European Campaign forFair Chocolate © Tere

za H

rono

vá

Chocolate is one of the most popular and widely consumed confectionery in the world. It has become a product of mass consumption: the average European and US-American con-sumes 5.2 kg of chocolate per year! Europe and the US ac-counts for more than 50% and 22% of global sales respec-tively.1

While chocolate is growing in popularity, little attention is paid to where the primary ingredient cocoa comes from and under which conditions it is produced. The value chain is very complex, opaque and characterized by a massive imbalance in the market at the expense of small-scale farmers. This of-ten leads to impoverishment, exploitation of workers and child labour.

Whereas the majority of cocoa consumption occurs within the Global North, cocoa is grown in tropical regions around the Equator. Only here can one find the specific conditions necessary for producing cocoa. Around 3.5 million tonnes of cocoa beans are produced each year.2

Cocoa cultivation is highly dependent on intensive manual labour. Cocoa pods do not all ripen at the same time, which makes continuous monitoring, care and harvesting necessary. A single tree si-multaneously carries flowers and pods at different stages of maturity. In addi-tion, cocoa trees are very susceptible to disease which spread rapidly in dense rows of trees. Hence, maintenance costs in cocoa cultivation are very high.When cocoa pods are ripe and cut from the trees by hand, the beans undergo a process of fermen-tation, drying, cleaning and packing. Farmers sell the sacks to intermediaries who resell them to exporters. Unprocessed cocoa is then transported to chocolate producing countries for roasting, crushing and grinding in the Global North, which capture the majority share of the value chain of choc-olate production.

Cocoa cultivation: Few regions, many dependentsCocoa is the primary source of income for 5.5 million smallholder farmers and is the livelihood for more than 14 million rural workers and their families.3 In some countries of West Africa such as Ivory Coast and Ghana, up to 90% of

needs to be reduced through fairer trading rules and trade justice. Although national and international politics play an important role in global trade, the private industry is a cru-cial actor in the present unfair game of cocoa production. Cocoa and chocolate processing companies bear great social and ecological responsibility which is often ignored in favour of corporate profit maximisation. Hence, the chocolate industry urgently has to take effec-tive measures to tackle the critical issues in co-coa production.To guarantee compliance with crucial economic, social and environmental standards in the cocoa production, it is impor-tant to adopt an independent certification and control system. For consumers this certification is recognisable through a la-bel such as the Fairtrade mark. Labels belong to respective la-belling organizations that set the standards, other independ-

ent organisations then certify products of companies. Whole Organizations and companies cannot be labelled as such.Critical consumer consciousness and behaviour can have a

huge impact on corporate decisions and hence have the power to foster the elimina-tion of existing injustice in the cocoa value chain. Therefore it is crucial that consumers impose pressure on chocolate companies to align all their chocolate and cocoa products to fair trade standards.

You want to learn more about the Make Chocolate Fair! Campaign? Visit our website www.makechocolatefair.org and get to know how you can participate.

ImpressumPublished June 2013 by Südwind, INKOTA, Mondo and EAP as part of the Make Chocolate Fair! CampaignText: Bernhard Zeilinger (Südwind), Viola Dannenmaier, Lina Gross (Inkota), Riina Kuusik-Rajasaar (Mondo), Veronika Bačová (EAP), Gerhard Riess (Pro-Ge)Layout: typothese.at

Make Chocolate Fair! is a European campaign of several civil society organizations in 16 European countries. The campaign advocates for better living and working conditions of cocoa farmers and their workers, for a sustainable and diversified agriculture and demands the end to exploitative child labour. The campaign is supported internationally by a growing number of people and organizations in Europe, Africa and Latin America.

Fair trade is an effective approach which takes into consideration the economic, social and

environmental aspects of the cocoa cultivation.

The bitter side of chocolate

The value chain is very complex, opaque and characterized by a mas-sive imbalance in the market at the expense of small-scale farmers.

Cocoa is also family business, every family member has to contribute by its manpower

Fact sheet

This publication has been produced with the financialassistance of the European Union. The contents of thispublication are the sole responsibility of Südwind, INKOTA, Mondo and EAP and can under no circumstances be regarded as reflecting the postition oft he European Union.

Sources1 International Cocoa Organization (2012): Quarterly Bulletin of Cocoa

Statistics, Volume XXXVIII No. 1, Cocoa Year 2011/12, table 412 World Cocoa Foundation (2010), Cocoa market update. p.23 Tropical Commodity Coalition (2010): Cocoa Barometer 2010, p.3;4 Hütz-Adams, F/ Fountain, A.C. (2012): Cocoa Barometer 2012, p.35 World Cocoa Foundation (2012): Cocoa market update. p.16 World Cocoa Foundation (2010): Cocoa market update, p.17 Food Navigator (2011): Business Insights report.

