• From Commodity to Quality - Creating an Ethical Chocolate Industry through Transparent Trade

December 07, 2017

When Brian Wallace founded Endorfin Foods in 2013, he knew that it would be a challenge to maintain his exacting standards for sustainably and ethics while making chocolate. The modern cacao trade is firmly rooted in European colonialism and slavery, and recent reports about the use of slave and child labor on farms in the Ivory Coast show that the ethical standards of the chocolate market have not improved much since the period between 1600-1800 AD when chocolate plantations were originally planted in colonized countries by local peoples forced into labor by the English, Dutch, and French.

Cacao is treated as a commodity, meaning that all cacao beans are assigned a fixed price per ton, regardless of quality or origin. Since more scale is the only way to make more money, producers focus on growing as much cacao as possible, with no attention to quality.

Under this system, most cacao farmers live on less than $2 a day. Even though the global chocolate market is worth $100 billion, the world market price for top grade cacao is currently $1900 per ton - this sum has to be split between everyone on the supply chain, including farmers, post-harvest processors and transporters. (In contrast, Hawaiian grown cacao, which is grown subject to U.S. labor laws, is assigned a price of $30,000 a ton.)

Problems with Modern Chocolate trade

WHAT ABOUT FAIR TRADE?

Fair Trade is only marginally better for farmers than the world commodity market for cacao. The Fair Trade model still treats cacao as a commodity - they set a minimum price per ton of cacao, and farmers get this, or the world market price, whichever is higher. Fair Trade also adds a set premium of $200/ton to all cacao transactions.

To receive Fair Trade certifications, producers must adhere to certain labor standards, like committing not to use child labor, and environmental stewardship standards. This can lead to improved conditions. However, Fair Trade certifications have not demonstrated that they significantly improve farmer prosperity - farmers who receive fair trade prices still often struggle to provide sufficient food and housing for their families.

Here are a few reasons why Fair Trade is not enough:

1.Unless the world market price drops below $2000/ton of cacao (which has not happened in some time), farmers with Fair Trade certification only make $200/ton more than their non-certified neighbors.

2. Under Fair Trade cacao is still traded as a commodity, so quality isn’t taken into account, and farmers can’t make more money by growing better cacao. This also means that that Fair Trade certification isn’t necessarily an indication of quality chocolate.

3. Like Organic certification, Fair Trade certification is super expensive, so only large suppliers can easily get it. Less well-off producers who choose to invest in Fair Trade certification often don't see the financial benefit making up for their investment, and can suffer financially for years.

If you want to read more about Fair Trade - and how we need to do better - check out this article from Yes! Magazine.

    WE'RE INTO TRANSPARENT TRADE

    The bean to bar chocolate industry is helping to establish a new kind of world chocolate market. Bean to bar makers, and their increasingly educated consumers  place a higher value on higher quality chocolate, and love exploring the wide variety of flavors and textures found in different origins of cacao. They seek out farmers who will grow smaller amounts of specialized, high quality cacao, and pay a premium price for it, knowing that educated consumers are happy to pay more for a really good chocolate bar, especially when they know that everyone in the supply chain received fair compensation for their labor. 

    At Endorfin, we are committed to purchasing only agroforestry cacao from trading companies that implement ethical, transparent trade practices. Since XXX we have been sourcing [ABOUT HOW MUCH OF?] our cacao through a Berkeley based company called Uncommon Cacao, which is developing long term relationships with small and medium sized artisan cacao producers in 5 central and south American countries and connecting them with bean to bar chocolate makers around the world.

    Uncommon Cacao Impact

    Emily Stone, the founder of Uncommon Cacao, says that within the commodity system most cacao farmers have no choice but to sell their cacao through coyotes, who make their way out to remote farms and quote prices that are usually far below the current market rate. "They cruise around in pickup trucks with a scale, cash, and a handgun,” Stone said in a recent Forbe’s magazine article about the company. “We pay about double the amount the coyotes pay.” 

    Since most farmers live in remote regions and don’t have access to internet or phone, it is impossible for them to verify whether the market rate they’re being quoted by coyotes is accurate, or to advocate for a higher price for higher quality cacao.

