1 Pe ople Pr oc esses Pr oduc ts Ca bosse

Organic cocoafarming Expanding opportunities forcocoa farmers

CS3_E_BC_AR08_Cabosse.indd 1 29.10.2008 11:34:04 Uhr DominicanRepublic

Uganda

Tanzania

Brazil

In this issue of Cabosse,wehighlight organic cocoafarming programs in Africa, South America and the Caribbean that aremaking adifferenceinthe lives of farmers and their families.

Cabosse is the French term forcocoa pod

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4 Contributing to asustainable cocoasupply chain 5 Organic cocoa – whatdoes it mean forfarmers? 7 Organic cocoafarming in Brazil Managing the conversion program From organic beans to chocolate “Permaculture” education program benefits children of cocoafarmers “Native” – The first Brazilian bio chocolate drink 14 Organic cocoafarming in Tanzania 20 Organic cocoafromUganda 23 Organic cocoafromthe Dominican Republic 25 “Organic” cocoa – understanding the claim 28 Arangeoforganic cocoaand chocolate products 30 Looking ahead

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BarryCallebaut’s vision is to be the heartand engine of the chocolate industry. Cocoaisthe basis of our business.This precious crop growsina narrow belt 20° north and south of the equatorinthe Americas,Africa and Asia. Most of the world’scocoa is grownonsmall farms of about five to eighthectares.Cocoa must be carefully tended, harvested, fermented and dried to yield beans with the necessaryquality and flavor required to producedelicious chocolate forconsumers around the world. As the world’sleading cocoaand chocolate manufacturer,with opera- tions in morethan 20 countries and morethan 7,000 employees,we believe thatcontributing to the developmentofasustainable cocoasup- ply chain is imperativefor achieving profitable growth.Contributing to asustainable cocoasupply chain is also the cornerstone of our corpo- rate social responsibility program. We view “corporateresponsibility” in abroad sense.Webelieve we have aresponsibility to all our stakeholders – shareholders,customers, consumers,suppliers,employees and the communities whereweoperate – and an obligation to consider their respectiveexpectations.Wepay particular attention to conditions in cocoa-growing countries and those lacking awelfarestructure. We arecommitted to working to empower cocoafarmers,toensurethatchildren arenot harmed in cocoafarming and to provide our employees asafe, healthyand inspiring work environ- mentand skill enhancementand developmentopportunities.

Sustainable developmentisdevelopmentthatmeets “the needs of the presentwithout compromising the ability of futuregenerations to meet their ownneeds. ” The World Commission on Environmentand Development (The Brundtland Commission), 1987

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BarryCallebaut has long been engaged in activities to supportcocoa farmers and cocoafarming communities.Weregardactivities thathelp to empowercocoa farmers to be vital forensuring asustainable cocoa industryand facilitating the economic growth of origin countries. In this issue of Cabosse,wedescribe the organic farming program that BarryCallebaut launched in Brazil and the program thatBiolands,a companyinwhich BarryCallebaut owns a49% stake, started in Tanzania. We also highlightthe successful organic farming programs run by twoorganic cocoasuppliers to BarryCallebaut,EscoLtd.inUganda and n¨®ÇnÇ÷¨ in the Dominican Republic. Although the economic,social and environmental factors differ from countrytocountry, organic farming is helping to makeapositivediffer- enceinthe lives of manycocoa farmers and their families,asthese exam- ples illustrate. This progress notwithstanding,organic certified cocoabeans representless than 1% of the worldwide cocoacrop. The majority of organic beans,about 75%, areproduced in the Americas,with the Dominican Republic topping the list.The categoryoforganic chocolate confectioneryisexpected to grow 34.3% worldwide from 2008 to 2012, or from 30,300 tonnes to 40,700 tonnes,according to market intelli- genceprovider Euromonitor International. Despite the strong growth in recent years,organic cocoaand chocolate remains aniche market. Europe is the biggest market forimports of organic cocoabeans,and most organic products sold in the United States and in Canada are imported from Europe.

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Business and governmentleaders,economists and organic experts often have differing views about the value of actively increasing the amountofland under organic management. One of the challenges cited in debates about organic agricultureisincreasing crop yield per hectaretomatch or exceed the yields produced under conventional farming practices.While an in-depth look at the technical specifications and ramifications of organic agricultureisbeyond the scope of this publication,wehope the following success stories will provide useful examples and insights thatcontribute to the pursuit of sustainable cocoafarming practices.

Organic agricultureisaproduction system thatsustains “the health of soils,ecosystems and people.Itrelies on ecological processes,biodiversity and cycles adapted to local conditions,rather than the use of inputs with adverse effects.Organic agriculturecombines tradition,innovation and sciencetobenefitthe shared environmentand promote fair relationships and agood quality of lifefor all involved.” International Federation of Organic AgricultureMovements (ɟ¨Çþ), June 2008

A$Çæ€A Organic agricultureshould sustain and enhancethe health of soil, plant, animal, human and planet as one and indivisible.

