Cocoa crisis: Bio-based tech and regenerative agriculture help alleviate market upheaval

16 Apr 2024 --- Companies are developing novel ways to mitigate the current challenges in the cocoa industry. Climate-induced drought, broader biodiversity issues and disease are ravaging cocoa crop yields in key growing regions in West Africa — and this is impacting market dynamics and pushing up prices globally. But, in a positive response, several firms are unraveling how to alleviate the difficulties by boosting regenerative agriculture, developing cocoa alternatives and bio-based technologies.

The BIO4Africa project is a new initiative born from the ongoing drought in Côte d’Ivoire where the Fairtrade Kapatchiva cocoa cooperative is struggling with poor cocoa harvests.

The four-year, EU-funded project transfers simple, small-scale and robust bio-based technology to rural Africa by helping farmers produce a broader range of high-value products using local biomass.

Biochar’s soil-improving properties 
The project’s primary focus is the pilot production of biochar, which is made from empty cocoa pods and other agricultural waste. It is being trialed in a specially-built pyrolysis kiln at the Felix National Polytechnic Institute (Institut National Polytechnique Félix) in Yamoussoukro, Côte d’Ivoire’s capital.

Biochar is predicted to improve and retain moisture in soil.

“As the soil is frequently dried by drought, it’s difficult for our producers to get great yields. The use of chemicals has killed the soil’s ‘friends.’ With the use of bioproducts, we can bring the soil back to life and support plant growth,” says Kouassi Kouassi, president of the cooperative’s survey council.

Tony’s Chocolonely's supplier Fairtrade Kapatchiva cocoa cooperative is struggling with poor cocoa harvests.Kouassi expects fertilization with cocoa pod biochar to have a positive impact on farmer incomes as well as the soil.

“What we want is for every farmer to earn a living wage. It’s about having enough income to pay for food, health and education and to invest in renewing the plantations.”

Sustainable & fair cocoa supply chains
The cooperative — which supplies ethical chocolate brand Tony’s Chocolonely — is pushing to eliminate chemical fertilizers and pesticides, encouraging all its 3,000 farmer members to make the move to organic production. Collaborating with the chocolate brand also aligns with the strategy to make cocoa supply chains free from child labor. 

“Tony’s provides financial support and training to fight child labor on the plantations. Today, we have 18 community liaisons who work with the farmers to raise awareness of child labor and encourage children to go to school,” explains Agniful Didier Amichia, Kapatchiva’s head of sustainability.

Tony’s Chocolonely also supports the planting of shade trees, which protect the cocoa trees from the sun to improve yield and restore biodiversity.

Cocoa-free chocolate
Another company working in the sustainable chocolate space is Planet A Foods, which recently closed a €14.2 million (US$15.10 million) Series A funding round to fuel mass-market expansion. The company’s fermentation process uses proprietary technologies to turn all-natural, locally sourced ingredients, including oats and sunflower seeds, into ChoViva: a cocoa mass and cocoa butter with melt-in-the-mouth texture and full-bodied chocolate flavor. 

ChoViva can be used in a hybrid context with conventional chocolate or as a full replacer. It contains up to 30% less sugar and has a very low CO2 footprint due to local ingredients and short supply chains.

A JP Morgan report attributes rising cocoa prices to a global supply shortage, chronic underinvestment in cocoa farms and investor speculation.Planet A Foods supplies firms including Griesson-de Beukelaer, Peter Kölln and Lufthansa, and forecasts several product launches for later this year.

“In the future, chocolate will become more expensive than caviar unless new steps are taken,” says Dr. Max Marquart, Planet A Foods’ co-founder and CEO.

Cargill is also pushing the boundaries in alternative cocoa. Last week, the company announced a partnership with Voyage Foods to scale up alternatives to cocoa-based products. While Cargill remains committed to its traditional chocolate business, cocoa-free confectionery is not cocoa-dependent and is, therefore, less subject to market volatility, which does offer more stable pricing for Cargill’s customers. 

Further price hikes on the horizon?
Cocoa prices are predicted to remain a significant concern, with the escalation showing no signs of abating.

According to a recently published JP Morgan report, cocoa prices are rising due to a global supply shortage, chronic underinvestment in cocoa farms and investor speculation. They say that chocolate brands are grappling with the impact of higher cocoa costs and this is resulting in price hikes and shrinkflation.

In his State of the Union Address in March, US President Joe Biden called out brands for using “shrinkflation” tactics amid the cost-of-living crisis.

In its latest Cocoa Market Report for February 2024, the International Cocoa Organisation (ICCO) reaffirms how high cocoa prices “remain a significant concern” due to a supply shortfall from key producers Côte d’Ivoire and Ghana, resulting in a 28% and 35% decrease in arrivals at Ivorian and Ghanaian ports, respectively, compared to the previous season.

The spike in cocoa prices has urged Hershey's to relieve 5% of its workforce.Relative stocks of Ivorian and Ghanaian beans are declining in the US market. ICCO believes they are “assumed to be attracted into the European market in anticipation of compliance with the EU deforestation-free regulation.”

This issue prompts the question of whether the US will be hit harder by a potential further rise in chocolate products or other cost-saving measures linked to the ongoing cocoa crisis. 

Hershey’s feels weight of historic cocoa prices
The squeeze on US cocoa prices is highlighted by Hershey’s recent announcement that rising cocoa prices were weighing on the business. The company plans to slash 5% of its workforce. 

“We continue to operate in a dynamic environment, but we are encouraged by the resilience of seasonal traditions and the consumer response to innovation within our categories,” said CEO Michele Buck recently.

While historic cocoa prices are expected to limit earnings growth this year, we believe our strong marketing plans, innovation and brand investments will drive top-line growth and meet consumers’ evolving needs.”

“We are elevating our focus on productivity and transformation to strengthen our business and deliver peer-leading performance over the long-term.”

By Gaynor Selby