chocolate special OXFAM 2017

CHOCOLATE SPECIAL

Chocolate doesn’t grow on trees You can’t pick chocolate from a tree.

But you can pick cocoa beans. Before cocoa turns into chocolate, there are many steps to be taken. Not all of these steps are taken in a fair way.

We are flooded with grim messages about our sweet sin. Will there be sufficient cocoa to feed our chocolate addiction in the future? Is our favourite chocolate bar made with the help of children’s hands? Why do we pay our chocolate greedily, while cocoa farmers in the South remain poor?

Who is the most powerful player in the chocolate supply chain?

Oxfam is looking for the answer to all of these questions. We denounce injustice in the chocolate chain and strive for changes. Let yourself get carried away in the chocolate stream, from bean to bar.

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1.FROM BEAN TO BAR 1.1 COCOA TREATMENT IN THE SOUTH 1 Cocoa is a tropical plant that can be grown only in a narrow belt around the equator. In our region it is not possible to grow cocoa. The plant needs a warm and humid forest area.

Cocoa producers in the South work on a small scale, on parcels of 1 to 2 hectare. The most important cocoa area is West Africa; Ivory Coast and Ghana together count for 60% of the global cocoa production.

2 The cocoa tree is characterised by its white or pink flowers that grow directly on the trunk or branches.

3 Twice a year part of the flowers become big, oval fruits: the cocoa pods. Only twenty to sixty pods will grow into ripe fruits. Their white jellylike interior contains 25 to 75 seeds: the cocoa beans.

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4 The cocoa pods are cut from the tree by hand with a machete.

5 They are opened and the white pulp is scraped out of the pod by hand, 6 and piled on banana leaves to be covered by the same leaves.

After a few days of fermentation the cocoa beans get their typical brown colour and taste. The beans are turned over regularly and 7 days later they are ready to dry.

In South America a different fermentation technique is used, in wooden crates instead of banana leaves 7 After fermentation the cocoa beans are spread on bamboo tables or on a groundsheet to dry in the sun.

8 After quality control the cocoa beans are packed in gunny sacks.

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1.2 EXPORT Most frequently the dry cocoa beans are sold by individual farmers to buyers or intermediaries of export customers.

Because most of the farmers have no other way to sell their beans, they are forced to accept a too low price from the buyer. In the best case, cocoa farmers unite themselves in a cooperative society. As a society they are in a much stronger position to negotiate a better price for their beans.

Only a small part of the global volume of cocoa beans is sold under Fairtrade conditions or under organic certification conditions, with a Fairtrade premium on top of market prices or a bonus for organic cocoa beans. However, the majority of the cocoa beans is not sold under these conditions. Only a few cooperatives own an export license. Therefore, small cooperatives depend on bigger export companies who sell their beans on the international export market.

1 MT

1 MT

organic + fairtrade cocoa beans = 2300 $ + 200 $/MT Fairtrade premium

fairtrade cocoa beans = 2000 $

+ 200 $/MT Fairtrade premium

(Source: FLO-minimum price October 2012)

The international market price has been above this level for years, so Fairtrade buyers purchase at the international market price and pay the Fairtrade premium of 200$/ton on top.

$/MT

international market price cocoa

3000 2500 FLO-minimum price

2000 1500 1000 500 0 Jan. 2012

Jan. 2013

Source: ICCO (International Cocoa Organization)

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Jan. 2014

Jan. 2015

Jan. 2016

1.3 CHOCOLATE PRODUCTION IN STEPS To this day chocolate is mainly produced in the North. A few powerful western cocoa companies import the cocoa beans and process them to cocoa mass, butter and powder, and finally to liquid chocolate, called ‘couverture chocolate’.

Only a handful of companies dominate the chocolate market and rake in big profits by converting a cheap raw material (cocoa beans) into liquid chocolate which they sell to producers of bars, tablets and luxury chocolate products.

1. Breaking the cocoa beans.

Result: nibs (kernels of the cocoa bean) 2. Nibs are roasted and ground to a viscous cocoa mass 3. Nibs are roasted and ground to a viscous cocoa mass 4. Cocoa cake is further ground into cocoa powder 5. Cocoa mass is mixed with sugar and milk powder and refined by rolling presses. This results in a fine texture, which can be tasted later on in the chocolate 6. After the rolling press the chocolate is kneaded in a conching machine, in which the chocolate gets a homogeneous texture, volatile fermentation acids evaporate and the good aromas develop. This is a very

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important step in the process, because the number of hours chocolate is conched defines the final aroma of the chocolate. In this stage, cocoa butter is added in order to make the chocolate more liquid.

