Case study - Cocoa Cartel Stirs Up Global Chocolate Market

Case study: Cocoa Cartel
Stirs Up Global Chocolate
Market

Introduction
Will ‘GHANA-IVORY COAST COCOA CARTEL (COPEC)’ solve problems for cocoa
farmers?
 The study tries to find an answer to this question.
 COPEC is a union of Ivory Coast and Ghana for selling cocoa beans at
premium pricing

Methodology
 Based on the information provided in the case study
 The external resources will be used to add more weight to the
answers

Findings
Similarities and differences between COPEC and OPEC:
 COPEC like for OPEC is a union of two world’s largest producer of cocoa, Ivory Coast and Ghana (WSJ 2020)
 COPEC safeguards the cocoa farmers against challenges like fluctuating cocoa prices and oversupply of
cocoa (WSJ 2020)
 COPEC like for OPEC might have its nemesis in its farmers who do not know ways to respond to a
decreased demand (WSJ 2020)

Continues..
Sustainability theme:
 Population growth and urbanization have affected land rights of
farmers (WSJ 2020)
 Premium pricing for cocoa from Ivory Coast and Ghana will make Ice
Cream, Candy Bars, Biscuits and other baked goods pricier(WSJ 2020)
 This new cartel receives support from the U.S. three big candy
makers; Mars, Mondelez and Hershey WSJ 2020)

Continues..
 Living costs for farmers have steadily gone up despite the price
fluctuation of cocoa in the international market (Ingram et al. 2018)
 might perhaps provide a more stable income for the cocoa farmers
provided if the initiative really turns out the way as anticipated (WSJ
2020)
 The use of technology such as for cutting crops can be time-saving
and will also increase the farmers' productivity (De Figueiredo Silva et
al. 2019)
 The central governments of Ivory Coast and Ghana can educate
farmers on the technology (De Figueiredo Silva et al. 2019)

Continues..
 COPEC requires support in forms of regulatory guidelines for an
agricultural commodity
 According to Ghana’s Lands Commission, only less than 2% of the
cocoa farmers have legal rights to the land (WSJ 2020)
 Cocoa plants stop producing or become diseased after 30 years or so.
To begin with, replanting a cocoa tree, farmers need the permission of
the landowner that is mostly refused (WSJ 2020)

Continues..
 Cocoa farmers need to go through informal agreements with the
landowner before they can access the land (WSJ 2020)

Continues..
 The oral agreements between the farmers and the landowner result
in farmers clearing forests and thus begin farming. This results in
deforestation (WSJ 2020)

Continues..
Role of central governments:
 The development of economies would mean improved living
standards for its citizens
 However, the ‘Central Governments’ in the Ivory Coast and Ghana
should address the challenges of economic development
 degrading living standards of cocoa farmers living especially in these
countries is a challenge (WSJ 2020)

Continues..
 the farming sector has been that glittering for the farmers as it once
was. Hence, the role of the central governments would be of high
importance in ensuring that the cocoa cartel gets all the needed
support
 It is because this may certainly improve the earnings for the
farmers that they need to manage their growing expenses (Akinwale
and Folarin 2018)

Continues..
 One of the political risks can be
the growing urbanization of Ghana
and the Ivory Coast. Urbanization
results in increased deforestation,
which is both good and bad for the
countries in concern (WSJ 2020)
 The good thing is it generates
more land to support the
infrastructure development works
such as the construction of
residential spaces
 Conversely, it results in a
decreased number of plants that
are significantly important to
support the world in fighting
against global warming

Continues..
 Growing urbanization in Ghana and
Ivory Coast has also undermined
the legal land rights of the farmers
 For any plantation of cocoa, the
farmers need to rely on the original
landowner
 The landowners many times refuse
these farmers' request to build up a
cocoa plant
 Farm rehabilitation is not happening
at the pace it is needed to support
the living standard of cocoa farmers
as well as improve the
environmental condition (Asare,
Afari-Sefa and Muilerman 2018)

Analysis
COPEC and OPEC
 COPEC just like OPEC faces many issues such as ineffective
communication between stakeholders of the cocoa sector in Ghana
and the Ivory Coast
 The middlemen and the central governments usually find it
troublesome to communicate the farmers to adjust their farming with
varying market demand
 Farmers just know that they have to produce cocoa at large scale, so
that, they get good benefits and that their living requirements are
sufficiently fulfilled

