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The global chocolate market

Performance and Legitimacy in Social Enterprises HEC Management School, University of Liege 3-4 March 2011 ‘Performance in agricultural social enterprises: confronting the productivity gap, breaking the poverty cycle and securing food sustainability’ Dr Amanda Berlan.

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The global chocolate market

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  1. Performance and Legitimacy in Social EnterprisesHEC Management School, University of Liege3-4 March 2011‘Performance in agricultural social enterprises: confronting the productivity gap, breaking the poverty cycle and securing food sustainability’ Dr Amanda Berlan

  2. The global chocolate market • Cocoa represents a multi-billion £ industry • US chocolate market = approx $18 billion annually • UK chocolate market = approx £4 billion annually • Consumption is rising and major growth in key markets • e.g. India and China • The global chocolate market is presently characterised by: • a concern for ethical practices in production • more demand for quality cocoa (single origin and • ‘terroir’)

  3. Cocoa in crisis? GLOBAL TRENDS • Consumption is rising BUT production is falling so global cocoa market is characterised by undersupply (an estimated 1M/MT annually by 2014) • This is driving prices up (and chocolate bar sizes down) SOCIO-ECONOMIC ISSUES • Average age of farmers high; young people not interested in cocoa farming • In many countries incomes from cocoa are low FUTURE IMPLICATIONS • Impact on long-term food sustainability of abandonment of food production

  4. The Dominican Republic

  5. Cocoa in the DR The DR: • formerly had a very bad reputation for poor quality cocoa • is the second largest exporter of Fairtrade cocoa • has the second largest cocoa-producer cooperative globally • has the largest area of cocoa-growing land certified by Rainforest Alliance • is the largest exporter of organic cocoa

  6. DR cocoa producer profile • Most farmers produce organic cocoa, which can fetch very high premiums • Current cocoa producer population = 36,000 farmers • Typical profile is: male, average age 58, and has a small plot of land (≤ 10 acres) where cocoa is grown alongside other crops • Literacy levels are low among cocoa farmers and workers

  7. Challenges in DR cocoa production • Many farmers are abandoning production and selling their land to larger landholders. In 1980, 84% of farms were ≤5 ha. By 1998, 68% of farms ≤5 ha. • Incomes are low, producers reported having debts and bonuses spent before they are even earned • Producer housing is of poor quality • Young people are not interested in becoming cocoa farmers, and this puts the long-term future of cocoa production at risk • Farm productivity is low and has the potential to be doubled or trebled in some areas, therefore farmers earn only a small amount even when the cocoa price and/or organic premiums are high

  8. Social entrepreneurship and cocoa in the DR • 9,500 producers are in the cooperative CONACADO and their numbers are growing • Impact of social entrepreneurship on: • Quality - switch from Sanchez to Hispaniola • Productivity (hopefully) because easier to provide agricultural extension services • Producer morale and affiliation, leading to less abandonment of farming and therefore better long-term food sustainability • The national cocoa market

  9. Sales of cocoa in MT (Oct 2008-Sept 2009)

  10. Legitimacy of CONACADO “generalised perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions” (Suchman, 1995) “the congruence, in multiple stakeholder judgements, of an organization’s perceived actions with their expectations of its performance” (Nicholls, 2010) • The growing membership of CONACADO reflects the sense of legitimacy it has acquired among farmers • Farmer discourses reflect pragmatic (“it’s good for us”), cognitive (“can’t live without CONACADO”) and moral legitimacy (“CONACADO is a good organisation”).

  11. Importance of legitimacy No legitimacy Farmers abandon production No cocoa = no chocolate AND No cocoa = threat to food sustainability

  12. Performance of CONACADO • Adopted multiple certifications which has opened up new markets (organic, Ökogarantie BCS, Demeter, Bio-Suisse, USDA organic, ‘Hand in Hand Organic RapunzelFairtrade’, Fairtrade, Rainforest Alliance, ISO, Kosher, ISO 9001, KOSHER and JAS) • Has grown by focusing on quality and set a new standard across the DR • CONACADO by far the largest exporter, vastly outperforming competitors and making more efficient use of resources

  13. Concluding remarks • The abandonment of cocoa has implications for long-term food security and is symptomatic of broader problems in farming and food sustainability worldwide • In order for cocoa, chocolate and food production to have a sustainable future, it is necessary to drastically rethink food production and value chains • Based on the evidence from the Dominican cocoa sector (and other countries), Social Enterprises have a vital role to play and have become social imperatives in the modern world.

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