Ghana Grows Our Cocoa, So Why Can’t It Make Chocolate? | Big Business

Summary

Ghana, the world's second-largest cocoa producer, earns minimal profits from the $100 billion industry due to exporting raw cocoa. Despite challenges like climate change and poor land conditions, Ghanaian entrepreneurs are striving to establish local chocolate industries. The government is backing these efforts to process more cocoa domestically, aiming to increase farmer incomes and reduce poverty. Initiatives like the Living Income Differential have helped, but Ghana still processes only 30% of its cocoa domestically, with most of the value addition happening abroad. The narrative highlights the struggle to decolonize chocolate and the need for a fairer share of profits for Ghanaian farmers.

Takeaways

• 🍫 Ghana is a leading cocoa producer but only earns a small fraction of the industry's profits, with most revenue generated from the finished chocolate products.
• 🌍 Cocoa beans from Ghana are primarily exported to Europe and North America, where they are processed into chocolate by major chocolate companies.
• 💰 The disparity in earnings is stark, with large chocolate companies making billions while many cocoa farmers live in poverty, earning as little as $2 a day.
• 🏭 Ghanaian entrepreneurs face challenges in establishing chocolate factories within the country, aiming to 'decolonize' the chocolate industry.
• 📈 The Ghanaian government is investing in the domestic chocolate industry, but the question remains whether local entrepreneurs can secure a larger share of the profits.
• 🌱 Ghana and Ivory Coast, together producing over 60% of the world's cocoa, have introduced a fixed price system to ensure better earnings for farmers.
• 💲 The Living Income Differential (LID) is a premium added to the price of cocoa, directly benefiting farmers, but some large companies have been accused of not paying this premium.
• 🌡 Climate change, plant disease, and exhausted land are among the challenges faced by cocoa farmers, affecting their productivity and livelihoods.
• 🌿 The organic farming of cocoa without pesticides can yield higher incomes for farmers, but many small farms are not certified organic, keeping earnings low.
• 🏛 The historical context of colonialism has contributed to the current state of the cocoa trade, with a legacy of raw product export and farmer poverty.
• 🏭 Efforts to process more cocoa domestically face hurdles such as the lack of a local dairy industry, the need to import sugar, and challenges with temperature and power stability in Ghana.

Q & A

What is Ghana's position in the global cocoa production?

Ghana is the world's second-biggest producer of cocoa.

What percentage of the $100 billion cocoa industry does Ghana earn from its cocoa production?

Ghana earns only about 2% of the $100 billion cocoa industry.

Where do Ghanaian cocoa growers primarily export their cocoa beans?

Ghanaian cocoa growers primarily export their cocoa beans to Europe and North America.

What is the main issue with the cocoa value chain according to Lloyd?

Lloyd points out that the money in the cocoa value chain is made in the finished product, not in the raw state that Ghana is shipping out.

What is the average income of many cocoa farmers in Ghana?

Many cocoa farmers in Ghana live in poverty, earning just $2 a day.

What is the main challenge for Ghanaian entrepreneurs like Michael in opening chocolate factories in their home country?

Ghanaian entrepreneurs like Michael face challenges such as the lack of a domestic chocolate industry and the struggle to decolonize chocolate production.

What efforts is the Ghanaian government funding to grow a domestic chocolate industry?

The Ghanaian government is funding efforts to support cocoa processing inside Ghana, including creating a free zone outside Accra with tax breaks for factories.

What percentage of the world's cocoa does Ghana and Ivory Coast grow together?

Ghana, together with Ivory Coast, grows over 60% of the world's cocoa.

What is the main reason for the low income of cocoa farmers in Ghana according to Kristy?

Kristy explains that the small size of farms and the lack of organic certification are part of the reasons why cocoa farmers are so poor in Ghana.

What is the Living Income Differential (LID) and how does it benefit cocoa farmers?

The Living Income Differential (LID) is a premium added to every ton of cocoa, which goes directly to the farmers, helping them to take home nearly 30% more money than the year before.

What is the main challenge for Ghana's chocolate industry in terms of production?

The main challenges for Ghana's chocolate industry include the lack of a local dairy industry, the need to import sugar, and the difficulty of maintaining appropriate temperatures for chocolate production due to Ghana's hot climate.

What is the current state of Ghana's cocoa processing and what is the goal for the future?

Currently, Ghana processes only 30% of its cocoa beans domestically, with most being sent overseas. The goal is to increase the export of cocoa in its semi-finished and finished state, and to create demand for finished chocolate within Ghana.