(retrieved from www.foodnavigator.com on the 24.04.2013)8 Gilbert, Christopher (2008): Value chain analysis and market power in

commodity processing with application to the cocoa and coffee sectors. In: Commodity market review, 2007-2008, pp.8

9 LMC International (2011): Cocoa Sustainability. p.2. (retrieved from http://www.worldcocoafoundation.org/learn-about-cocoa/documents/LMC-WCFCocoaSustainabilityReport_2010-11.pdf on the 23.04.2013)

10 International Cocoa Organization (2008): Quarterly Bulletin of Cocoa Statistics, Volume XXXIV No.1, Cocoa Year 2007/08, table III

11 Payson Center for International Development and Technology Transfer (2011): Oversight of Public and Private Initiatives to Eliminate the Worst Forms of Child Labor in the Cocoa Sector in Ivory Coast and Ghana. Tulane University. p.7

12 Riess, Gerhard (2012): Die Weltweite Kakaokette. PRO-GE, Vienna13 International Cocoa Organization (2013): Quarterly Bulletin of Cocoa Sta-

tistics, Volume XXXIX No.2, Cocoa Year 2012/13, table III14 International Cocoa Organization (2013): ICCO Statistics – net confection-

ery sales value in 2012. Based on data from Candy Industry. (retrieved from http://www.icco.org/about/chocolate.aspx on the 22.04.2013)

15 International Cocoa Organization (2013): ICCO Statistics – net confectionery sales value in 2012, p.23

16 Hütz-Adams, F/ Fountain, A.C. (2012): Cocoa Barometer 2012, p.1917 International Cocoa Organization (2013): Quarterly Bulletin of Cocoa Sta-

tistics, Volume XXXIX No.2, Cocoa Year 2012/13, table 9

Companies should guanrantee to farmers:

fair payment to cocoa farmers and their workers

human and labour rights and no exploita tive child labour; better working conditions: safety clothing, medical support, working hours according to ILO conventions and national laws

enhance cocoa farmers’ capacities to per-form sustainable and diversified farming

Independent certification and monitoring

Fig. 1 Main Producing Countries13

© P

avla

Jebi

li Za

čalo

vá (P

eopl

e in

Nee

d)

Cocoa farmer, Ghana

!!!

© C

hris

tina

Schr

öder

(Süd

win

d)

Ivory Coast: 37,1%Ghana: 21,9%Indonesia: 11,2%Nigeria: 5,9% Brazil: 5,5%Cameroon: 5,2%Ecuador: 4,8%

For speculators, on contrary, volatile prices are lucrative for speculative trading on futures markets which also sparks volatility. While cocoa traders are able to compensate volatile prices by storing beans until the prices are favoura-ble, farmers in the Global South are often forced to sell their beans immediately due to poor living conditions and lack of storage facilities.

Crucial consequences of price declinePrice volatility and decline together with increasing produc-tion costs result in economic insecurity and the impover-ishment of millions of cocoa farmers. Despite the fact that the demand for cocoa will increase by nearly 20% in the up-coming years and increasing revenues for chocolate com-panies, many farmers cannot even cover their living costs.10 With limited income and lack of information on market devel-opments, the cocoa farmers and their families and workers are the losers in a lucrative cocoa and chocolate industry.

Exploitation of workers and child labourLow and insecure income also leads to serious social prob-lems. Insufficient financial resources cause the deteriora-tion of working conditions for plantation workers, which often leads to breaches of internationally recognised princi-ples as defined by the Universal Declaration of Human Rights and the International Labour Organization (ILO). Due to low prices, cocoa farmers cannot provide their workers with suffi-cient salary, humane board, lodging and health care.The use of child labour is a way to keep costs down with child trafficking being a well-documented side effect of the problem. Currently, up to 2 million children are work-ing on cocoa plantations in West Africa, more than 500,000 of them involved in hazardous child labour which seriously harms their physical and mental health and strip them from their right to education. Further, there is evidence of children exposed to child traf-ficking and forced labour, especially in Ivory Coast.11

Such practices are serious breaches of international human rights standards and are strictly prohibited under international labour law (ILO regulations 182 and 138).

Unsustainable farmingBecause of insufficient income, farmers use additional farm-land to cultivate more cocoa, often at the expense of sustain-able, ecological and diversified farming. Sometimes, they even clear areas of rainforests to extend their cocoa produc-tion. The most crucial environmental problems resulting from wrong and unsustainable farming are soil degra-dation, water and soil contamination through pesticides and fertilizers. In addition, up to 40% of the crop is lost every year due to incorrect maintenance.12

Cocoa farmers’ income is often based on the cultivation of cocoa alone and not on several crops. This sole dependency on cocoa magnifies the impact of volatile cocoa prices, and creates an ecological disaster by harming biodiversity. Fur-thermore, cocoa farmers lack training and access to expert advice on sustainable agriculture to improve productivity

and increase the quality of their cocoa beans.

