Project: Series: Authors: New Business Models for Case Study Series Stephanie Daniels, Sustainable Trading Peter Läderach and Relationships Melissa Paschall Paper: Reaching High-Value Markets: fine flavor cocoa in Ghana i This paper is part of a publication series generated by the New Business Models for Sustainable Trading Relationships project. The partners in the four-year project – the Sustainable Food Laboratory, Rainforest Alliance, the International Institute for Environment and Development, the International Center for Tropical Agriculture, and Catholic Relief Services – are working together to develop, pilot, and learn from new business models of trading relationships between small-scale producers and formal markets. By working in partnership with business and looking across a diversity of crop types and market requirements – fresh horticulture, processed vegetables, pulses, certified coffee and cocoa – the collaboration aims to synthesize learning about how to increase access, benefits, and stability for small-scale producers while generating consistent and reliable supplies for buyers. For further information see: www.sustainablefoodlab.org/projects/ ag-and-development and www.linkingworlds.org/ Please contact Stephanie Daniels [email protected] if you have any questions or comments. ISBN 978-1-84369-863-0 Available to download at www.iied.org/pubs ©International Institute for Environment and Development/Sustainable Food Lab 2012 All rights reserved Stephanie Daniels works with the Sustainable Food Lab to lead collaborations between large scale companies, development NGOs and farmer organizations towards development of sustainable global value chains. [email protected] Peter Läderach works with the International Center for Tropical Agriculture (CIAT). He works on spatial analyses and supply chain tools for coffee and cocoa. [email protected] Melissa Paschall is a doctoral student with Institute for Economy and the Environment at the University of St. Gallen, Switzerland. [email protected] ii Reaching High-Value Chapter title 1 Markets: fine flavor cocoa in Ghana Table of contents Acronyms and abbreviations ���������������� 2 5. Improved agronomic management ������� 17 Fertilizers ������������������������������� 17 Executive summary ������������������������ 3 Controlling pests and diseases ������������� 17 1. Introduction ���������������������������� 4 Planting density ������������������������� 18 Post-harvest management ���������������� 18 2. The global industry for fine flavor cocoa �� 6 How is fine flavor cocoa priced? ������������� 7 6. The business case ����������������������� 19 3. The Ghana context ����������������������� 8 7. Challenges and risks �������������������� 22 Ghanaian cocoa: a solid foundation for fine Risks ������������������������������������ 22 flavor �������������������������������� 8 Challenges ������������������������������ 23 The need for innovation �������������������� 9 8. Encouraging results �������������������� 25 Engaging the entire value chain ������������ 9 9. Lessons learned ������������������������ 26 4. A strong research component ������������ 12 Identifying a growing region �������������� 12 References �������������������������������� 27 Genetic selection and fingerprinting ��������13 New Business Models publications ��������� 28 Flavor evaluation �������������������������14 Propagation ������������������������������15 Training ���������������������������������16 1 Acronyms2 Reaching High-Value Markets: fine flavor andcocoa in Ghana abbreviations AE-LBI Agro Eco-Louis Bolk Institute CIAT International Center for Tropical Agriculture CMC Ghana’s Cocoa Marketing Committee CODAPEC Cocoa Disease and Pest Control COCOBOD Ghana Cocoa Board CRIG Cocoa Research Institute of Ghana CRU Cocoa Research Unit, University of the West Indies FFC Fine flavor cocoa FOB Freight-on-board GHc Ghanaian Cedi Ha Hectare ICCO International Cocoa Organization IITA International Institute of Tropical Agriculture LBC Licensed buying company NBM New Business Models OFFCFA Offinso Fine Flavor Cocoa Farmers Association QCD Quality Control Division SFL Sustainable Food Laboratory STCP Sustainable Tree Crops Program 2 Executive summary Ghana Fine Flavor Cocoa is a collaborative Lessons have also been learned: project involving chocolate manufacturers, • Research takes time, and isn’t always international agricultural research institutes, predictable. Flexibility must be built into the small-scale farmers, and international non- timeline and expectations must be realistic. governmental organizations. Its aim is to design and implement a fine flavor cocoa value chain in • Regular and targeted communication, Ghana, to help small-scale cocoa farmers gain management of industry