How does the fixed price system introduced by Ghana and Ivory Coast aim to help raise farmer wages?

The fixed price system sets a price floor for cocoa, ensuring a minimum income for farmers, and includes the Living Income Differential (LID), which provides an additional premium to farmers.

What is the role of Niche Cocoa Industry in Ghana's cocoa processing?

Niche Cocoa Industry is Ghana's second-largest cocoa manufacturer, processing 10% of the country's cocoa and has become successful by taking advantage of the tax breaks in the free zone outside Accra.

What are the challenges faced by small companies like fairafric outside the free zone?

Small companies like fairafric face challenges such as not receiving tax breaks, difficulties in procuring cocoa beans, and the high costs associated with building a cold chain for chocolate distribution.

What is the current consumption rate of chocolate in Africa compared to Europe?

Cocoa consumption in Africa is very low, with an average of 0.4 kilograms per person, compared to Europe where the average is about 5 kilograms per person.

Outlines

00:00

🌍 Ghana's Struggle in the Global Cocoa Industry

Ghana, the world's second-largest cocoa producer, earns a mere 2% of the $100 billion industry's revenue. Cocoa beans are primarily exported to Europe and North America for chocolate production, while local farmers live in poverty. Entrepreneurs face challenges in establishing chocolate factories in Ghana. The government is now funding efforts to develop a domestic chocolate industry. Ghana and the Ivory Coast, which together produce over 60% of the world's cocoa, sell to major chocolate companies that process the beans abroad. Farmers face hardships such as climate change, plant disease, and poor land conditions, leading to low incomes. The historical context of cocoa farming in Ghana, including its colonial past, has contributed to the current state of the industry.

05:03

💼 Efforts to Improve Farmer Wages and Local Processing

In 2019, Ghana and the Ivory Coast introduced a fixed price system with a price floor for cocoa, including a Living Income Differential (LID) premium for farmers. Despite initial compliance from large chocolate companies, allegations arose that some were not paying the premium. The LID has helped to increase farmer income, but there are still significant challenges. Ghana processes only 30% of its cocoa domestically, with the rest being sent overseas. The president of Ghana has expressed a desire to increase domestic cocoa processing, and the government has created a free zone with tax breaks to encourage this. Niche Cocoa Industry, located in the free zone, has become a significant manufacturer, but smaller companies outside the zone face difficulties, including procuring cocoa beans and dealing with the lack of a local dairy industry and high temperatures.

10:04

📈 The Future of Ghana's Chocolate Industry and Challenges

While Ghana has seen an increase in processing facilities, most only produce intermediate cocoa products rather than finished chocolate. Niche's business primarily focuses on these intermediate products, with a small portion dedicated to finished chocolate bars made abroad. There is a push to create demand for finished chocolate within Ghana, as cocoa consumption in Africa is significantly lower than in Europe. Niche is developing a chocolate drink aimed at the school market and seeks to source ingredients locally within Africa. Advocates are also pushing for an increase in the cocoa price floor and for larger chocolate companies to contribute more to farmer welfare. Despite progress, the chocolate industry in Ghana faces ongoing challenges, including the need for a cold chain for distribution and a reliable power grid. The industry is set to grow, and Ghanaian farmers and processors are striving for a larger share of the chocolate business.

Keywords

💡Cocoa

Cocoa refers to the dried and partially fermented seeds of the cacao tree, from which chocolate and other products are made. In the video, cocoa is the central theme, with Ghana being the world's second-biggest producer. The script discusses the economic disparity between cocoa production and the profits made by the chocolate industry, highlighting the low earnings of cocoa farmers.

💡Value Chain

The value chain in the context of the video represents the sequence of activities a firm operates in order to deliver a valuable product or service. It is mentioned that 'money is made in the finished product,' indicating that the most significant profits are realized in the production of chocolate rather than the initial cocoa beans.

💡Poverty

Poverty is the state of being extremely poor. The video script emphasizes the plight of many cocoa farmers in Ghana who live in poverty, earning as little as $2 a day, despite the cocoa industry's massive global profits.

💡Decolonize Chocolate

Decolonizing chocolate implies breaking away from historical colonial practices that have marginalized local producers and re-establishing control over the cocoa production process within Ghana. Michael, a Ghanaian entrepreneur, is quoted as saying 'we are trying to decolonize chocolate,' signifying a shift towards local production and ownership.

