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Solving the cocoa crisis with ParceLive

on August 7, 2019 No comments

Turn down any aisle in your local grocer’s and you are likely to be bombarded by labels claiming that products are ‘Fairtrade Certified’ by the ‘Rainforest Alliance’, among others, and that by buying such items you are giving back directly to communities in developing countries who are in desperate need of funds.

Alternatively, should you open to today’s stock market section in the daily paper, then you’ll simultaneously be confounded by traders who are urging you to trade on future speculation that demand for raw materials is only going to continue unabated for the next few years and that you should buy now in order to see a nice capital gain by next tax season.

So, what is one to do?

If you are an ethical consumer, then you are likely to think your purchase of farm-to-bag coffee or cocoa beans is worth a few extra dollars, pounds, or euros since farmers in Africa and South America are benefiting, right?

But what if you are also a supply chain manager within a large multinational corporation (MNC) with a line manager that demands you keep costs low and production runs high?

These problems are, of course, not mutually exclusive, but, rather, are easily solvable through increasing transparency into the socio-economic, political, environmental, and legal value chains that increasingly span the globe.

Read on to learn how technology, both old and new, is making these purchasing decisions easier for the dad buying bulk cocoa by day and picking up coffee beans and baking powder by night.

Current state of cocoa:

Despite the advent of Fairtrade in 1992 and its high-profile adoption by the likes of Starbucks some ten years on, the inner workings of such seemingly non-governmental groups remains largely shrouded in mystery for the modern-day-cum-ethical consumer.

These alliances, and though started primarily on behalf of small coffee bean farmers in the 1990s, were never fully able to realize their potential either vertically within MNCs heavily reliant on cheap commodities nor horizontally across those raw materials coming from rapidly developing countries and that include iron ore, lithium, sugar, wood, and oil, to name but a few.

Cocoa is merely the latest commodity to join a growing list of natural resources whose production output is shrinking due to environmental degradation at the source while also coming under threat from local government tariffs and protectionist measures meant to  draw out the revenue from these goods until they are completely depleted or another source of income can be found.

This is not only bad news for the smallhold or subsistence-based farmer living in South America or along the Gold Coast of Africa, but also consumers and production personnel based in Europe or North America.

The solution is, of course, shedding light into the current commodities supply chain (CSC), educating all parties involved in the purchasing process, and leveraging trusted technology to do so.

Coffee as a case study:

The reason the supply chain remains largely misunderstood across the commodities world is that the amount of raw data and inputs is hard to decipher and decode for the harried decision maker, whether that person be located on a shop floor or simply scanning the grocery store aisles for a fair price (no pun intended).

That said, and in solving the cocoa crisis, one must look historically to the coffee supply chain in order to better understand the complex nature of how goods move throughout the world.

Consider, first, high-yield nations like Uganda, Burundi, Ethiopia, and Rwanda still rely on middle-men and brokers to move their beans to market despite efforts to streamline this process (see diagram below, right-hand column) and, in so doing, remove those most likely to skim profits back down the chain from consumer to farmer.

Source: http://journal.utem.edu.my/index.php/jtec/article/view/4722

Cocoa farmers along the Gold Coast are confounded by much the same in terms of limited transparency and control in moving their goods to market despite blockchain ledger technology meant to improve their ability to find the best market prices so as to maximize their gains year in and year out.

The problem will remain one of scale, however, as smallholds are unable to achieve such pricing power or leverage in the negotiation process when those paying the most are large MNCs like Nestlé, Mars, and Hershey.

Only in moving product direct to consumers can small-batches yield high income from farmers, which is why tried-and-true tracking technology that is affordable, recyclable, and re-useable is the best interim means to connect buyer with grower.

Beyond CSR:

This is not an entirely unachievable aim as conscious consumers are growing increasingly willing to step outside the export and re-export market in sourcing their goods from those in rapidly developing countries.

While large MNCs should be lauded for their attempts at boosting calls to corporate social responsibility (CSR) programs, these measures remain largely lip service in the cocoa business since they, too, need to maximize profits.

Only by streamlining the supply chain and connecting, through physical tracking technology first and then blockchain second, will MNCs wake up and actually go direct to growers as small consumers must now.

Conclusion & call-to-action:

In looking back on previous attempts to garner gains for small-time coffee and cocoa bean growers, it is important not to forget lessons from the past.

That said, it is far more important to link those same persons with ethical consumers that are willing to circumvent large MNCs, source their chocolate and cocoa ethically, and, in so doing, drive both cyber and physical <<internal link>> transparency into the twenty-first century.

References – Further considerations: 

CallumSolving the cocoa crisis with ParceLive