Too Hot for Choc?
With global warming constricting cocoa production, the future of chocolate is on a rocky road.
More than the quintessential comfort food, chocolate drives a $102 billion global industry [1]. On Valentine’s Day 2015, Americans alone spent $1.7 billion on the sweet treat [2]. Consumer demand is expected to rise 30% by 2020, fueled by developing countries such as China and India [3]. But can the supply of cocoa – the key ingredient in chocolate – keep up in the face of climate change?
Growing Pains
Cacao trees thrive in a specific, limited geography which confines production to 20° north and south of the equator [4]. As of 2016, the Ivory Coast and Ghana together produce nearly 70% of the world’s cocoa [5]. However, as climate change increases temperatures in those areas (without sufficient rainfall to offset evaporation), a change in only 1-2°C could shrink suitable regions considerably [4]. Due to global warming, these effects are expected to be observed between 2030 and 2050 [4].
Image adapted from Läderach et al. 2013 [6].
Mars – Impact and Action
With FY15 net confectionery sales of $18.4 million, Mars Inc. is a global leader in the candy industry [7]. As the largest buyer of cocoa in the world, the company is acutely aware of the threat posed by climate change, especially in West Africa. In addition to being vocal in campaigns to combat global warming, Mars is pursuing two strategies to protect its raw material sourcing.
First, the company is diversifying its supply base and expanding into other promising localities, such as Latin America. In April 2016, the company acquired Hacienda La Chola, a 485-hectare cocoa farm in Guayaquil, Ecuador, signaling a diversification away from its historical supply base. Known for its technological innovation and irrigation systems, the purchase expands the company’s research and best-practices deployment base in the region [8].
http://www.confectionerynews.com/Commodities/Cocoa-s-future-lies-in-Latin-America-Report
Second, Mars has taken an active role in supporting its supply chain. Farmers in West Africa receive just 3.5% to 6.4% of the price consumers pay for a candy bar, a 16% decrease since the 1980’s [3]. Coupled with other difficulties of farming – such as long growth cycles of cacao trees (5 years to maturity) and high susceptibility to disease ($750 million in damages per year) – growers face low productivity and poverty [1]. As value continues to be squeezed from the supply chain, many growers are abandoning the industry. With the average age of growers at 51, sustainability is in serious question. In fact, pressure upon the industry is so great that Ghanaian and Ivorian leaders are calling for an “OPEC for Chocolate” to maintain a larger piece of the pie. By investing in local processing, they have the potential to change the game for manufacturers such as Mars [5].
In 2009, Mars committed to sourcing 100% sustainable cocoa by 2020, meaning farms from which they source would meet certain environmental and social standards and practices. Certified farms would ensure a level of quality, and farmers would be paid a premium over non-certified growers. In addition, Mars instituted Cocoa Development Centers to provide fertilizer, training, international donor agency support and research into variants that better withstand temperature changes, pests or disease [9].
Mars also intends to reduce its own greenhouse gas emissions. The company plans to be carbon neutral by 2040, and reduced carbon emissions by 25% between 2007 and 2015 [10]. In addition to individual effort, Mars united with 14 other food corporations, including competitors such as Hershey’s and Nestlé, to address the issue at scale. In November 2015, the group released a letter appealing to world leaders for accelerated regulatory action [9]. A month later, at the Nations Framework Convention on Climate Change, 195 countries agreed on efforts to limit global temperature rise below 2°C [11].
Role of Science and Recommendations for Mars
Where regulations may rein in the effects of climate change, science has the potential to help cacao trees survive in a new normal. Mars has organized networks of breeders to discover in the genome resistance to disease, efficient water and nutrient use, and adaptability to changing weather conditions. The difficulty lies in preserving the quality of cocoa produced by disease-resistant variants, as “natural hybrids” have delivered poor-tasting cocoa [2]. Other efforts are underway to create shorter, more drought-tolerant trees that require fewer resources [2]. Yet, regardless of how efficient cultivars become, successfully increasing yields may involve more structural improvements, such as improved irrigation systems and fertilizer distribution [2]. Mars should continue investing in research and best practice deployment, scaling the effort against climate change, and supporting the supply chain from a social and business standpoint. Ultimately, the future of chocolate in response to climate change relies on a triangulation of efforts from the public and private sectors, scientific and academic circles, and infrastructure improvements within local communities. (794)
[1] Henein, Maryam. “The Future of our Chocolate Supply.” https://www.honeycolony.com/article/the-future-of-chocolate/. Accessed November 2016.