expectations, and access to high-value markets. The project the cultivation of a sense of ownership among involves a range of activities at all levels of the all players allow key stakeholders to stay cocoa value chain from farmers through energized and interested despite delays. intermediaries to end buyers: • Balancing farmers’ existing skills with • Identifying and cultivating the right cocoa development goals is essential, as is varieties. providing enough targeted market and field knowledge to build farmer capacity to fulfil the • Adapting high-yield growing techniques from market requirements, and being willing to take vineyards and fruit orchards to increase the necessary risks to gain success. productivity despite the switch to lower- yielding varieties. • Government agency involvement is essential; however, such agencies are not naturally • Getting farmers and key government suited to fast-paced innovation. Realistic agencies excited and educated about quality timelines, regular communication and strong and flavor. relationships based on trust are critical for • Cultivating direct relationships with specialty government support over the long term. buyers in the US, European and Japanese • Finding the right agronomic and social markets to ensure market demand for the new conditions in which a project can flourish is varieties. essential. • Training farmers in appropriate cultivation and processing methods. Despite the project getting off to a slower start than hoped, it has notched up a number of successes. Promising varieties have been “Balancing farmers’ existing identified, and it is clear that with sufficient skills with development goals is volume, proper post-harvest processing, and rigorous quality control and traceability, these essential, as is providing enough beans could deliver significant value for farmers targeted market and field in the Offinso region and be an attractive knowledge to build farmer product for specialty cocoa buyers. There has capacity to fulfil the market been some increase in social capital, for instance the formation of a farmer association. requirements, and being willing Also, farmers have increased their knowledge of to take the necessary risks to agronomic practices for fine flavor cocoa, and gain success.” have been introduced to international industry contacts. 3 1 Introduction John Scharffenberger founded Scharffen Berger world’s cocoa is grown, and where many farmers Chocolate Maker with Robert Steinberg in 1996. struggle under conditions of extreme poverty? He brought his expertise from winemaking into Scharffenberger outlined the necessary steps the chocolate business, seeking out high-quality for accomplishing this goal: beans with unique flavors and aromas, and • Identify and cultivate the right genetics, such helping to launch a new American fascination as heritage Criollo and Trinitario varieties. with high-quality dark chocolate. • Adapt high-yield growing techniques from When the company was bought by The Hershey vineyards and fruit orchards, in order to Company in 2005, Scharffenberger stayed increase productivity despite the switch to engaged in marketing the brand, participating in lower-yielding varieties. chocolate tastings and visiting farmers in places famous for producing fine flavor beans. He • Get farmers and key government agencies remained passionate about sourcing high-end excited and educated about quality and flavor, cocoa beans in ways that brought social and in order to motivate the creation of a environmental benefits to these communities. segregated trading chain. • Promote ongoing industry engagement to One day, a friend from the development world ensure market demand for the new varieties. came to him with a question about how to alleviate poverty in cocoa-growing regions of Around the same time, a collaborative project to Africa. Growers in fine flavor origins of Latin create ‘New Business Models’ (NBM) linking America were getting three to four times the small-scale African farmers to formal markets market price; would it be possible to spread that was being launched and was seeking private opportunity to West Africa, where the bulk of the sector partners (Box 1). Scharffenberger was Box 1: The New Business Models project This case study is part of a publication series generated by the New Business Models for Sustainable Trading Relationships project. The partners in this four-year collaboration (2008–2012) – the Sustainable Food Laboratory, Rainforest Alliance, the International Institute for Environment and Development, the International Center for Tropical Agriculture, and Catholic Relief Services – worked together to develop, pilot and learn from new business models to facilitate trade between small-scale producers