Why Cacao Growers Aren't Vintners - The Cocoa Pod Shop

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Why Cacao Growers Aren't Vintners

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Many commentators have compared the burgeoning craft chocolate industry to the specialty coffee, wine industry, or craft beer industry.  While the wine model may look like a close match for a farm to bar operation, it is far from feasible for the industry. An article about Ritter Sport's purchase of land in Nicaragua for cacao production also rekindled my thinking about the issue.

While there are a few companies with ownership of farms and production, and a few niche integrated companies, this is the rare exception. For a number of reasons, it’s not practical to envision cacao growing and chocolate production becoming integrated on a wide scale anytime soon. Why not? Let's start with looking at just the production side. 

From farm to bean.

First, because of their often small plot sizes and small yields, most farmers do not produce enough beans for anything more than a few hundred pounds of chocolate, if that. The know-how, costs, and logistics of simply marketing these beans to end-users (craft chocolate makers or larger buyers), makes it almost impossible for the lone farmer to enter international markets. Very few individual farmers, with the exception of wealthy, well financed, large farms, are going to be able to reach out directly to large international buyers.

Fermenting on a small scale is difficult, and achieving good quality fermentation small-scale is challenging. Farmers don’t want to wait several days it takes after harvest to ferment and dry their beans before getting paid, if they can get cash immediately for wet beans or poorly fermented and dried beans.

At the cooperative level, where many farming families are associated, there is greater opportunity for uniform quality and for the larger group of farmers to penetrate international markets, but only as purveyors of beans. Fermentation needs to be handled with tight protocols that are followed uniformly from batch to batch and season to season. Managing post-harvest in a uniform manner from harvest to harvest is a big challenge.

A well run cooperative still needs international marketing and exporting ability if it wishes to distinguish itself based on quality. Cooperatives still often lack the knowledge and know-how to market their beans directly and internationally. The cooperative may not have the language ability to reach out to the Asian, North American and European markets, and they may not have the proper permits and paperwork to export directly. The country framework for exporting may also present a challenge.

Even for large, well established cooperatives, access to financing can be difficult and at onerous rates. Farmers desire immediate cash in hand for their beans, and the status quo of brokers and intermediaries currently supports this system, where growers are paid up-front and it is brokers and exporters who handle financing and risk. Throw in the unpredictability of yields from year-to-year and producers and cooperatives have an even more complex situation.

From bean to Bar

At the local or national level in many cocoa producing countries, there is little or no market for fine flavor chocolate or chocolate distinguished by farm origin. In many producer countries, the local population either does not consume much chocolate, or simply perceives chocolate as "chocolate"-just another flavor or sweet to be consumed, not something to be savored based on sophisticated flavor and origin distinctions. Even in the US the craft chocolate industry is but a niche in the entire chocolate market. Sophisticated consumers are a specialty group with higher education levels, incomes, and other demographics that will buy origin products. Most producer countries do not have such a sophisticated consumer market.

I have personally witnessed a "gold rush" mentality in Ecuador, where there are now over a dozen locally produced origin bars. However, most if not all of these are produced at 3rd party contract manufacturing facilities, so the "farm to bar" story is broken. 

Finally, the scale, logistics and costs it takes to produce, ship and market a brand to the US or other large consumer country from abroad is enormous.  Even with the (sometimes) lower costs of manufacturing in a cocoa producing country, it is usually a money-losing venture for at least the first two to four years, well beyond the financial capacity of even the most well-financed farm or cooperative, or individual small company. 

For these reasons alone, to consider cacao producers regularly being involved in the entire chocolate production process is farfetched due to costs and numerous logistical and production complexities, except for a few very well-financed producers or agro-industry giants.

Contemplating vertically integrated companies with control of cacao from farming to final chocolate production is not realistic on a large scale, and is probably many years off. Improving and enhancing the capabilities of growers and producers of all sizes to manage quality, consistency, and international marketing is key to enhancing quality chocolate for the international market.  

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