$n¨æ¨:R Organic agricultureshould be based on living ecological systems and cycles,work with them, emulate them and help sustain them.

ŸÇÉÚ®$|| Organic agricultureshould build on relationships thatensurefairness with regard to the common environmentand lifeopportunities.

nÇÚ$ Organic agricultureshould be managed in a precautionaryand responsible manner to protectthe health and wellbeing of current and futuregenerations and the environment.

Source: ɟ¨Çþ

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Prompted by the growing interest of consumers in organic products, BarryCallebaut launched aprogram in November 2001 to develop asource of certified organic quality cocoainthe state of Bahia, Brazil. The south of Bahia washistorically known as one of the world’s largest cocoaproducing regions,with some 600,000 hectares of cocoa plantations.Awidespread attack of the fungus known as witchs’ broom in the 1990s decimated cocoaplantations in the area. Cocoa bean production plummeted from ahigh of about 400,000 tonnes to about 100,000 tonnes in 2000. By 2005,the total production volume in Brazil had crept back up to 170,000 tonnes.Currentestimates indicate that400,000 hectares are being used to grow cocoa, though at much loweryields per hectarethan in previous years.

Creating opportunities forcocoa farmers BarryCallebaut’s Organic CocoaProjectoffered farmers an opportunity to improvetheir livelihoods as theyrestored their farms.Seven targetareas were selected forthe conversion program: Ilhéus,Itabuna, Ipiaú,Gandú,Ubaitaba, Coaraci and Camacã/Belmonte.Setting up the program involved educating farmers about the benefits and tech- niques of organic farming.Some 25 local farmers from each area agreed to participate in the training to learn about organic principles and practices and howtoimplementthem on their farms. BarryCallebaut assisted farmers to converttheir fields from conven- tional to organic farming and helped ensurecompliancewith the requirements of organic certification.Wehired and trained field techni- cians who arebased at BarryCallebaut buying stations in keylocations. Farmers meet monthly with a field technician forsupportand advice, and also meet regularly with one another to exchangeexperiences.

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Experimental areas established Three five-hectareexperimental areas were established on participating organic cocoafarms.The purpose wastoshowcase the benefits over a three-year period of awell-managed organic plot,under the supervision of organic conversion specialists and our field technicians. Organic materials areused by the farmers and converted into organic fertilizers.These help to enhancesoil fertility and promote the vigorous growth and production of the cocoatrees.Shade trees arecontrolled and techniques such as pruning and grafting areused. Grafting mother trees and increasing tree density with high-yielding seedlings has resulted in young and highly productiveorganic cocoa fields. When the experimental areas were started twoyears ago, cocoabean yields were close to 150kgper hectare. Averageyields noware up to about 450kgper hectare. After the thirdyear,when all recommended procedures have been implemented, yields of 750kgper hectareare expected. The results and lessons learned from the experimental areas will be made available to all farmers participating in the Organic CocoaProject. Manyhavealready visited the areas and witnessed the effectiveness of the farming methods and the opportunity to further improvetheir livelihoods.

Ihad already been engaged in natural farming for “30 years,byconviction and passion,when BarryCallebaut introduced their organic project to our cocoacommunities.Injoining them, Iachievedabetter organization and understanding of organic cocoafarming under the valuable cooperation of their leaders,consultants and field technicians.The partnership in the organic projectincreased our commercial relationship and encourages us to constantly improvethe quality of our cocoaharvests and the environment. Finally, we areverymuch concerned to maintain high standards to ensuresafesupplies to the consumers.

Narciso Alves da Cunha Lisboa, farmer partner, ” Farm Reunidas Lisboa, Municipality of Gandú/Bahia

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Managing the conversion program Converting conventional cocoafarms in Brazil to organic farms is along- term endeavor. The process – from changing farming practices to harvesting certified organic cocoabeans – normally takes from 18 to 36 months. To meet international standards fororganic farming and manufactur- ing,aproductmust be cultivated, produced and processed in ahighly responsible social and natural environment, without the use of anyarti- ficial fertilizers,genetically manipulated substances or chemical pre- servatives. BarryCallebaut Brazil workswith the advisory firm SertãoVerde, which specializes in organic conversion programs.The firm’s agricultural experts provide technical and scientificadviceand supporttoour field technicians and farmer partners.Theyvisit participating farms and liaise with the Brazilian certification organization InstitutoBiodinâmico(Éa÷). Éa÷,Brazil’slargest certifier,isaccredited by the International Federa- tion of Organic AgricultureMovements (ɟ¨Çþ)and by the Deutsche Akkreditierungsprüfwesen (÷ÇQ-$n).AnÉa÷ auditor visits each farm to ensurethatorganic guidelines arefollowed. Oncetheyachieve organic certification,farms areexpected to maintain organic farming practices and comply with the certification requirements.Each year farms must pass another audit in order to be re-certified “organic”.