Trade justice enables decent living In order to eliminate the negative effects of

the cocoa production on farmers and their families, it is important to foster change

in international trade relations. The imbalance between the profit of the

chocolate companies in the Global North and the insufficient income of the farmers in the Global South

the farmers rely on cocoa for their primary income. However, many cocoa farmers and workers have to get by with less than 1.25 US Dollar a day.4

70% of the world cocoa beans come from four West-Afri-can countries – Ivory Coast, Ghana, Nigeria and Cameroon5. Ivory Coast is by far the largest cocoa producing country providing more than one third of world traded cocoa. Ghana, as the second largest cocoa producing country, produces 21% of the global supply. Indonesia, Nigeria, Cameroon, Bra-zil and Ecuador are the other main suppliers of cocoa (see Fig.1). More than 90 % of cocoa is grown and harvested on small family-run farms of 2-5 hectares or less while just 5 % comes from plantations of 40 hectares or more.6

Tough competition with many losersThere are only a few big players in the highly compet-itive cocoa trading and chocolate confectionery market. While these companies are competing for an ever higher market share and higher profits, mil-lions of cocoa farmers bear the costs by receiving a smaller and smaller portion of revenues. Five big grinding compa-nies dominate the trade of cocoa: Cargill, Barry Callebaut, ADM, Petra Foods and Blommer have a share of more than half of the world market for grinding cocoa beans and are as well the dominating players in trade. Based on their market power they have a strong influence on the prices paid for co-coa. In chocolate production more than two thirds of the market share is held by only five companies (see Fig.2). By 2012, the global chocolate confectionery market generated net sales of approximately 80 billion dollars and is predicted to grow to 88 billion dollars in 2014.7

As in other commodities of international trade, companies of the Global North capture the largest share in the value chain. The cocoa producers in the Global South account only for a very small proportion of the sales revenue of an aver-age chocolate bar: for example 6.4 % in Ghana, 5.7 % in Ivo-ry Coast.8 This is compared with 16 % in the late 1980s. By contrast, the manufacturers’ share has increased from 56 to 70 % and for retailers from 12 to 17 % over the same period (see Fig.3).

Unequal actors - unfair tradeThe highly competitive cocoa and chocolate market and the fundamental power inequalities between small-scale farm-ers and multinational companies are one reason for serious price decline. While the profits for multinational chocolate companies have increased rapidly since the 1980s, the price of cocoa beans has halved (see Fig.4).Cocoa farmers, on the other hand, are poorly organised and lack insight into the development of world market prices for

cocoa. They therefore have to sell their harvest on conditions dictated by intermediaries. Millions of small-scale farmers stand opposite big traders and chocolate companies - an often unfair game. They lack the structure and organisation of big interest groups which would give them a bigger say in politics and international trade. Furthermore, depending on local trading structures, taxes and quality of the beans, cocoa farmers receive only part of the current market price. For example, farmers in Ivory Coast and Ghana received 40-50% and 70% of the world market price respectively.9

In addition to dramatic overall price decline since 1989, farm-ers also suffer from price volatility caused by changing sup-ply volumes in the course of crop diseases, pest infestation, droughts and political instability and turmoil in the produc-ing countries (see Fig.5). Due to these unstable prices, it is very difficult for them to calculate their income and expenses in advance. 0

1000

2000

3000

4000

5000

6000

'12'10/'11'05/'06'00/'01'95/'96'90/'91'85/'86'80/'81

US-$ per tonne, adjusted for inflation

US-$ per tonne

© C

hris

tina

Schr

öder

( Sü

dwin

d) /

Foto

lia

© S

amue

l Boa

teng

/ D

anie

l Ros

enth

al (L

AIF)

19 17,6 14,6 7 6 3,5 2,6

Fig. 2 Sales on the chocolate market in 201214

Source: International Cocoa Organization (2013): Quarterly bulletin of Cocoa Statistics, Volume XXXIX No.2, Cocoa Year 2012/13, table 9

Source: Hütz-Adams, F/ Fountain, A.C. (2012): Cocoa Barometer 2012, p. 19

-50%

Worker is loading cocoa beans, Ghana

Fig. 3 Share in the value chain of chocolate production15

Cocoa and Chocolate companies

Retailers

Cocoa farmers(1980: 16%)

Intermediaries

70%

0

500

1000

1500

2000

2500

3000

3500

4000

'12'11'10'09'08'07'06'05'04'03'02'01'00'99'98'97'96'95

Years' average

lowest day price

highest day price

17% 6%

7%

Fact Sheet “The bitter side of chocolate”

Fig. 4 Cocoa prices 1980-201216

Workers at cocoa harvest, Ghana

Child labour, Ivory Coast

Fig. 5 Volatility of cocoa prices 1995-201117

±15%