Record cocoa prices and the unfair chocolate value chain – meet the entrepreneurs working to change things

This year’s record-breaking cocoa prices may not be an exception, but a taste of things to come. Extreme weather and shifting climate patterns have eaten into yields in Ghana and Ivory Coast, which account for around 60% of global production. Crop diseases and a lack of planting have also hit harvests, meaning supply shortages could be four times worse in 2023-24 than a year earlier.¹

The cocoa industry in some ways has itself to blame. Its development of single-crop areas – known as monocultures – has made cocoa a driver of deforestation², robbing the world of natural carbon storage and speeding up climate change. This has also degraded soils and increased the need for pesticides, wreaking further damage on nature and harvests by killing off insects that can improve yields.³ The resulting threat to cocoa production is also a threat to millions of livelihoods – over 10% of Ghana’s population⁴ and 20% of Ivory Coast’s⁵ work in the sector.

Chocolate-makers guided by regenerative agriculture are trying to do things differently. Firstly, they’re turning monocultures into organic, agroforests to produce their beans. Secondly, they’re bringing cocoa processing to the countries where crops are grown, delivering an economic uplift for communities. Finished chocolate is around five times more valuable than unprocessed beans, according to Ghana-based fairafric, but this side of the business has traditionally taken place in developed countries. Indonesia-based Krakakoa is taking a similar approach to fairafric, and like fairafric is not just creating well-paid jobs, but producing award-winning chocolate.

We spoke to fairafric Chief Financial Officer Jonas Schaller and Krakakoa founder and CEO Sabrina Mustopo about how their companies are reshaping the chocolate value chain.

How are fairafric and Krakakoa making cocoa and chocolate production more sustainable?

Jonas Schaller, fairafric: We want to leave the Earth in a better state than we found it. The biggest obstacle to this is monocultures, which rob nutrition from soil within 20-30 years⁶. Agroforestry brings together different plants that create synergies: one provides nitrogen that another needs; one provides shade that another needs. It copies the rainforest and boosts biodiversity. This also creates better yields and better fruits, all while diversifying farmers’ incomes. By sourcing our cocoa from dynamic agroforestry, we can capture up to four times the carbon emissions from our supply chain over the long term.

Beyond the farm, we aim for zero waste and are operating with nearly none. All our inputs are organic, we reuse all our water, and our packaging is biodegradable. We also recycle all cartons locally, with Ghana’s first recycling company. And our chocolate factory is the world’s first to be powered by solar panels.⁷

^©Courtesy of fairafric

Sabrina Mustopo, Krakakoa: We work mainly around national parks, where a lot of deforestation happens. Farmers are not cutting down forests for fun – they’re doing it because they need money. We train farmers to grow cocoa in a different way, showing them how it can improve productivity and bean quality. We have historically paid a premium to market prices, and by giving farmers stability around income, we enable them to invest in pruning, sanitation and disease management on their farms, helping crop quality in the long term.

How did your companies get started?

Sabrina Mustopo: I used to be a consultant for agricultural developments. I saw that the way some businesses were set up created problems, so I started Krakakoa to see if business could be part of the solution. Indonesia is one of the world’s largest cocoa producers, but locally made chocolate has historically been poor quality, while high-quality produce was imported. Creating an integrated value chain seemed the way to change this – pay farmers more, cover the costs by capturing more value from production in the country of origin, and create better products.

I pitched the idea around but nobody wanted to do it, so I did it myself. That was 11 years ago. The jump from being a consultant to an entrepreneur was not huge in some ways – I was used to solving problems, running with ideas, dealing with unknowns. The big change was putting my head on the line.

Jonas Schaller: Our company was born out of frustration with the fact that, despite the efforts of development aid and promises from multinational chocolate companies, child labour and poverty are getting worse. Up to 60% of cocoa farmers in Ghana live below the poverty line.⁸ This is because what’s missing is value addition and job creation – nearly all cocoa beans produced in Ghana and Ivory Coast are exported for processing⁹. When people in developed countries buy chocolate, only a fraction of the value goes back to the country of origin.

Our factory has created 150 direct jobs. We’re also creating business for other businesses, such as the recycling firm I mentioned. A wrapper factory also started up here to service our demand, and now has other clients. Creating better-paying jobs also creates demand for goods, which in turn creates supply. Development aid doesn’t create demand, so it isn’t a long-term solution. We hope we are writing a playbook for value creation from commodities in any country of origin.

Read also: Let’s invest in nature

You pay above-market prices and above minimum wage. How do you remain profitable?

Jonas Schaller: The minimum wage in Ghana is basically below the poverty line. All our employees receive four times that, free healthcare for their family and pensions. But our production costs are still way lower than in EU factories. While set-up times and skilled labour shortages are driving up production costs in Europe, we create social impact and have competitive margins.

^©Courtesy of fairafric

Sabrina Mustopo: Because we control the whole value chain, including the high-value end and the final price, we can pay farmers more. We’ve got one factory in southern Sumatra so there’s no reliance on third party manufacturers, meaning we’re in control of our margins.