    In sharp contrast, Uncommon Cacao and other companies that use transparent trade practices publish all of their pricing to everyone in the supply chain. This means that farmers, processors, and buyers can compare prices paid for cacao in their region and use this information to set their own prices. This motivates farmers to produce higher quality cacao, which increases prices paid for cacao overall. 

    Uncommon Cacao Transparent Trade

    Uncommon Cacao also works to improve farmer prosperity and cacao quality by building relationships with experts on the ground, who teach them about best practices for growing cacao in the region so that they can provide locally relevant training and resources to farmers in their network.

    As cacao quality improves, farmers can command a much higher price for their cacao - farmers in the Uncommon Cacao network have reported an average 61% increase in income since starting to trade with the company. This can dramatically improve quality of life, and makes growing high quality cacao much more economically attractive. This is key at a time when the average age of chocolate farmers is 50 years old, with many younger people choosing to plant other crops that are more profitable. 

    Uncommon Cacao Price Comparison Graph

    DRYING & FERMENTING

    Uncommon Cacao is unique as a supply chain company in that it works with communities to improve post harvesting techniques for fermentation and drying. Both of these processing steps require a lot of labor and resources, and if they are done incorrectly, quality suffers. In the extractive commodity market, farmers have to dry and ferment cacao on their own farms at significant effort, expense, and risk. Uncommon Cacao finds skilled artisans on the ground and has them create best practices for fermenting and drying in that region, then helps farmers implement these practices.

    Drying Cacao at Oko Caribe
    Drying Cacao at Oko Caribe in the Dominican Republic - Image from Uncommon Cacao

    Uncommon also trades with companies that buy wet cacao from farmers and dry and ferment it in a central location. In this system, farmers are freed from the work and risk of fermenting their own cacao, while the post-harvest processing companies get to focus on refining their processes. In countries like the Dominican Republic there are several of these post-harvest processing companies, which compete for the best wet cacao, raising prices and increasing income and quality across the board.

    HOW TRANSPARENT TRADE SUPPORTS THE ARHUACO

    Cacao de Colombia (CDC), Uncommon Cacao’s Columbian arm, recently installed a state-of-the-art-fermentation and drying center in the community of Macondo, where they source cacao from farming families throughout the region, including the indigenous Arhuaco tribe from the Sierra Nevada de Santa Marta region.

    According to a 2016 survey of 31 experienced Arhuaco farmers trading with CDC, farmers are making 58% more income by selling wet cacao to CDC than dry to other buyers - so they make more money, and they don’t have to do the labor of drying and fermentation!

    Arhuaco income increase w/Uncommon Cacao

    For a community in which cacao is the main source of income for 9 out of 10 farmers, and 50% of households live on less than $3.1 a day, this increase in income makes a huge difference in farmer wealth. Almost all farmers surveyed said selling to CDC improved their lives and monetary situation, saying that the increased income allowed them to purchase new tools, pay back debts, hire new employees, and send their children to school. This inspired them to pay more attention to their crops and plant more trees and to pass their farming knowledge on to their children.

    GOING BEYOND CERTIFICATIONS

    We decided a few years ago that we wouldn’t be seeking fair trade or organic certifications for our chocolate, because, regardless of whether or not we have the money to afford it, the requirements for these certifications are far below our standards for quality and equality. We are dedicated to making chocolate bars that go far beyond these certification labels by buying only cocoa that is ethically traded and perfectly fermented by artisan farmers who received a truly fair price for their labor.

    We're willing to pay more for ethically traded, agroforestry grown cacao because we know that the premium price we pay is an investment in our artisan farmers and in the future of fine flavor cacao genetics, our planet, and humanity. We know we could be making more money if we bought cacao that was merely Fair Trade, or that was grown on big plantations instead of in agroforestry farms, and we could be charging fewer dollars per bar. We could be making more if we didn’t use compostable packaging on all of our products, too. But we’re not just looking to fill our own bank accounts - we’re investing in the future of cacao, chocolate, and our planet.

    Transparent Trade is helping create a regenerative, relationship based chocolate industry. It allows everyone in the supply chain to work together, letting us share information on what works and what doesn’t, improving quality and the entire cacao market economy over time. As a small bean to bar chocolate company, we rely on companies like Uncommon Cacao to build relationships with farmers, assure that we receive top quality cacao, and provide fair compensation to everyone else involved in the supply chain. This is  a much needed shift from the extractive model that represents the majority of cacao traded today