Going organic we sawour plantations begin to harmonize “with Mother Nature. Soils turned alive. Cocoatrees, green gardens and other vegetation became vigorous. Almost no diseases; back to pureair and water.Plenty of animals returned to the revitalized environment, which made the whole community happy, including farmers,workers and their families.Our thanks to BarryCallebaut fortheir remarkable contribution to natureand the cocoacommunities and for offering to consumers ahealthyoption of traceable organic quality cocoa.

Leilson Dos Anjos Oliveira, fa”rmer partner, Farm Santo Antonio,Itacaré/Bahia

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From organic beans to chocolate Working closely with local specialists,BarryCallebaut has succeeded in converting morethan 7,200 hectares to organic cocoafarming methods in southeast Bahia, home of its Brazilian cocoaprocessing operation.One of the conditions of the Organic CocoaProjectisthatBarryCallebaut maintains priority to buy the certified organic cocoa, which is sold at a higher pricethan conventional beans.Farmers in Brazil receiveapremium of about '|÷ 550to'|÷ 600 per tonne fororganic versus '|÷ 200 to '|÷ 400 per tonne forconventional cocoafromBrazil. Some 4,120 hectares were certified organic by Éa÷ by March 2005. At this time,106 cocoafarmers,among them six women,participated in the program.ByMarch 2008, an additional 3,116 hectares were certified organic. Farmers together supplied approximately 850tonnes of traceable organic beans to BarryCallebaut buying stations during fiscal year 2007/08. The Organic CocoaProjectnow includes 7,236 hectares of organic cocoa fields and 116 farmer partners.The aim is to increase the total annual production volume of the participating farmers from 850to1,500 tonnes of traceable high-standardorganic beans during fiscal year 2008/09. BarryCallebaut’s processing facility in Ilhéus/Bahia, includes aproduc- tion line certified forprocessing organic cocoabeans into organic cocoa mass,also known as cocoaliquor.Strictrinsing and separation procedures were implemented to ensurepurity during processing.

Our Organic CocoaProjectisaprincipal driver for “sustainable developmentinthe Bahia cocoaregion with special focus on the Mata Atlântica Rainforest.With the cooperation of BarryCallebaut,Iwas able to complete university courses in biodynamic agricultureand environ- mental engineering.This acquired knowledgeisveryhelpful formydaily work and contacts with our farmer partners in the project.

Elvídio Antonio Dos”SantosJunior,aBarryCallebaut Brazil field technician

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“Permaculture” education program benefits children of cocoafarmers Avegetable garden is an extension of the classroom in three rural schools located on large cocoaplantations in Brazil wherefarmers aregrowing organic cocoainpartnership with BarryCallebaut.The gardens arepartof the PermacultureProject(ProjetoPermaculturanaEscola)initiated by BarryCallebaut in September 2006. The one-room schools were built on the farm premises forthe children of cocoafarmers and workers.Noother schools areclose by.Some 65 to 70 children,from6to14years of age, attend the three schools and par- ticipate in the PermacultureProject. The children,who helped to plant the school gardens,learn about the importanceofgood nutritious food fortheir health and wellbeing – and howtogrowvegetables and herbs. At lunch time,vegetables from the school garden areserved. The word “permaculture” is derived from the expression “permanent agriculture.” The concept calls forplanting in away thatmirrors a natural ecosystem.Inaddition,agricultural techniques areclosely linked with the environment. The benefits of the school vegetable gardens and the special instruc- tion in health,nutrition and caring forthe environmentare clearly visible. Teachers and parents reportthatsincethe projectstarted, children are performing better in school and eating morenutritious food.

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The projecthas also broughttogether members of the community who gettoknoweach other while helping out in the gardens.This has served as acatalyst forother community activities such as the production of handicrafts,foods and other items to be offered forsale in locally organ- ized workshops or fairs.The public education authorities have generously provided transportation assistancetoenable community members to visit the differentschools participating in the Permacultureprogram and the BarryCallebaut Ilhéus production site.

The lives of my children have very much changed in apositive “waybecause the Permacultura projectoffers anew quality of lifeinterms of nourishing food and also respect forthe individual, which Ifeel is so importanttoday.

Jivoneide OliveiraDos Santoslives on SãoJosé Farm whereher husband” is afarm worker;her children attend arural farm school in the municipality of BarradoRocha

It’s amazing to me,this Permacultura project! Inever would “have imagined Iwould be able to learn so manynew things and to participate in such aprogram – I, aperson with almost no school education.The sense of learning comes through in everything Iplant, cultivate, harvest and eat. ” Marcelina Dias Santos, 66, is the mother of 12 children and an activehelper in the Permaculturegarden of the rural farm school in SãoJosé,Ibirataia/Bahia

Inever imagined I’dget the opportunity to participate in such “aprojectand to contribute to the success of ahigher-quality education forsomanychildren and members of our communi- ties.” Jocelita SilvaSantos(“Cely Luz”), coordinatorofthe PermacultureProject taughtinthree rural farm schools in three cocoagrowing communities in Bahia