💡Domestic Chocolate Industry

The domestic chocolate industry refers to the local production of chocolate within a country, as opposed to exporting raw materials. The script mentions the Ghanaian government's efforts to grow its domestic chocolate industry to allow the country to benefit more from its cocoa production.

💡Climate Change

Climate change in the script is associated with the challenges faced by cocoa farmers due to extreme weather conditions that affect cocoa cultivation. It is one of the factors contributing to the difficulties faced by farmers like Joseph, who grows 11 acres of cocoa.

💡Organic Cocoa

Organic cocoa is cocoa grown without the use of synthetic pesticides or fertilizers. Joseph, a farmer mentioned in the script, earns a higher income because he grows organic cocoa. The video suggests that organic farming could be a way to improve farmer incomes.

💡Living Income Differential (LID)

The Living Income Differential is a premium added to the price of cocoa to ensure that farmers receive a living wage. The script explains that the introduction of the LID meant farmers took home nearly 30% more money than the previous year, illustrating an attempt to address poverty among cocoa farmers.

💡Free Zone

A free zone, as mentioned in the script, is an area designated by the government for certain economic activities, offering tax breaks and other incentives. The Ghanaian government created a free zone to support cocoa processing within the country, which benefits companies like Niche Cocoa Industry.

💡Cocoa Processing

Cocoa processing involves the transformation of raw cocoa beans into intermediate or finished products such as cocoa powder, cocoa butter, or chocolate. The script discusses the limited domestic cocoa processing in Ghana, with only 30% of cocoa beans being processed within the country, and the efforts to increase this percentage.

💡Colonialism

Colonialism is the policy or practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically. The script refers to the historical impact of colonialism on the cocoa industry, where Ghana's one-way cocoa trade with Europe has kept farmers in poverty for generations.

Highlights

Ghana is the world's second-biggest producer of cocoa but only earns about 2% of the $100 billion industry.

Cocoa growers export most of their cocoa beans to Europe and North America for chocolate production.

Big chocolate companies make billions while many cocoa farmers live in poverty, earning just $2 a day.

Ghanaian entrepreneurs struggle to open chocolate factories in their home country due to the raw export focus.

The government is funding efforts to grow a domestic chocolate industry.

Ghana and Ivory Coast grow over 60% of the world's cocoa, selling to major chocolate companies.

Farmers face challenges such as extreme weather, plant disease, and fatigued land.

Joseph, a Ghanaian farmer, earns a higher wage due to organic cocoa farming without pesticides.

The majority of Ghanaian farms are small and not certified organic, contributing to farmer poverty.

Ghana's cocoa trade with Europe dates back to colonial times, perpetuating farmer poverty.

Ghana and Ivory Coast introduced a fixed price system with a Living Income Differential (LID) for farmers.

The LID has helped farmers earn nearly 30% more but is a small fraction of chocolate makers' sales.

Hershey's was accused of not paying the LID premium but later claimed full participation.

Ghana processes only 30% of its cocoa beans domestically, with 70% sent overseas.

The president of Ghana announced intentions to process more cocoa in the country.

The government created a free zone with tax breaks to support cocoa processing inside Ghana.

Niche Cocoa Industry has become Ghana's second-largest cocoa manufacturer, processing 10% of the country's cocoa.

Small companies outside the free zone face difficulties in procuring cocoa beans and establishing factories.

Ghana lacks a dairy industry, requiring chocolate makers to import milk and sugar.

The hot climate in Ghana poses challenges for chocolate production and distribution.

Fairafric, a cocoa maker, aims to produce chocolate in Ghana despite the challenges.

Ghana has five times more processing facilities today than a decade ago, but most only process cocoa into intermediate products.

Advocates want to raise the cocoa price floor and have big chocolate companies contribute more to farmer income.

As the chocolate industry is set to grow, Ghanaian farmers and processors seek a larger share of the profits.

Transcripts

Narrator: Ghana is the world's second-biggest

producer of cocoa, but the country only earns about 2%

of the $100 billion industry.

Cocoa growers here export most of their cocoa beans to Europe

and North America, where they're turned into chocolate.

Lloyd: We are shipping out the cocoa in its raw state,

and if you look at the value chain of cocoa,

money is made in the finished product.

Narrator: While big chocolate companies

rake in billions a year, many cocoa farmers live in poverty,

earning just $2 a day.

And Ghanaian entrepreneurs, like Michael,

have struggled to open chocolate factories

in their home country.

We are trying to decolonize chocolate. This time around,

we are saying that it can be done right here in Ghana.

