Melting Chocolate – Climate Change and the Cacao Bean Supply Chain for Lindt & Sprüngli
Exploring how a global chocolate manafacturer, Lindt, will adapt to climate change threatening its cacao bean supply
Lindt & Sprüngli (Lindt) is a Swiss chocolate company with an exceptional reliance on the cacao bean as a raw material input for their chocolate products. Nearly every product in their annual sales of 365 billion CHF[1] is composed of a minimum of 30% cacao[2]. Cacao cultivation will be negatively affected by climate change because it can only be grown in a narrow temperature and humidity band around the equator, and that the amount of land suitable for cacao cultivation will decrease significantly with rising global temperatures. For example, in Ghana where Lindt sources 100% of their Africa-based cacao[3], agricultural surveys found that of 294 locations assessed, 10.5% showed increasing suitability for cacao production and the remaining 89.5% would become less suitable by 2050[4]. Importantly, not only will the total area of cultivation decrease, the quality of existing land will also decrease. The figure below highlights this risk.
Recognizing the importance of this threat, Lindt is taking action to strengthen their supply chain and sourcing strategies. To-date, their primary initiative has focused on a holistic approach referred to as the “Cocoa Commitment Campaign[6]”. Three key aspects of the program involve working closely with small-holder cacao famers to promote specialist skills and training, providing farmers direct capital resource support, and ongoing evaluation/auditing processes of the overall program. The specialist training focuses on good farming practices, biodiversity, harvesting, labor rights, and more. Capital support is delivered by providing farm equipment, and construction of schools and drinking water wells. Finally, Lindt has implemented a partnership with an NGO called The Forest Trust to evaluate progress made by farmers and the overall effectiveness of the program, with proposed interventions and iterations made as required.
Maps highlighting the decline in suitable land for growing cacao in 2050[5]
Due to the success of the program so far, Lindt is planning to roll out the program beyond just Ghana over the next 3-5 years. They hope to fully cover their cacao supply across Ecuador, Papua New Guinea and others by 2020.[7]
While Lindt’s progress so far has been notable, I believe the severity of the risk requires additional action to further protect their supply chain. For example, ironically, it is the cocoa trade that is partly responsible for helping fuel deforestation and climate change by extension.[8] Lindt should publicly take a stand against farmers and organizations that clear rainforest land in order to plant cacao farms. As Lindt already maintains a tight tracking and quality control process for their source farms, clamping down on these farmers and farming techniques would be unlikely to affect their cacao supply. In fact, it would be a great opportunity to highlight their strong sustainability and other community engagement initiatives. In the medium to long term I believe that Lindt could also begin diversifying their cacao source countries and more importantly, exploring cacao substitutes like the carob bean[9]. Another longer term strategy could be to explore GMO-cacao to be more resistant to the rising temperature and humidity changes. Mars Chocolates is already pursuing this approach through a couple different channels.[10]
Finally, a few open questions came to mind while researching this topic. I felt that there are many parallels to coffee farming and the coffee trade, and it would be interesting to see how companies like Starbucks are planning to address similar challenges. Secondly, since I don’t believe that Lindt can protect cacao fully by themselves, I wonder about how an industry-consortium could work between other multinational firms.
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[1] Lindt, “Key Figures”, Lindt Corporate Site, [http://www.lindt-spruengli.com/investors/financial-information/key-figures/], accessed November 2017.
[2] Lindt, “FAQ”, Lindt Corporate Site, [https://www.lindtusa.com/faq], Accessed November 2017
[3] Lindt, “The Lindt Sprungli Farming Program”, Lindt Corporate Site, [http://www.chocolate.lindt.com/world-of-lindt/sustainability/the-lindt-spruengli-farming-program/], accessed November 2017.
