Examining a Mast Brothers Assertion
Posted in: Opinion
I'd like to clarify some of the math that you did. You said:
"Do some math. Is it possible to pay $25,000/MT for beans and make a 2.5 oz (71gr) bar of chocolate that can be sold (profitably) for $7?
At $25,000/MT raw, whole beans in multiton quantities costabout $11.35 per pound. By implication in the video, that money is paid to the farmer and therefore would not include customs, insurance, freight, and other costs, so the calculation understates the actual landed price of the beans and therefore the following cost basis is low.
Assume an 80% yield on those beans (i.e., every 100 lbs of beans yields 80 lbs of usable nib after roasting and winnowing - this is generous) raises the price per pound of nib to about $14.15. Assuming a 70% cocoa content chocolate, that means that the cost ofjust the cocoa nib componentof a pound of chocolate is north of $9.90 - also assuming zero loss in the process of making the finished product."
It looks to me like there may be some mistakes in the calculations you used. Here are some calculations that I made:
80% yield means that 1 MT yields 800 kg of cacao nibs.
So 800 kg costs $25,000.
$25,000/800 kg = $31.25/kg or $.03125/g
Mast Brothers bars are 71g.
70% of each bar is cacao so 1 bar has 49.7g of cacao.
Putting it all together: $.03125/g x 49.7g cacao = $1.55/bar for the cacao.
Add in the cost of the sugar and they still make a profit. If they paid 5x then the cost per bar is only about $0.80.
Of course, this ideal yield with no other losses, so their profit margin is still lower, but it does seem feasible.
The Mast Brothers also claimed "up to 10x" so it's not at all clear how much cacao they bought at this price. I might suspect that it was a very small percentage of their total volume.
I'm not being critical; I'm just trying to get accurate math. You're right that this was an instructive exercise to do.
I also think that you point about asking how much of this profit actually got to the farmers is spot on.