7. The final result after conching is called ‘couverture chocolate’ 8. The last step is tempering, which shrinks the chocolate and makes it hard and shiny.

9. Chocolate confectioners and companies mould the liquid chocolate in bars, tablets, and add flavours via a number of ingredients such as nuts, fillings, caramel and inclusions. The chocolate cools down and is sold in its final packaging to supermarkets and end consumers as chocolate bars, tablets, bonbons, pralines and truffles.

cocoa pods

cocoa beans

cocoa powder cocoa nibs cocoa presscake

cane sugar

cocoa butter

cocoa mass

milk powder

2. THE CHOCOLATE CHAIN 2.1 WHAT IS WRONG WITH THE CHOCOLATE CHAIN? Poor cocoa farmers All in all, the cocoa farmer has a positive point of departure: cocoa can be grown only in a narrow belt around the equator while the demand for chocolate is increasing internationally, stimulated by booming markets like China, India and Brazil.

One would expect that the cocoa farmers are in a strong negotiating position: they are growing a scarce commodity which is wanted eagerly by rich countries in the North. However, the Ivorian cocoa farmer cannot live of his land and his family is trapped in structural poverty. How is this possible?

Market concentration The international cocoa market is disrupted. Only a few industrial processors dominate a big share of the market. Barry Callebaut and Cargill are 2 processors who control more than 70% of the chocolate chain.

The international chocolate chain has the shape of an hourglass. Millions of cocoa farmers are situated at the one side, a handful of processors and chocolate multinationals are in the middle, and billions of consumers can be found at the other side of the

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hourglass.

The international cocoa trade is not well regulated. As a consequence multinationals thrive in a dominating position. They are able to impose their conditions to often weakly organised cocoa farmers. This gives multinationals the opportunity to negotiate low prices for cocoa beans, import these cheaply into Europe and maximize the benefits of processing cocoa beans into chocolate. The farmers at the beginning of the chocolate chain have no bargaining power and often they have no choice but to sell their unprocessed beans to a handful of buyers at too low a price.

In this way, the added value of cocoa processing remains in the hands of the mighty western chocolate industries. Is this fair?

> 70 % Callebaut Cargill

Millions of cocoa farmers

Processors and chocolate multinationals

Billions of consumers

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Oxfam worldshops’ campaing against child slavery 2010 12

Child labour To this day, child labour is a painful reality in West Africa. It is a dismal consequence of a concentrated cocoa market that doesn’t pay fair prices for cocoa beans. The farmers are practically forced to look for ‘cheap labour’.

In Ghana and Ivory Coast it concerns children who should be going to school, but who are helping their parents out of necessity by doing heavy work in the cocoa fields. They often have to carry heavy bags, work with machetes, are exposed to chemical substances and fungicides. In worse cases, children from neighbouring countries are illegally forced to carry out heavy and dangerous labour in the cocoa fields.

In the latter case we talk about child slavery.

Old and sick cocoa trees EA big part of the cocoa trees in West Africa are aged (30 to 40 years old) and yield less than the younger trees in South America. Because of the structural poverty in Ghana and Ivory Coast the farmers lack money to plant new cocoa trees. Moreover, many cocoa trees are affected by mould and plagues. The cocoa farmers don’t earn enough to invest in remedies.

The average yield of cocoa in Ivory Coast lies between 600 and 1000 kg per hectare. Yet, producers with old or sick trees often have a lower yield.

The cocoa price that the farmer gets from the buyers is simply too low to invest in the renewal of trees. For

decades, the industrial chocolate companies refrained from supporting the cocoa farmers and only recently started financing nurseries with more resistant plants.

Weak authorities The governments and authorities in cocoa producing countries could act more stringently to keep control over their own laws and international agreements. Authorities don’t invest sufficiently in education, schools, paved roads, health care, potable water, infrastructure etc. They often lack financial means, or corruption is at play. Mighty companies even succeed in avoiding taxes by setting up complex constructions in cocoa producing countries.

Our own Belgian government could play a more prominent role in setting up and complying with fair rules in the international cocoa trade. As a genuine chocolate country, Belgium could claim more transparency regarding labour conditions in cocoa producing countries and in the whole supply chain.