CS3_E_BC_AR08_Cabosse.indd 12 29.10.2008 11:34:19 Uhr Organic cocoafarming in Brazil 13

“Native” – The first Brazilian organic chocolate drink Using beans supplied through its Organic CocoaProject, BarryCallebaut provided the organic redcocoa powder to makethe first organic chocolate drink to be launched in Brazil. “Native” organic chocolate drink,produced by the Brazilian company NativeOrganic Products Ltd.,made its debut in 2005 at the Bio Brazil Fair in SãoPaulo.The drink,which also contains organic sugar,issold in about 3,000 outlets across Brazil, including food stores,delicatessens and major supermarket chains.Itisalso sold to stores in South Africa, Spain, Portugal, Malaysia and Taiwan. Morerecently,NativeOrganic Products launched aline of organic cook- ies,including achocolate cookie made with the same organic redcocoa powder as the chocolate drink. The productlaunches mark importantmilestones forthe participants in the Organic CocoaProjectand forestablishing BarryCallebaut as a preferred supplier of certified organic cocoaproducts across the Americas.

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Biolands,based in Tanzania, is Africa’slargest exporter of certified organic cocoa. BarryCallebaut has purchased 100% of Biolands’ top-grade organic cocoasince2000,and in April 2008 we acquired a49% stakeinthe company. The Biolands enterprise is one of the largest organic smallholder cocoa programs in the world. In Tanzania, among the poorest countries of the world, agricultureisthe main source of income formost of the popu- lation.Farms aresmall: about 0.6hectareonaverage,with about 300 trees including cocoaand other varieties.Biolands has implemented a “bottom-up” cooperation model in Tanzania. Farmers areencouraged to grow other crops,such as rice, in addition to cocoa, to diversifytheir sourcesofincome.Biolands worksdirectly with farmers to increase production,improvethe quality of cocoa, ensurefair prices arepaid to the farmers – and improvethe farmers’ quality of life. This certified approach guarantees full traceability forevery bag of cocoasold by the participating farmers,enabling consumers to know this cocoahas been produced in asustainable and responsible manner. Biolands cocoaiscertified organic by the Swiss Institute forMarket- ecology(Éþ¨), one of the most renowned international agencies for inspection,certification and quality assuranceofeco-friendly products.

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Cooperation and trust Biolands has been working since1999 with local farmers in the district of Kyela, Mbeya region.Ithas provided training,technical advice, supplies of seedlings and pruning equipmentto20,000 smallholder cocoafarm- ers.Some 647,000 seedlings have been planted to date,according to the Biolands monitoring system.The first crop of certified organic cocoa wasshipped in 2000,and sincethen approximately 14,700 tonnes have been produced. Thankstocooperativeefforts and business relationships built on mutual trust,Kyela farmers areproducing higher yields of high quality cocoa, and theyare receiving afair pricerelativetothe world market. “When we started the program,for manyfarmers,itwas the first time theyweretreated seriously as partners – partners who areexpected to produceagood productinreturn forabetter price. Theyfeel thattheir cocoaand their work arevalued,” said Eric Smeets,Biolands founder and managing director. BeforeBiolands started working with farmers,therewas no properly fermented, washed and dried cocoafromthe area. Now, up to two-thirds of the cocoacropisprocessed according to the highest quality standards. “Tanzania’spotential as aproducer of fine-flavor cocoaisbeing restored,” he said. “Having acompanythatbelievesintreating people fairly and honestly is appreciated,” said Eric Smeets. “Still, it is results theywant. And we work hardtoensurewedeliver fair and honest services.Asaresult of our field visits,wherewepromote the pruning and cleaning of farms and removalofblack pods,farmers have been able increase production by an averageof20%.”

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Organic certification and internal controls The improvements in cocoaquality were achievedasaresult of rigorous controls instituted by Biolands.The companydeveloped an Internal ControlSystem to introduce, monitor and maintain the organic farming of cocoa first under {ÚLJcertification and then under the Éþ¨ certifica- tion.The companyalso achieved É|¨ 9001 certification. The 20,000 farmers supply cocoain107 villages.This is done under the supervision of 185 people in the villages who areemployedbyBiolands. This approach facilitates the constanttwo-way communication between farmers and Biolands,and ensures transparency and traceability of the crop.Daily purchase statistics and cash requirements arereported from the field to the office through |þ| text messaging,asmost of the area has mobile phone coverage. Biolands supplies bicycles to all the villagecoordinators.Tohelp improveproductivity and efficiency,Biolands is developing with partners an innovativenew kind of bicycle designed to transport five 50-kgbags of cocoabeans.

