the tools and empowering them to make more of their own business well absolutely and it's the whole way the supply chain is set up it's set up so that Africa in particular produces raw beans or deodorized cocoa butter for the international market and then they make the chocolate so all of the sweet end all of the value addition is in Europe or North America but it's the way the supply chain is set up there were small parts of it which are run by let's say the trading houses or the chocolate companies when they know the farmer and they know the communities there were lots of examples of them paying decent prices providing support Healthcare Etc but the fact is most farmers are invisible in the supply chain and so there's no way that these big companies are going to support them so there's a disconnecting responsibility the ultimate responsibility lies with the consumer and so you have to try and look for a brand where you know at the very least that they are tracking that they have some idea who the farmers are they're getting the cocoa from otherwise you've no idea if it's sustainable does the customer actually care well I the thing is I think it really depends on the the the part of the world that you're in but if you look at Western Europe and you look a lot of part of North America you think of Australia as well yes it is really important to a lot and you think of Youth as well they're making up more and more of the population under 25 these sustainability issues are key but I think the trouble is you get issues like Mass balancing where the chocolate bar you buy actually the cocoa in there may not be sustainable but somewhere in the supply chain it is that's got a certificate and you're paying for that but you might be eating sustainable chocolate so there's so much confusion out there about it as well I think at the very least as a consumer you've just got to try and buy sustainable that's the starting point Evans as consumers in Western countries in Europe do we need to be more educated about where our chocolate is coming from um yes and I I think that not not just the consumers but the question also is who who is required to educate the consumers very well and here if I may digress a bit I think this is where I feel then the origin uh governments would require to do more they they have to do more and own the narratives when it comes to the sustainability transformation within within the Coco sector other than that I think Western consumers are leared most people are always demanding and in most cases let's face it they are even the ones who are demanding for the change but but if the the origin makers if if we don't have enough Act S I mean there are actors I'm not saying there are not actors who are also call calling for the change but we need to have more actors who are very bold and courageous and be able to own the sustainability narrative in our own way in our own language so that we can meet the Western World you know it's not about a debate about whose narrative should be upheld against the other but at least we should also be part of it and I think there are a bit more companies that are coming up this way and trying to also educate not just just the Western consumers but their own local consumers as well Christie we hear so much about the cost of living crisis in European countries but there are some products some Commodities people will make sacrifices to buy and chocolate is always one of those isn't it I think so I think we have a very emotional relationship with chocolate that we don't necessarily have with other foods and that you know gives um some support to the supply side that we would necessarily see if we were singing if we were seeing like these wild you know price swings for other Commodities um we might not have the same kind of um elevated Supply that we continue to have for chocolate and I really think that comes back to our you know our emotional ties to this food and we use chocolate for the important moments in life we use it for um celebration we use it to as an expression of Love um we use it for selfcare care in in many situations and I think consumers are less willing to give up a food that gives them all of that return because the value of chocolate you know H it's it spans many dimensions so I think we do um we we may we may stick with chocolate uh regardless if we see um a price change and nuk what do you think will happen in the next couple of years if we keep seeing these wild wild price swings for C Co I mean it's getting extremely expensive and you've got to think that down the line some point there's going to be a point where the price of a bar chocolate for some people will just be too much um yeah I I mean the price swings the prices do go up and down and um of course if if this persists if the quantities get lower and lower then of course the prices will get higher and higher there's also new countries that we know that are now investing in Coco in in America so there might be new sources um for me the most important thing to keep um Coco sustainable is to invest in the farmers to make sure they earn at least a living income which is the bare minimum and the companies although governments also play a role companies can take uh action on that they can decide to pay a higher price Tony Shalon is a Dutch um brand has done that and they've opened up their chain for others to do it so I think company really need to think uh good deep now and if they want to keep Coco sustainable if they want farmers in Ghana and cir to keep investing uh they need to to pay a higher price commit to a longer term higher price companies gonna an nuke just mentioned a brand there Tony's chalone now when I first that saw that on the shelves in England my initial reaction was it looked different yeah then I looked at the price and I thought that's very expensive chocolate and now I I was wrong because I'm getting more of an understanding that this is actually what it costs so have we been underpaying or have we been fed you know cheaper chocolate and now other brands come onto the market and they're actually charging what it costs absolutely I mean that's completely the case if you want to pay a fair price to Farmers part of the