Narrator: Now, the government is funding efforts

to grow a domestic chocolate industry.

But can Ghana's entrepreneurs get a bigger share

of the profits?

We visited a cocoa farm and processing plant to find out.

Ghana, together with Ivory Coast,

grows over 60% of the world's cocoa.

The countries sell to all the big chocolate companies,

from Hershey's to Mars to Nestle,

which process the beans abroad

in mostly Europe and North America.

Narrator: Joseph grows 11 acres of cocoa. And it isn't easy.

Farmers battle more extreme weather due to climate change,

plant disease, and fatigued land.

Every October,

he and his family begin

harvesting the yellow pods.

It takes just four days.

Narrator: Joseph collects the pods and takes them

to the breaking ground.

Here, workers crack them open and remove the beans by hand.

Joseph uses the leftover pods as compost under his trees.

Narrator: Joseph then dries the beans for another week.

In total, he packs 75 bags of beans a year.

His income is about $27 a day.

It's a high wage for a Ghanaian farmer,

because Joseph grows organic cocoa without pesticides.

But many farmers in Ghana live at or below the poverty line,

earning less than $2 a day.

That's because the majority of farms are small

and aren't certified organic, according to Kristy,

a cocoa scholar nicknamed "The Doc of Choc."

We are talking about really small plots.

And this is part of the reason

why cocoa farmers are so poor.

Narrator: But that's not the only reason

farmers make so little.

Kristy: Cocoa's been farmed in Ghana for over 100 years.

There are many parts of the country

where the land is really fatigued now,

and the trees are old.

Narrator: In the 15th and 16th centuries,

Portugal and Spain monopolized cocoa,

controlling production and trade from their colonies

in Latin America and the Gulf of Guinea.

Europe's elite were the biggest customers.

The crop arrived in what's now Ghana in 1876.

Around the same time,

the British declared the southern region a colony

and began invading north.

Locals owned and ran all the small farms,

but the raw product was exclusively exported to Europe.

A lot of what we know today as contemporary chocolate

really grew out of this trading relationship

between Ghana and Britain,

including the flavor of chocolate itself.

Narrator: Although Ghana gained its independence in 1957,

its one-way cocoa trade with Europe still exists today.

And it's kept farmers at the beginning of the supply chain

in poverty for generations.

To help raise farmer wages,

Ghana and its neighbor Ivory Coast teamed up in 2019.

The two largest cocoa-producing countries in the world.

And so when they get together on something,

everyone has to pay attention.

Narrator: They introduced the fixed price system,

which set a price floor for cocoa.

In 2020, Ghana set the price floor at $2,600 a metric ton.

That included a $400 premium

added to every ton of cocoa.

And this value goes directly to the farmers.

Narrator: The premium is called

the Living Income Differential, or LID.

It was the first of its kind in the chocolate industry.

It meant farmers took home nearly 30% more money

than the year before.

At first, big chocolate companies agreed to pay the LID.

You can't really not buy Ghanaian and Ivorian cocoa.

So the big buyers really had no choice.

Narrator: The LID's markup may seem like a lot,

but the millions it has raised to combat farmer poverty

is a fraction of big chocolate makers' sales.

But soon after it launched,

reports surfaced accusing Hershey's of buying cocoa

without paying the premium.

Michael: It's sad to note that these companies

who have the resources may not want to abide

by this simple appeal.

Narrator: In an email to Business Insider,

the company said, "Hershey supports

and is fully participating

in the Living Income Differential."

When the corporations do pay, the LID has helped farmers.

Lloyd: It's pushing farmers to even increase their yield.

That's how come last year,

we're able to hit a record 1.2 million tons of beans.

Narrator: After farmers dry the beans, they're bagged up.

About 70% of these beans will be sent overseas.

Ghana processes only 30% of its cocoa beans domestically.

But in 2020, at a press conference in Switzerland,

the president announced he wanted to change that.

We intend to process more of our cocoa

in our country, with the aim of producing

more chocolate ourselves.

Narrator: And he said it right in front

of the top commerce ministers of Switzerland,

one of Ghana's biggest customers.

That statement in Switzerland caused a lot of controversy,

I must say. He clearly mentioned our intentions

to put in efforts to also add value within Ghana.

Narrator: To support cocoa processing inside Ghana,

the government created a free zone outside Accra.

Any factory operating inside gets a tax break.

Lloyd Ashley runs Niche Cocoa Industry in the free zone.