It is absolutely necessary to implement brave competition rules to guarantee sufficient competition.

A fair trade policy –with the adequate regulation- will encourage competition and will make price deals among the big companies untenable.

We are confident that growing cocoa will become financially attractive again when the Ivorian farmer can negotiate fair prices for his own cocoa.

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No care for the future In this supply chain little to no attention is paid to external costs; social and environmental costs often don’t get invoiced. Since the full liberation of the market and the strongly decreased government role in e.g. Ivory Coast, farmers have been given prices for their cacao without taking into account the cost of maintaining the trees, the fields or keeping up the standard of living of the farmers. The consequences are very visible today: the bill is passed on to the farmers of the future generation.

2.2 FAIRTRADE BEANS VERSUS CONVENTIONAL BEANS One of the problems in the conventional large scale cocoa trade is that the cocoa beans get stacked indistinguishable in the warehouses of industrial processors. Mixing up certified and non-certified beans during processing, is called ‘mass balance’. The volume of certified cocoa is registered precisely on paper, which should result in a corresponding volume of Fairtrade chocolate in the output of the mass balance process.

Oxfam-Wereldwinkels is very critical about ‘mass balance’. Of course, the certified cooperative that delivers the cocoa beans gets a fair price and a premium on top. But if neither the processor nor the consumer knows which beans are ending up in their chocolate bar, it is difficult to trace abuses. Moreover, this system doesn’t stimulate long-term relations. Within

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the mass balance system buyers are allowed to purchase continuously from various certified cooperatives. As a cooperative, you have no certainty of sales volumes, which makes future planning precarious.

Oxfam-Wereldwinkels demands maximal traceability in its own chocolate supply chain; we want to know which cooperatives delivered the beans in Oxfam Fairtrade chocolate and we want to be able to follow these beans throughout the chain by having them processed separately.

This system is called segregation or segregated processing.

MASS BALANCE noncertified

PROCESSOR

certified

SEGREGATED

noncertified

certified

PROCESSOR

PROCESSOR Oxfam Fair Trade chocolate 15

2.3 THE OXFAM CHOCOLATE SUPPLY CHAIN Oxfam prefers a traceable chain for its chocolate. By making the supply chain traceable we can get control of structural problems in the chain.

Knowing where the ingredients of our chocolate are sourced, we can demand access to audit reports from the certifiers and inspect how things are running; if there is control on child labour, if a fair price and premium are paid, if labour conditions are good, if the environment is respected, etc. Traceability is a must for a fairly managed supply chain within the crooked chocolate market.

2.3.1 Criteria The Oxfam chocolate chain must comply with a set of criteria. Our bars and tablets contain: ƬƬ

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Traceable Fairtrade cocoa beans.

We know where the beans in our chocolate are sourced and are able to follow their path throughout the whole supply chain, to the cooperative in the country of origin.

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Traceable Fairtrade cane sugar.

We know where the sugar in our chocolate is sourced and are able to follow its path throughout the whole supply chain, to the cooperative in the country of origin.

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Raw materials that are preferably purchased from cooperatives which are supported by Oxfam-

Wereldwinkels in their development. ƬƬ

No market concentration; we move away from giants and switch to smaller processors.

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Control over child labour and no child slavery in our supply chain.

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Delicious and high quality ingredients.

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“Belgian chocolate”: the process of mixing, refining and conching is carried out entirely in Belgium.

2.3.2 Purchase The purchase and processing of organic and Fairtrade certified cocoa beans for Oxfam chocolate is carried out by the Dutch companies Tradin and Dutch Cocoa. In Ivory Coast, Dutch Cocoa purchases non-organic Fairtrade cocoa beans for Oxfam, from the cooperative called Ecookim.

Organic cocoa: hard to find in West Africa Organic cocoa is hardly cultivated in West Africa because authorities (Ivory Coast and Ghana) support the use of agrochemicals to fight against plagues. Ghana supports air spraying the cocoa fields; Ivory Coast offers free pesticides to its farmers. In order to grow crops organically the soil should not have been treated with chemicals over at least the past three years.

Moreover, a farmer who tries to grow crops organically risks field

contamination if his neighbour doesn’t use organic farming methods. Investing in certified organic cocoa from West Africa is therefore extremely difficult under these circumstances.

