Analysis: It's all down to the cocoa bean's supply chain and the journey which takes it from trees in equatorial areas to factories and shop shelves
St Valentine's Day is synonymous with dating, cuddles, and gifts from your partner. For many of us, it is also an occasion to exchange sweets and, chief among them, chocolates. Nonetheless, the latest figures from the Consumer Price Index reveal a worrying landscape. Where chocolates have been appreciating at an average of 1.5% per month, totalling an increase in price of more than 20% in less than two years. So why is this the case? And is there a way to indulge in chocolates without hurting your wallet?
We often see chocolate in the form of bars, sweets, or cooking powder, but we hardly see the cocoa fruit from which chocolate is produced. Making chocolate is a lengthy process which involves extracting cocoa seeds and fermenting, roasting, and grounding them, among other steps. But it all starts with the cocoa fruit, an exotic plant whose seed – the cocoa bean – holds the magical flavour we all love. Thus, to understand why chocolate is becoming pricier, it is necessary to look at the cocoa supply chain and the seeds' journey from the trees to the factories and the shelves.
Cocoa trees are grown in equatorial areas, near the tropical rainforests of South America, the gulf of Africa, and Oceania. In these fertile lands, farmers take advantage of the hot and humid climate to grow cocoa alongside a variety of crops for both export and domestic consumption. In particular, cocoa, together with coffee, cotton, and palm nuts, is categorised as a 'cash crop', that is, a crop that is cultivated predominantly for the international markets.
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From an economic perspective, cash crops differ from regular crops like rice, tapioca, or plantains that are cultivated for sale and consumption in local markets. While the price of regular crops is determined by the rules of supply and demand and follows the seasonality of planting and harvesting seasons, the price of cash crops depends on international supply chains and agreements among farmers, middlemen, and multinational enterprises.
Typically, cash crops yield a much higher financial return than regular crops as they are not subject to the same fluctuations in demand and take advantage of the higher purchasing power of global buyers. In equatorial areas, cultivating cash crops can be a poor farmer's opportunity for economic gains and social mobility. Nonetheless, cash crops have been subject to numerous scandals as they are connected to growing deforestation rates and exploitative practices in opaque supply chains.
For instance, palm-oil producers have incurred a row of international criticism over the growing deforestation rates in tropical rainforests. When smallholder farmers are commissioned production targets, they are easily tempted to expand their farms into fertile forest areas, replacing the native vegetation. For example, Indonesia, the world’s largest producer of palm oil, has been plagued by scandals over its rapidly declining forest coverage.
Unfortunately, breaches of forest reserves are hard to observe and prevent, and they gravely undermine the integrity of forest ecosystems. Such breaches can only be remediated in retrospect by confiscating and requalifying the land – a process that is highly time-consuming and resource-intensive.
In other scandals, sweets multinationals Mars and Nestlé have been reprimanded over their complicity in the exploitation of poor farmers in the Global South. When the price for cocoa beans is too low, plantation owners may have to cut their employees’ wages or resort to other practices, like child labour, that enable them to lower their costs of production. Notably, contractual demands from multinationals are also directly connected to growing deforestation rates, as farmers may seek to expand onto more fertile lands to meet the high production targets imposed by global buyers.
Overall, chocolate production is a delicate business that requires multiple moving gears to function effectively. First, the price of cocoa should be high enough for the plantation owner to make a living and employ a workforce to cultivate, harvest, and process the crop. Second, the demand for sweets should be low enough that it can be fulfilled using existing farms without causing further deforestation and environmental degradation. Third, the final product should be priced affordably for the consumers, who are only willing to pay that much for a chocolate bar or sweet.
However, the equilibrium of these moving parts is being rapidly disrupted. As global income rises, so does demand for cocoa, and people in formerly low-income countries such as China are becoming consumers of the tropical delicacy. Since there is only so much arable land that can be used for cocoa production, prices are destined to rise with the growth in demand, and demand will likely be unmet. Matters are further complicated by other factors, such as debt, inflation, and global warming, which endangers the global production of the crop.
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Take Ghana, the world's second-largest producer of cocoa. Financially, the country is suffering from a spiral of hyperinflation and currency devaluation due to the debt it accrued over the past decades, and the cedi – its local currency – has been losing about 20% of its value year-over-year since 2020.
Although the price of cocoa beans has increased, it has not grown at a rate comparable to the country’s inflation rate, making the production of cocoa less appealing than it used to be in the past. As a result, many cocoa farms within the country have been abandoned in favour of gold-mining or other non-farm activities featuring a higher short-term return.
In a nutshell, the price of chocolate is rising because cocoa production is becoming increasingly more expensive. While you may, in principle, opt for sweets with a lower cocoa percentage, or look for discount brands at your favourite grocery store, maybe you are better off paying two extra bucks and knowing that your chocolate bar is not causing deforestation, exploitation, or other ills somewhere in the Global South.
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