[4] P. Läderach, “Predicting the future climatic suitability for cocoa farming of the world’s leading producer countries, Ghana and Côte d’Ivoire” Springer Link, [https://link.springer.com/article/10.1007%2Fs10584-013-0774-8], accessed November 2017
[5] P. Läderach, “Predicting the future climatic suitability for cocoa farming of the world’s leading producer countries, Ghana and Côte d’Ivoire” SpringerLink , [https://link.springer.com/article/10.1007%2Fs10584-013-0774-8], accessed November 2017
[6] Lindt, “Lindt & Sprungli Achieves 2016 Cocoa Commitment”, Lindt Corporate Site, [https://tinyurl.com/y9lu6vzk], accessed November 2017
[7] Lindt, “Responsible Procurement”, Lindt Corporate Site, [http://www.lindt.ca/en/world-of-lindt/sustainability/responsible-procurement/], accessed November 2017
[8] Anna Pujol-Mazani, “Is Your Chocolate bar Fueling Deforestation in West Africa?”, Reuters, [https://www.reuters.com/article/us-westafrica-chocolate-deforestation/is-your-chocolate-bar-fuelling-deforestation-in-west-africa-idUSKCN1BP1J4], accessed November 2017
[9] Battle I, Tous J (1997). Carob tree (PDF). Rome, Italy: International Plant Genetic Resources Institute. ISBN 978-92-9043-328-6. .ccessed November 2017
[10] Rebecca Rupp, “Can GMOs Save Chocolate?”, National Geographic, [http://theplate.nationalgeographic.com/2015/03/18/can-gmos-save-chocolate/], accessed November 2017
Hi AT,
Thank you for your article. I agree with your recommendations to Lindt, and wonder if we could even draw some more from our discussion of IKEA? For example, what is stopping Lindt from purchasing some farms, or taking an ownership stake, to drive more money into the region and take on full responsibility for its actions and impacts?
I think an industry consortium is possible, but it will need companies to sign up to it. The fairtrade movement is a good example of a parallel, and yet I believe that the message is lost on the majority of consumers. Unfortunately, perhaps the forces of capitalism will be too great to create a large shift without changing the final consumer demand – that, in my opinion, is where Lindt should be focusing.
@AT, great post, and I appreciated your comments too, @NicoK! Although @NicoK posited that Lindt could take more action to become vertically integrated, I would like to posit that Lindt may also want to think about diversifying its product strategy in light of climate change affecting cacao bean farming. Why would one company rely so significantly on one plant? Perhaps they could develop more non-chocolate candy brands or acquire other brands.
Although you suggest that they could pursue GMO-cacao as an alternative, I hesitate to think that this could prove effective from a PR standpoint. Public sentiment is in the favor of healthier alternatives, and with chocolate already being considered unhealthy, I don’t think adding GMO ingredients will help its case.
AT – What a thoughtful article summarizing the challenge facing Lindt! I disagree slightly with some of you and @Nico’s recommendations. They both assume that, like Ikea, Lindt is the industry leader and that it would be capable of demanding higher standards from farmers and organizations that clear rainforest land. Unlike Ikea, Lindt only has 9.9% marketshare, trailing behind Hershey with 44.6% and Mars at 29.2%. I also don’t think the number 3 company in the market can successfully build an industry consortium without the support of the other two industry giants who together command 3/4ths of the market. I also disagree that clamping down on farming techniques wouldn’t affect their cacao supply. If I was a cacao farmer, I would just stop selling to Lindt and take my business elsewhere. Buying cacao farms and controlling their own supply could be one possible solution!
Citation: ttps://www.statista.com/statistics/238794/market-share-of-the-leading-chocolate-companies-in-the-us/
Thanks for the great post, @AT!
I agree with you that the severity of the threat demands a stronger response from Lindt. While it is admirable that the company is attempting to pour more capital and education into its supply markets, these solutions do not address the fundamental root cause of rising temperatures. While education on the risks of deforestation may slow climate change, the impact the rest of the human population has on global climate change will likely be far faster than any slow-down Lindt can bring about.
I therefore agree with @scolby that Lindt simultaneously needs to decrease its dependence on cacao. However, rather than diversifying into non-chocolate candy, I think the company could do this by changing the recipe of their chocolate to include less pure cacao. Ferrero SpA in Italy provides one compelling example: when the company first entered the market for chocolate confectionary, it decided to include a large percentage of hazelnuts in its recipes due to the high prices of cacao. The situation has now reversed, and the company is finding hazelnuts more difficult to source than chocolate. I would imagine the company is considering shifting raw materials prices as it develops new recipes and revises old ones, and I believe Lindt could do the same.
Thanks AC, this is a very interesting read. As an avid fan of chocolates I definitely do not hope to see that climate change would one day significantly impact the supply of cacao bean and, as a result, the supply of chocolate products. I agree with you that what Lindt is doing at the moment would probably not suffice to cope with climate change in the mid- to long-term. In addition to the recommendations you made to the company, I also wonder if they could innovate the growing techniques of cacao beans to make the plant more resistant to changes in temperature and humidity? At the same time I am a little concerned about the introduction of GMO cacao beans as that could raise concerns among customers who are health-conscious. Finally I am eager to learn about the actions the chocolate production industry as a whole would take to better cope with climate changes.