Organic cocoa: easier in Latin America Growing cocoa without using agrochemicals is certainly possible. In Latin America governments provide support to farmers such as organic fertilisers, composting courses, which stimulates organic cultivation.

Hence, most of the organic certified cocoa beans are sourced in Latin America.

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Belcolade Belcolade is a Belgian chocolate company that is part of the Puratos group. In 1988 Belcolade decided to invest in the production of real Belgian chocolate. Their factory located in Erembodegem turns semifinished cocoa into couverture.

Belcolade holds all necessary certificates to produce organic and Fairtrade ingredients fully traceable.

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Klingele Chocolate The organic and Fairtrade couverture is delivered by Belcolade to Klingele, a small local chocolate company that converts the raw materials into chocolate bars. For moulding and cooling down (‘tempering’) the chocolate, the correct temperature is crucial.

This process requires true craftsmanship. While converting the chocolate into bars, other ingredients (cocoa nibs, coffee, caramel, see salt, almonds…) are added. These are all Fairtrade certified where possible. Klingele Chocolate holds all necessary certificates to produce organic and Fairtrade ingredients fully traceable.

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Althaea Althaea processes liquid Fairtrade chocolate, delivered in tanks. This family business has

Organic and Fairtrade certified cocoa beans for organic Oxfam chocolate are purchased by Tradin from the following cooperatives in Central and South America: ƬƬ ƬƬ ƬƬ

Conacado, Dominican Republic Acopagro, Peru CAC Divisoria Ltda, Peru

2.3.3 Processors for Oxfam Processing cocoa beans results in semi-finished products: cocoa mass, butter and powder. The processor sells the semi-finished products for Oxfam chocolates to Belcolade for the production of ‘couverture’.

The processors hold the necessary certificates to process the organic and Fairtrade beans fully traceable and segregated.

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been passionately producing chocolate tablets and bars for more than 40 years. Althaea is certified according to IFS and BRC standards, a guarantee for food safety control in every step of the process. Althaea produces both high-quality chocolate products for the regular market and certified chocolate products for private label brands.

Thus, Oxfam chocolates in the world shops are the result of a fully traceable supply chain. At every step in the supply chain we choose for segregated processing of the organic and Fairtrade certified raw materials.

The segregation is controlled in every step by the internal control systems of the various processors. The external criteria control is done through audits and controls carried out by FLOCert.

Only 3 products in the Oxfam assortment (5g tablets, hollow chocolates, sprinkles) are still produced following the ‘mass balance’ principle. In the near future we wish to produce these items in a fully traceable chain too.

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3. STRONG COCOA FARMERS Oxfam-Wereldwinkels has been striving for a fair cocoa chain for many years. Cocoa farmers are well positioned on the world market: they grow a scarce product that is more and more sought by rich countries in the North. Yet, the farmers can hardly live from their crops. In order to improve this situation, OxfamWereldwinkels analyses the causes and will plead with the policy makers for improved rules. Only by doing so, cocoa farmers will get a fair chance in the market and in their livelihood.

Together with Oxfam, farmers fought to obtain a chair at the negotiation table over the last few years. And it worked out well. But to sit at the table is one step. To be heard is something else. Farmers should be able to codefine the crucial agenda items during international cocoa conferences.

Oxfam-Wereldwinkels gives cocoa farmers a voice. We bring together small cooperatives and make sure they can take part in cocoa conferences with the indispensable background knowledge about the sector. In this way all players can experience what is at stake in the lives of cocoa farmers.

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3.1 Focus on Ivory Coast Ivory Coast is the most important cocoa producing country in the world, with 35% of the global production.

Neighbouring country Ghana is runner-up and the whole West African region counts for 70% of the worldwide cocoa beans volume. If a problem occurs in this region, the whole sector will be affected.

In order to fully understand the challenges and to remain wellinformed, Oxfam-Wereldwinkels consciously chooses to be present in Ivory Coast.

Ecookim We have been following Ecookim for a longer period, so we know the local situation very well. We know how the organisation is structured and how they communicate with their members. In addition, we know they use an internal control system to counter unacceptable practices. They have a thorough method to tackle and prevent child labour. All these elements strengthen our confidence in this union of cooperatives. By purchasing cocoa from Ecookim we support this organisation and help it to move forward in the international market which is still heavily concentrated. Today Ecookim sells its cocoa beans, like every individual farmer, to only one of the big players in the market. They don’t have a broad

choice to whom to sell. The cocoa beans of Ecookim are processed in Oxfam chocolate spreads and in various 50g and 200g chocolate bars and seashells of the Oxfam Fair Trade brand.