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Fair prices,proper paymentfor weight “When Biolands started to buy organic cocoainKyela in May2000,the existing cocoabuyers facedalmost no competition and payments to farmers were very low,” says JeremyLefroy,Director. “Prices to agents were equivalentto'|÷ 0.31 per kilogram at the time.Biolands introduced directpaymenttofarmers at ahigher levelthan theyused to receive – provided thatthe cocoawas organically produced and of good quality.” “The improvementinquality coupled with directpayments to farmers and ahealthylevel of competition have all contributed to arise in farm- ers’ incomes which has faroutstripped the improvementinthe world market pricesince2000,” added JeremyLefroy. “Youcan see the evidence in the improvements to houses and higher school attendance.Cocoa is also the main contributor to local government financethrough the 5% levy charged. Thathelps to maintain and improvethe public infrastruc- ture.” Biolands has also led the wayinchampioning the proper weighing of cocoa. “In the past,farmers have been cheated on weightasbuyers have used atin or ‘kopo’tomeasureinstead of calibrated scales.Invariably the tin held morecocoa than the buyer claimed,” explained Dickson Mkisi, General Manager of Biolands.Biolands regularly checksand recalibrates its scales to ensureaccuracy,and all weights and measures areinspected and certified by the government. Asked to describe the relationship between the farmers and Biolands, organic specialist Gosta Ericsson said: “Biolands is perceived by the farmers as areliable business partner.Thereistrust.This is extremely importantbecause farmers have often been cheated by unfair practices. The farmers knowthatBiolands pays afair priceand thatwepay for the weightdelivered. We do not takecocoa on credit and then ‘forget’ to pay. We paycash on the nail.”

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Improving the quality of life Biolands is one of the biggest employers in the Kyela districtinMbeya. Besides its network of 20,000 farmers,itoffers full-time,part-time or seasonal employmenttoabout 300 people.Inaddition to positions supervising cocoacollection in the villages,the jobs include office staff,loaders and hand pickers. Biolands pays staff well above the national minimum wage. “We are bringing real employmentopportunities to rural areas and helping to boost the imageofagricultureinthe eyes of young people,who other- wise mightbetempted to drifttothe towns,” said JeremyLefroy. The companyisrun by Tanzanian staff.Eric Smeets and asmall group of directors provide guidance. Biolands managers areexpected to train their successors.Employees areencouraged to “grow with the company” and to takeonsenior managerial positions.Some have movedinto senior positions at Lima, aBiolands counterpartspecializing in coffee, and Mavuno,another Biolands company. Biolands workstogether with the local community on anumber of health,education and social welfareprojects in Kyela, providing financial supportand other services.Ithas along relationship with the local districthospital in Matema and helps payfor the maintenanceofthe hospital’sonly ambulance and administrativeservices such as e-mail. In 2008, it helped fund the purchase of agenerator. The companyhas assisted local primaryschools and provided books and helped to financeeducational materials about ÇÉ÷|/Aɇ. Biolands also sponsors an employeefootball team.

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Investing in the future In 2007,the farmers produced about 2,500 tonnes of organic cocoa. Biolands is committed to seeing this volume grow.Eric Smeets believes the waytogrowistomakefarms moreproductivebycontinuing to deliver seedlings and providing tools to clear and maintain fields. “Our investmentinthe Kyela region is an investmentinthe future – forthe farmers and their incomes,aswell as forBiolands,” he said. “Without BarryCallebaut’s steadfast commitmenttobuy cocoafrom us at afair price, we would not have been able to achieve our mission in Kyela,” said Eric Smeets. “BarryCallebaut’s supportasareliable busi- ness partner makes it possible forustodoour work to empowerlocal farmers.”

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In addition to our organic projectinBrazil and Biolands in Tanzania, BarryCallebaut also sourcesorganic cocoafromvarious other suppliers around the world. One is Esco Uganda Limited, the largest cocoaand vanilla exporter in Uganda. An organic projectlaunched by Esco in the Bundibugyo districtinwestern Uganda has had apositiveeconomic and social impactonthe livelihoods of severalthousand cocoafarmers and their families.Sustainable agricultural practices have improved, and farmers areproducing largervolumes of organic beans forwhich they receiveahigher pricethan forconventional beans. Bundibugyo covers 2,400 squarekilometers and is geologically partof the Western RiftValley. The soil is volcanic and very fertile,especially in the lowlying areas.The averagetemperatureranges between 28 to 35 °C (82 to 95 °F) and annual precipitation is about 2,150mm(84 in.). Mukasa Samuel, afarmer in Kyamiazl, Busaaru parish,started organic farming in 2002 on twoacres of land. Todayheowns sevenacres of organic cocoaand plans to buy more. He can affordthe school fees for his four children and aims to supportthem through primaryand secondaryschool so theycan attend university.