In the free-zone enclave,

you're getting 10 years' free duty

on your imported parts for equipment.

So it gives you the opportunity to also increase capacity.

Narrator: Niche has become Ghana's

second-largest cocoa manufacturer.

The company says it processes 10% of the country's cocoa.

And Niche processes two tons of it an hour.

The cocoa beans arrive here from farms all over rural Ghana.

Workers stack the bags high, then cut them open, one by one.

The beans funnel into this grate on the floor.

And the rest of the process is controlled digitally,

from roasting the beans to grinding them into cocoa mass

that's then sent to get mixed with milk and sugar.

And from there, it comes here for a tempering process,

a cooling process, and then a packaging process.

Narrator: Niche has been pretty successful.

But for small companies outside the free zone,

it hasn't been as easy to get up and running.

Michael: Hello, come on, everything OK?

Crew Member: Yeah, everything is OK.

Narrator: Michael runs fairafric,

a cocoa maker that opened in Amanase

to be closer to cocoa farmers.

But since it's outside the free zone,

it didn't get the tax breaks.

Fairafric also had trouble buying cocoa beans.

As shocking as that may sound,

it's really hard in Ghana to procure cocoa beans.

Narrator: Another hurdle keeping Ghana's

chocolate industry from taking off?

Well, it's very hard to make chocolate in Ghana.

Narrator: For one, there's no dairy industry.

Anybody producing chocolate in Ghana

is definitely importing large volumes of milk

from either Europe or other continents.

Narrator: Chocolate makers also have to import sugar,

mostly from Brazil.

And finally, it's hot in Ghana.

Chocolate, by its nature,

it's very sensitive to temperature.

Any rise in temperature may cause the chocolates to melt.

There's not the kind of cold chain

that you need to distribute chocolate effectively

within Ghana or much of West Africa.

Narrator: And building out that cold chain

has been expensive.

We have used insulated building materials

for some sections of our building. Some sections

of the building is completely insulated roofing sheet.

Narrator: Also, Ghana's power grid

is sometimes unreliable.

Electricity, for example, it's another issue here.

Although there's power, it's never stable.

Narrator: Fairafric's top sellers

are finished chocolate bars.

Inside temperature-controlled rooms,

this machine pumps the chocolate into molds.

Michael: So our installation capacity is 10,000 bars

of chocolate every hour.

Narrator: That's a fraction of what a Hershey's

or Mars factory can do.

This machine wraps the chocolate bars.

With 68 workers, the company is scaling up

to produce 50 million bars a year.

Michael: The practice has always been that the raw materials

are sent to Europe for processing.

This time around, we are saying that it can be done

right here in Ghana.

Narrator: But Kristy says the country

still has a long way to go.

Definitely no silver bullets, for sure.

When you have a whole system, like colonialism,

it doesn't shift quickly.

Narrator: While there are five times

more processing facilities in Ghana today

than a decade ago, most only process cocoa

into intermediate products like...

Cocoa butter, cocoa mass, cocoa liquor,

cocoa powder, not to chocolate.

Narrator: 96% of Niche's business

are these intermediate products.

Most of the finished bars are still made abroad.

We need to increase the export of cocoa

in its semi-finished and also in the finished state.

Narrator: Lloyd wants to create demand

for finished chocolate within Ghana.

Cocoa consumption is very, very low in Africa.

I mean, compared to Europe, where you have

an average 5 kilograms-per-person consumption,

you're talking about 0.4 in Africa.

Narrator: That's because historically,

finished chocolate bars had to be imported from Europe,

so they cost a lot.

To create new demand in Ghana,

Niche is making a chocolate drink

Lloyd hopes to sell in schools.

He also hopes to source ingredients from inside Africa,

dairy from Egypt, and sugar from South Africa.

To train talent in Ghana, fairafric started this lab

and hired locals to develop new flavors.

And for farmers, advocates want to raise

the cocoa price floor to about $3,100 a metric ton.

And they want big chocolate companies

to foot more of the bill.

Nearly every big chocolate producer has programs set up

to lift farmers out of poverty.

But by some estimates, 73% to 90% of Ghana and Ivory Coast

cocoa farmers are still below Living Income standards.

If you're the CEO of these big companies,

it's time to come down and look at these yourself.

Narrator: As the industry is set to grow about 5%

in the next six years, Ghanaian cocoa farmers

and processors are vying for a larger stake

in the big business of chocolate.

Can we also be allowed to add value,

it would be changing the lives of the people

that play real roles in growing the beans.