[2] Schmitz, Howard and Shapiro, Howard-Yana. “The Race to Save Chocolate.” Scientific American. https://www.scientificamerican.com/article/the-race-to-save-chocolate/. Accessed November 2016.
[3] Goodyear, Dave. “The Future of Chocolate: Why Cocoa Production is at Risk.” https://www.theguardian.com/sustainable-business/fairtrade-partner-zone/chocolate-cocoa-production-risk. Accessed November 2016.
[4] Scott, Michon. “Climate & Chocolate.” https://www.climate.gov/news-features/climate-and/climate-chocolate. Accessed November 2016.
[5] Mungai, Christine. “Ghana and Ivory Coast want a bigger cut of world chocolate billions—why their ‘CHOCPEC’ tie-up could be a game changer.” http://mgafrica.com/article/2016-03-23-ghana-and-ivory-coast-want-a-bigger-cut-of-chocolate-billionswhy-a-chocpec-tie-up-could-be-a-game-changer. Accessed November 2016.
[6] Läderach, P., Martinez-Valle, A., Schroth, G. et al. Climatic Change (2013) 119: 841. doi:10.1007/s10584-013-0774-8.
[7] Candy Industry. http://www.icco.org/about-cocoa/chocolate-industry.html. Accessed November 2016.
[8] Nieburg, Oliver. “Mars buys Ecuadorian Cocoa Farm for Scientific Research.” http://www.confectionerynews.com/Manufacturers/Mars-buys-Ecuador-cocoa-farm-Hacienda-La-Chola. Accessed November 2016.
[9] Mars Inc. Website. “Our Cocoa Policy.” http://www.marsgcc.com/global/about-us/policies-and-practices/cocoa-policy. Accessed November 2016.
[10] Wilcox, Meg. “Global Food Companies Unite On Climate Action.” https://www.ceres.org/press/press-releases/global-food-companies-unite-on-climate-action. Accessed November 2016.
[11] UN Climate Change. “Historic Paris Agreement on Climate Change. “ http://newsroom.unfccc.int/unfccc-newsroom/finale-cop21/. Accessed November 2016.
I particularly agree that science has the potential to help cocoa trees survive in the new normal. I wonder if this is something that Indigo can look into through altering genetics or microbiomes, especially given cocoa is a more premium product than corn or wheat.
The one thing I worry about is the competitive landscape of the chocolate factory. Given Mars produces relatively cheap chocolate, how could it ensure to keep prices low if it pays certified growers a premium to meet its goals of 100% sustainable cocoa by 2020? How would it make sure that Hershey’s or Nestle will not gain market share due to lower prices?
One solution could be premium product introduction, where Mars introduces a sustainable chocolate bar similar to “Divine,” where the packaging is much sleeker and contains a story of the social mission for fair trade. Could Mars differentiate itself this way, while connecting with consumers and fulfilling its sustainability mission?
Thanks for the post but let’s hope the answer to this question is no! As you mentioned in the beginning of your post, cocoa can only be grown in specific regions so this is not only a problem for local communities. Mars must increase awareness around the issue of climate change to make it a global issue. While chocolate is not particularly the platform people would expect to fight this epidemic from, I believe every large organization with the reach of a company like Mars is responsible for ensuring the proliferation of sustainable efforts across the world.
While I remain concerned about the supply of chocolate moving forward, I am most worried about the effect this could have on the farmers that depend on this crop as one of their only sources of revenue. Luckily, it appears that the Bill and Melinda Gates foundation has provided funding for research about how to diversify their crops into more heat-resistant plants like oranges and how to grow cocoa more effectively through better shading and various types of seeds to increase the resilience of the crops.(1) Hopefully this will help these farmers to mitigate some of the impact of climate change on their livelihoods.
(1) https://www.scientificamerican.com/article/climate-change-could-melt-chocolate-production/
Very interesting article, I appreciate that you tacked different aspects of how the climate changing affect the value chain of the chocolate business. I got particularly interested on the part you said that cacao trees are high susceptibility to disease, and I would want to further understand if the same type of disease affects the different part of the world in which cacao is important and what are being done to improve it. Additionally, from your article and the graphic, Latin America is growing, being prioritized – is it maybe because the climate change affects differently the region? Is it labor / tax costs? Or because of logistics / closer to final destination of the product?
Interesting news on sustainability in the sector: http://www.confectionerynews.com/Commodities/M-S-says-customers-do-care-about-sustainable-cocoa