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From coffee to cocoaand vanilla Although cocoagrowing in Uganda dates back to the 1950s,ithas played aminor role to coffee as an exportcommodity forseveral decades. In the 1990s,however,after awidespread attack of coffee wilt disease decimated the coffee crops,farmers began again to propagatecocoa from the existing cocoatrees.Fromthe 1990s to about 2000,the cocoa industrygradually rebounded, offering farmers an opportunity to diversifytheir crops and improvetheir livelihoods. In 2001, as apost-war conflictsituation in the area stabilized, Esco ini- tiated the organic cocoaprojectwith the supportof$Q¨QÇ (Export Promotion of Organic Products from Africa), aprogram created by the Swedish International DevelopmentAgency (|É÷Ç). The projectstarted with 1,500 certified farmers in Kasitu subcounty and has expanded to 6,500 certified farmers across almost the entire district. Farmers regularly participate in training sessions on organic agri- cultural practices.Training is also provided on health topics including malaria prevention, ÇÉ÷|/Aɇand family planning. The farmers’ total annual production volumes have increased each year and currently areabout 2,000 tonnes of certified organic cocoa and 4,000 tonnes of conventional cocoa. Alongside the cocoa, farmers also grow organic vanilla.

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Economic and social impactoforganic farming Farmer training has resulted in an improvementinagronomic practices including mulching,pruning and soil erosion control. Soil fertility has been improved through the regular practiceofapplying organic manure. Cocoafermentation practices have also improved. These efforts have led to better quality and higher yields of both cocoaand vanilla. Beforethe projectstarted, farmers did not usually planttrees except cocoaorsupporttrees forvanilla. Nowtheyactively planttrees to maintain tree coverand to provide shade.The Esco organic projectteam provides free tree seedlings to participating farmers and closely super- vises tree planting. The premium paid fororganic wasakey motivator forfarmers to grow organic cocoa. Earning morehas enabled farmers to improvetheir homes, supporttheir children’s schooling,and increase their mobility through the purchase of bicycles and motorbikes. Asavings program instituted by Esco offers farmers the opportunity to save moneyinasafeand reliable way, providing afallback position during the off-season when the earning potential from cocoaislow.Farmers who deliver cocoatoEscobuying stations maydeposit 300 Ugandan shil- lings per kilogram (about '|÷ 180 per tonne) in apersonal accountthat earns apromotional premium.Moneycan be withdrawnwhen needed, such as at the startofthe school term to payfor school fees.When the moneyispaid out,the farmers receiveasubstantial premium. “The savings program is something Iampersonally very passionate about,” said Philip Betts,directorofEscoUganda Ltd. “Farmers can set aside funds so theywill have moneywhen theyneed it,plus apre- mium,instead of having to takeout loans at often high rates to pay foressentials.”

CS3_E_BC_AR08_Cabosse.indd 22 29.10.2008 11:34:40 Uhr Organic cocoa 23 from the Dominican Republic

BarryCallebaut partnered with n¨®ÇnÇ÷¨,the Dominican Republic’s Small CocoaGrowers Association (ConfederaciónNacional de Cacaocul- toresDominicanos) to establish an organic cocoaproduction program and to producehigh-quality “fair trade organic” chocolate forthe Euro- pean market.Sincethe successful conclusion of the two-year projectin 2004, n¨®ÇnÇ÷¨ has been asupplier of organic cocoatoBarryCallebaut. In the Dominican Republic,the cost of living forcocoa growers is rela- tively high compared with African growers. n¨®ÇnÇ÷¨ has therefore looked formarket niches,such as the organic cocoamarket,toguarantee areasonable pricelevel to its members and therebyoffer them some protection against the impactofthe international market price fluctua- tions.A“fair” price, according to the Fairtrade Labeling Organizations International (Ÿæ¨), covers the production costs and provides the growers amodest profit. The cocoafarming communities getback partofthe pro- ceeds in the form of social projects,such as school renovations,the con- struction of amedical center or road repairs. The objectives of the multipartner projectincluded developing asus- tainable market for n¨®ÇnÇ÷¨ small growers,producing raworganic cocoabeans of superior quality forBarryCallebaut,increasing the com- petitiveness of n¨®ÇnÇ÷¨ and BarryCallebaut in the organic cocoa sector, developing the necessaryincentives to motivategrowers to focus on the quality of cocoaonanon-going basis,and sharing the know- ledgegathered with all n¨®ÇnÇ÷¨ organic cocoagrowers.The projectwas funded by n¨®ÇnÇ÷¨,BarryCallebaut and agrant from the Business Linkages ChallengeFund (aænŸ), which was financed by the British Govern- ment’sDepartmentfor International Development(÷ŸÉ÷).

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Demonstrated success As aresult of the project, cocoaquality has improved – as well as the livelihoods of small growers in the poorest production regions.More women have been employedand the entirecommunity has benefited from ahigher purchasing power. While the projectwas focused on twoofn¨®ÇnÇ÷¨’s eightregions (Block 2and 8), the training and lessons learned on howtogrowquality organic cocoawereshared with the managementand technical staff of all other regions. “Cocoafarmers and technicians have learned howtohandle the cocoa as afood product, taking careofall hygiene procedures and quality and traceability aspects,” explained Abel Fernández, Operation Manager at n¨®ÇnÇ÷¨. “Research carried out as partofthe projecthas enabled our technicians to identifythe best fermentation and drying process from among differentsurfacesincluding wood, concrete and plastic certified forfood management. n¨®ÇnÇ÷¨ has been able to increase our offer of high quality beans,toguarantee some additional income to our members as well as to be internationally recognized as asupplier of high-quality organic cocoabeans.”