Continues..
COPEC vs. OPEC
 COPEC lacks a regulatory framework needed to govern the purchase,
sale and consumption of the agricultural commodity
 Production takes years to happen
 It is difficult to safeguard the farmers against a sudden price fall
 no benefits in keeping the cocoa beans at home rather than selling it
at reduced profits (Maepa et al. 2017)

Continues..
 Very few farmers only own the lands
 For each plantation, they need to go through informal contacts with
the original landowner
 Their request to plant a new cocoa tree is refused several times (WSJ
2020)

Continues..
 Farmers will get more benefits provided if chocolate makers from
around the globe agree to this change
 However, cocoa farmers are not very positive towards COPEC
 If everything turns well like the initiative has adequate supports of
the central governments, architects, etc., it should provide a stable
earning opportunity to farmers (Gallo, Antolin-Lopez and Montiel
2018)

Continues..
 The central governments in the context will have a role to play like
educating farmers on how to use the technology
 cocoa farmers live in a state of uncertainty regarding whether there
will be adequate land for them to plat cocoa tree or also sufficient
reimbursement for the cocoa beans (WSJ 2020)
 Deforestation as a result of this agreement is making the
environment more vulnerable to air pollution (Kassa et al. 2017)

Continues..
 Central governments can take many decisions to benefit this new
cartel. The list of decisions includes adopting new technologies for
crops cut, facilitating a regulatory framework to govern actions
related to commodity, etc.
 The original landowners in Ghana and Ivory Coast rarely grant
permission to farmers for using their land space to plant cocoa trees
 It affects a smooth flow of cocoa farming

Conclusion
 COPEC should provide some relief to the cocoa farmers of the Ivory
Coast and Ghana provided if its barriers are effectively managed
 Lack of appropriate support of the worldwide chocolate makers to this
cartel is one of its barriers
 Few chocolate makers such as Mondelez have agreed to pay for the
premium
 The central governments need to support this cartel through all
possible means

Recommendations
 The use of technology such as for the crops cut can increase the pace
at which cocoa farming happens
 Farmers should know how to be benefitted from using technologies
 It they could know it would not just ease out their work pressure but
also increase their work efficiency
 Farmers should be educated on anything related to a commodity like
the purchase and consumption procedure

References
 Akinwale, J.A. and Folarin, O.E., 2018. Factors Influencing Farmers’ Adoption of CRIN TC Cocoa Hybrid Technology in
Oyo State, Nigeria. Pelita Perkebunan (a Coffee and Cocoa Research Journal), 34(3), pp.191-198.
 Asare, R., Afari-Sefa, V. and Muilerman, S., 2018. Access to improved hybrid seeds in Ghana: Implications for
establishment and rehabilitation of cocoa farms. Experimental Agriculture, 54(2), pp.273-285.
 De Figueiredo Silva, F., Zilberman, D., Kaplan, S. and Potts, M., 2019. The impact of high-yield technologies on the
cocoa market in West Africa.
 Gallo, P.J., Antolin-Lopez, R. and Montiel, I., 2018. Associative Sustainable Business Models: Cases in the bean-to-bar
chocolate industry. Journal of cleaner production, 174, pp.905-916.
 Griffin, J.M. and Teece, D.J., 2016. OPEC behaviour and world oil prices. Routledge.
 Ingram, V., Van Rijn, F., Waarts, Y. and Gilhuis, H., 2018. The impacts of cocoa sustainability initiatives in West Africa.
Sustainability, 10(11), p.4249.
 Kassa, H., Dondeyne, S., Poesen, J., Frankl, A. and Nyssen, J., 2017. Impact of deforestation on soil fertility, soil carbon
and nitrogen stocks: the case of the Gacheb catchment in the White Nile Basin, Ethiopia. Agriculture, Ecosystems &
Environment, 247, pp.273-282.
 Maepa, M., Bodunrin, M.O., Burman, N.W., Croft, J., Engelbrecht, S., Ladenika, A.O., MacGregor, O.S. and Harding, K.G.,
2017. life cycle assessments in Nigeria, Ghana, and Ivory Coast. The International Journal of Life Cycle Assessment,
22(7), pp.1159-1164.
 WSJ 2020. Cocoa Cartel Stirs Up Global Chocolate Market. [online] WSJ. Available at: https://www.wsj.com/articles/new-
cocoa-cartel-could-overhaul-global-chocolate-industry-11578261601 [Accessed 17 Feb. 2020].