problem is so much chocolate is the majority of it is consumed in Western Europe or North America it's for those kind of tastes it's always changing the way they produce it so that's where all the value addition is even if Coco is double the price that what it currently is it's still going to be a relatively smaller part of the overall cost of a bar but it eats away at the margin so I think the thing is certainly if we look at the cost of chocolate I could imagine the kind of standard Dairy Milk Bar you get now could become significantly more expensive it will be smaller and they might start mixing it with other things or it becomes the luxury bar and then the kind of stuff that most people are eating is like fun-sized chocolate which let's face it isn't very nice and they put all sorts of substitutes and a lot of sweet uh sugar sugar in there as well to try and get around it so it could just be it's going to move up the scale of luxury you mentioned a phrase Fun Size Evans we're hearing a phrase shrink flation so the bars are getting smaller the price a is the same is is that something we'll see a lot more of I mean this really annoys consumers doesn't it absolutely I mean consumers always want value for their money so I mean if prices remain the same and sizes decrease of course depending on other attributes that are added most consumers obviously would not would not be happy in in such a situation just come to you on that point Christie shrinkflation consumers noticed this you know year on year I see pictures on social media of the chocolate bar someone bought a year ago much loved brand and now look what they've done this really does irritate people doesn't it yeah I mean it's super annoying and like you say it's very visible to the consumer I mean consumers are smart and they they know their products and especially when it's a beloved brand and chocolate has so many beloved brands that we are tied to especially at certain times of year then of course people notice when their product is less than it was before um at the same time I I do still think there is a tension between that kind of annoyance and still wanting your brand I mean brands are powerful and when you combine that with the our attachment to Chocolate it's like if you're you know shopping for your favorite holiday treat or you know whatever I think that that might still supersede um the the feeling of being a little bit cheated by the size of the product that's a good point in Nuke isn't it that you know these Brands they know we love their product these brands have got us for Life almost haven't they yeah in a certain sense but I I mean you see in the Netherlands at least more and more brands that claim to be sustainable but they're not allowed to say that anymore by the authorities if they can't prove it on paper so I think uh consumers younger consumers want more sustainability so there is space for newer Brands and I just mentioned one um yeah so the brand shouldn't be um trusting too much on the image they have at this moment they need to work for it Ted what's the future of chocolate then is it going to get smaller more expensive and as I said earlier a luxury item for the middle classes well the thing is I think they're going to respond I mean we saw prices got went up to over $1,000 a ton the market did respond as well and essentially less buying as well but also you see that whenever the prices are really high or any kind of input is high there are substitutes you don't necessarily have to use cocoa butter you can even use cotton seed oil if you want to there's all kinds of other substitutes you can put in you can reduce this you can add that and of course it's been mentioned Latin America is becoming a major producer Ecuador could even overtake GH as the number two next season so with all of that coming in there as well I think we'll see an adaptation I think they're very clever when they sell chocolate bars I think we'll take one look at it and say oh this is the same and we'll take one bite and we'll notice the difference here's a question for you Ted on a completely consumer focused issue why does American chocolate taste so bad to us Europeans well I don't know look my wife and my kids they really like things like Hershey's kisses and everything I mean to me I don't know I personally don't like that flavor at all but it is a very specific flavor and of course you got to think of American food the way it mixed in with American food even people who don't like things like Hershey's they're going to love American um you know uh chocolate chip cookies and things like that so I think maybe that's a crossover across the Atlantic chocolate chip cookies Evans what do you think the future holds for the Chocolate World and in particular the farmers of West West Africa I mean is life going to get better well for the chocolate word I think I I agree that the market would respond to itself I mean given not not only vast lands being being cleared to grow plantations of Coco in other parts of the world Asia is should also be pictured in Indonesia and other parts of of Latin America as well and also probably one should mention that there's also this disruptive technology of labade chocolates and so I think that the market will in some way respond to to the crisis that that we are facing where the challenge still lies I think then is with a small small holder Farmers I think until two things until one already has been mentioned the chocolateers also change their purchasing practices they they limit their opportunistic stance their unsustainable strategies that they develop to to suit their interest that is one until they change that the farmers still do not have hope and then the second thing would be origin government policies also should be more transparent and transformative that takes into consideration the the the the welfare of small holder Farmers other than that chocolate I think would be fine but smallholder Farmers would not Evans ANUK Christie and Ted a delicious topic on round table today remember you can see more discussion and debate on our YouTube channel just search for Roundtable trt world but for now for me and de Brady and all of the team here goodbye and thank you for watching