Things aregoing much better formenow.BeforeIhad any “cocoaand only had my small field to grow food formy family,nobody wanted to lend me money, not even 100 pesos. SinceIhavecocoa, everyone asksme, wherever Igo, ‘Howmuch would youliketohave? We’reatyour service.’” Damiana Castro, cocoafarmer,Block 2

SinceIjoined n¨®ÇnÇ÷¨ in 1993, the quality of my life “has improved. During this time,Ihavereceived better prices formycocoa because Iamtaking partinthe organic production program.Asaresult,mycocoa farm is in avery good condition.” FranciscoAntonion Méndez, cocoafarmer,Block 8

CS3_E_BC_AR08_Cabosse.indd 24 29.10.2008 11:34:43 Uhr “Organic” cocoa – 25 understanding the claim

To be certified “organic,” cocoamust meet the legal standards fororganic agricultureofthe countrywhereitwill be sold and thereforethe farms must be regularly inspected by arecognized certifying body.The United States,the European Union and Japan have comprehensiveorganic legis- lation and the term “organic” maybeused only by certified producers. It is commonly assumed that “organic” means “chemical-free,” and indeed organic certification standards include as aminimum requirement thatchemical fertilizers and pesticides arenot used. But organic cocoa production means morethan not using chemical inputs. Converting conventional cocoa fields to organic can be amajor chal- lengeand takeseveral years,particularly if the cocoafarming system has been abused by the excessiveuse of chemical fertilizers.Such overuse creates imbalances in the soil and indirectly causes severe problems with pests and diseases.Inturn,farmers have often turned to chemical pesticides to combatthese problems. The use of chemical fertilizers and pesticides,however,ismorewide- spread in certain regions of the world than in others.Onsmallholder farms in Africa, forexample,farmers maynot be able to affordsuch syn- thetic aids or mayuse them infrequently or not at all. In addition to avoiding chemical inputs,organic certification also requires thatfarmland be free from chemicals forthree or moreyears. Traceability must be ensured through written production and sales records. Organic products must be strictly separated from non-organic products.Inaddition,periodic on-site inspections by certifiers must takeplace.

CS3_E_BC_AR08_Cabosse.indd 25 29.10.2008 11:34:44 Uhr 26 “Organic” cocoa – understanding the claim

An optimal environmentfor cocoa Amoreholistic waytodefine ahealthycocoa production system is to consider whatisneeded to producecocoa in asustainable way. Asustain- able cocoaproduction system is one thatprovides an optimal environ- mentfor acocoa plant. The moreoptimal the environment, the fewer interventions areneeded to managediseases and pests. The cocoatree’snatural environmentisthe Amazon Rainforest,replete with adiversity of shade trees.For optimal growth,cocoa requires a humid and tropical climate with well distributed rainfall and stable high temperatures.

Shade and biodiversity Shade trees areindispensible fororganic cocoaproduction.Farmers are encouraged to combine cocoawith hardwood trees,trees thatcan be used for firewood, as well as other farm crops and plants.Manyofthe shade trees lose their leavesduring the season and contribute a steady supply of nutrients through the organic fertilization of the soil. Cocoaand shade trees must be regularly pruned and old and diseased branches must be removed, in order to create abalancebetween shade and sunlight. Pruning also ensures proper ventilation which helps prevent fungi infestations.Such biodiversity on cocoafarms can help control pests and diseases,while the additional food crops can enrich the family’s daily diet and offer additional sourcesofincome.

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Soil fertility To thrive, acocoa tree needs soil thathas agood balanceofessential nutrients.Ahealthyplantisless prone to attacksbypests and diseases, so improvementand maintenanceofsoil fertility is acritical factor in organic cocoaproduction.This can be achievedbypreventing soil erosion through the use of stone walls or barriers,building terraces,orplanting hedges and trees in rows across the main slope of an inclined area. One of the most importantmeasures to improveand maintain soil fer- tility is to continuously add to the soil organic material such as branches cut during the pruning of cocoatrees and shade trees,weeds,and empty cocoapods.The application of manureand compost is also helpful, espe- cially on young farms.

Pest and disease control Cocoaisathigh risk to be attacked by various pests and diseases such as swollen-shoot virus,black pod disease,pod rot, witches’ broom,vascular streak dieback and black root disease.Itisestimated thatone-thirdofthe annual worldwide cocoacropislost to such diseases. The use of chemical inputs likepesticides and fertilizer is not allowed in organic production,sotaking caretomaintain an optimal balance of sunlight, shade,air,water and nutrients is importanttohelp prevent attacks. If pests or diseases appear,the infected branches and plants must be cut and removed. Grafting cocoatrees with disease-resistant varieties is alwaysrecommended in organic cocoafarming. When these measures arefollowedbycorrectharvesting and careful fermentation and drying,the result is good quality organic cocoabeans produced in asustainable manner.