Coopasa This organisation attempts to support its members in marketing cocoa beans. Today, the quality of the beans can still improve and the cooperative is not certified yet. OxfamWereldwinkels does not purchase cocoa from this group yet, but does support Coopasa by offering training on cultivation techniques, quality improvement and diversification. We focus on introducing risk-sharing principles in this cooperation so it can survive in a turbulent international market.

By working together with Coopasa, Oxfam-Wereldwinkels can keep track of the difficulties in the field.

This approach strengthens our lobbying in conversations with other stakeholders. We also try to involve this partner in our political work where possible and desired. Supporting this partner thus reinforces our policy work.

4. Now it’s up to you!

What can you do to improve the situation of cocoa farmers in the South? For a start, you can buy your chocolate in the Oxfam-Wereldwinkel.

The supply chain is thoroughly examined and continuously improved wherever possible. Purchasing your chocolate in the Oxfam-Wereldwinkel proves that you support our approach.

Wise choice!

You can also support other actions of Oxfam-Wereldwinkels. Our organisation is not merely striving for fair chocolate. We market products that prove how difficult it can be to overcome obstacles in international trade. We keep on denouncing injustices (market concentration, unreasonable tariff barriers, environmental costs that are moved on to the next generation.) You can raise your voice and denounce that unfair trade structures do not open doors for the weakest links in the supply chain: farmers in the South.

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The Oxfam Fair Trade assortment

A series of 7 organic chocolate tablets.

Since 2015. Cocoa supplied by Belcolade to the Klingele chocolate factory.

Cocoa from Peru and the Dominican Republic/ Coffee from Honduras, Tanzania, Congo, Uganda / Cane sugar from India / Vanilla from Madagascar / Nuts from Uzbekistan / Coconut from Sri Lanka.

A series of 5 non-organic chocolates + 2 cocoa spreads and seashells.

Coco supplied by Belcolade to the Althaea chocolate factory. Since May 2016 fully traceable in our assortment.

Cocoa from Ivory Coast / Sustainable palm oil from Ghana / Cane sugar from Mauritius and Costa Rica / Nuts from Bolivia.

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Chocolate sweets.

Cocoa supplied through Gepa, our German Fairtrade colleagues.

Organic truffles and pralines.

Cocoa supplied by Belcolade to the Belvas chocolate factory.

Cocoa from the Dominican Republic, Peru, Cameroon, Bolivia, Sao TomĂŠ and Principe / Cane Sugar from Paraguay, Philippines / Vanilla from Madagascar / Nuts from Palestine / Brazil nuts from Peru.

Cocoa from the Dominican Republic and Peru / Coffee from Honduras, Tanzania, Congo, Uganda/ Cane Sugar from India.

Hollow chocolate figurines for Easter and Saint Nicolas: 5 g chocolates and sprinkles. For the time being, we buy these products according to the massbalance principle. The rather small volumes do not legitimize a switch to full traceability for the moment. Cocoa supplied by Barry Callebaut, to De Schutter (hollow chocolate production), Portion Pack (5g chocolates) and InterWest (production and packaging of sprinkles).

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Dreaming of a fair future!

It is obvious that the chocolate chain is a complicated system with various big and small players who are confronted with numerous problems. As long as the income of cocoa farmers is insufficient to cover their basic needs, cocoa cannot be called a sustainable crop. The struggle of Oxfam-Wereldwinkels is therefore not finished yet. But the years of lobbying and campaigning have increased pressure and our demands for a fair cocoa trade are picked up more often. In the first place governments should make fair rules for international trading, to the benefit of all players involved in the chocolate chain.

More and more frequently the term ‘shared responsibility’ is used. One cannot expect that one single player in the chocolate chain will solve all the problems; all stakeholders will have to unite their forces in order to find thorough solutions.

Choosing consciously for fair trade is the first step.

ed. JAN17 - 021 • Art. nr: 08805 - V.U. John Vanwynsberghe, Ververijstraat 15, 9000 GENT - Foto’s: Yel, Tineke D’haese, Lieve Blancquaert