Cacau farmers earn 6% of the value of chocolate bars....hardly worth the effort!!!
Posted in: Opinion
Extracted from 14 Dec 2014 Financial Times (Brazil)
The sector, which turns cocoa beans in butter, powder and cocoa liquor used to make chocolates and flavoring for desserts and sweets, has been undergoing a process of strong concentration of ownership in recent decades, due to the activity requires investment capital intensive.
Many of the transactions dating back to the merger between Callebaut, a Belgian manufacturer of industrial chocolate, and, Cacao Barry of France, in 1996 began the consolidation of the sector.
In the early 1990s, there were about 40 significant size cocoa processors. Just over a decade later, the number was 9, and ADM, Barry Callebaut and Cargill came to dominate the industry ever since. According to the United Nations Trade and Development Conference, the "ABC" [ADM, Barry Callebaut and Cargill] of cocoa accounted for 41% of world capacity fruit processing in 2006.
ADM and Cargill combined and changed the nature of trade and cocoa processing in the 1990s, when the industry took its expertise in the grain trade.Since then, the larger companies won more power to expand its processing capacity. In 2013, Barry Callebaut acquired the cocoa processing operations of the Asian group Petra Foods, cementing its top ranking position.
Gerry Manley, director of global cocoa operations Olam, made it clear that the company needs to be a leader in the processing segment to remain "strong" as a company, when the company announced the acquisition agreement with ADM. It would be possible to say that the trading companies and cocoa processors are simply trying to follow their customers -the chocolate manufacturers.
This sector also saw rapid consolidation, with the top five manufacturers, including Mars, Nestle and Mondelez, now accounts for over 65% of total sales of chocolate.
The importance of global brands and increasing marketing costs and research and development in an increasingly internationalized and competitive market helped to promote consolidation.
According to Ecobank, 70% of the value of a chocolate bar is with the cocoa and chocolate companies, reflecting investments in marketing and research and development; 17% of the value is with the retail and 7%, with intermediaries such as trading companies.But, as the great chocolate gain strength, cocoa farmers find themselves under increasing pressure.They get only 6% of the value of each chocolate bar today, compared to 16% in the 1980s, says Edward George, Ecobank. "Very small part of the value is related to the raw material," he says.
The great cocoa and chocolate companies are now coalesced around a plan of action to encourage the development of sources "sustainable" cocoa. But unless the proportion of the value that it is for growers change or the whole cake grows, farmers have little incentive to continue cultivating cocoa
updated by @Jim2: 04/11/15 01:51:56AM