CS3_E_BC_AR08_Cabosse.indd 27 29.10.2008 11:34:46 Uhr 28 Arangeoforganic cocoaand chocolate products

BarryCallebaut is one of the largest processors of organic cocoaproducts in the world. We introduced our first organic chocolate in 1996. Today, we offer industrial and gourmet customers awide rangeofcertified organic products including cocoapowder,cocoa mass,cocoa butter,chocolate and fillings.Our chocolate rangeincludes semibitter and extrabitter dark chocolate,milk chocolate and white chocolate. According to $' regulations,certified organic chocolate must be pro- duced with at least 95% organic ingredients,based on the total weightof the finished product. Our organic chocolate products meet strictquality requirements as well as the $' requirements and/or ®ÇŸ€Ç or Japan’s requirements forcertified organic products. All organic cocoaproducts aremanufactured with organically grown or certified ingredients.Weuse organic ingredients including cocoa, sugar, nuts and milk powder from suppliers in Europe and other regions.

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Organic plus Fairtrade In addition to certified organic cocoa, we also offer cocoapowders that arecertified both organic and Fairtrade.The Fairtrade Labeling Organiza- tions International (Ÿæ¨)arrangedirectcontracts with cooperatives,manu- facturers,traders,importers and exporters of foodstuffs, and ensurethat theyare paid afair pricefor their products.BarryCallebaut is certified by Ÿæ¨-n$ڀ,the certification body for Ÿæ¨,toproducearangeofFairtrade cocoaand chocolate products.The products aremanufactured with rawmaterials purchased from Fairtrade manufacturers recognized by Ÿæ¨-n$ڀ.All these products aremanufactured and registered in separate production runs.

Organic products forconsumers BarryCallebaut offers solutions forretailers who want to offer customer label products made with organic chocolate to consumers.Inaddition,we offer the “aɨ” line of organic chocolate products sold under the Sarotti brand to retailers.

CS3_E_BC_AR08_Cabosse.indd 29 29.10.2008 11:34:47 Uhr 30 Looking ahead

BarryCallebaut has along-term commitmenttosupporting sustainable and environmentally-friendly cocoagrowing practices.Inaddition to our ownprograms to empowercocoa farmers,such as the organic cocoapro- grams described in this issue of Cabosse,BarryCallebaut has joined forces with other companies and industryorganizations to work together on solutions to complexproblems in cocoagrowing regions of the world. This collaboration includes taking aleading role in industryassociations – such as the World CocoaFoundation (´nŸ) – and participating in other partnerships committed to sustainable cocoafarming and to ensurechil- dren arenot harmed in cocoafarming. The World CocoaFoundation,established in 2000,workstostrengthen the partnership between industryand cocoafarmers.With morethan 60 member companies and organizations,the ´nŸ supports arangeof economic,social and environmental programs in cocoacommunities in Africa, Asia, CentralAmerica and South America. ´nŸ programs focus on raising farm incomes,encouraging responsible,sustainable cocoa growing and strengthening communities. BarryCallebaut supports the Sustainable Tree Crops Program (|€nQ), apublic-privatepartnership and innovation platform started in 2000 that seekstogenerategrowthinrural income among tree crop farmers in an environmentally and socially responsible manner in West and Central Africa. The organization is managed by the International Institute of Tropical Agriculture(ÉɀÇ)and is supported financially by the '.|.Agency forInternational Development('|ÇÉ÷), and the global chocolate industry and trade associations represented by the ´nŸ.

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As partofthe Sustainable Tree Crops Program in West and CentralAfrica as of April 2008, 24,114 farmers were directly trained through the participatory Farmer Field School approach and 51,780farmers indirectly benefited from farmer-to-farmer knowledgesharing.Trained farmers realized yields 15 to 40% greater than non-trained farmers while using 10 to 20% less pesticides.Participating cocoa-farming household income in 2004was on average23to55% higher than in previous years as aresult of improved production and marketing skills developed through the program. In line with our strategic goal to increase directsourcing volumes, BarryCallebaut is supporting Biolands in its efforts to replicate in other countries in Africa the “bottom-up” model fororganic cocoapro- duction thathas proved successful forcocoa farmers in Tanzania. At the same time,BarryCallebaut is working to further improveits Quality Partner Program (PartenairedeQualité) forcocoa farmers in Ivory Coast.This program is based on a “top-down” model in which we work with some 40 cooperatives representing 40,000 cocoafarmers.In 2008/09, we will be testing the twomodels in the field and evaluating their effectiveness in improving the quality and quantity of cocoa produced as well as the livelihoods of cocoafarmers and their families.

Formoreinformation BarryCallebaut – www.barry-callebaut.com/csr International Federation of Organic AgricultureMovements (ɟ¨Çþ) – www.ifoam.org World CocoaFoundation – www.worldcocoafoundation.org Sustainable Tree Crops Program – www.treecrops.org

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