HOW ARE CHOCOLATE COMPANIES DOING IN BOOSTING COCOA FARMERS’ INCOMES?
OUR RESEARCH SUGGEST THERE'S A LONG WAY TO GO...
By UWE GNEITING Senior Researcher at Oxfam, based in Accra, Ghana.
This Valentine’s Day, with chocolate on many people’s minds, we launch a new research report that looks at chocolate companies’ efforts to raise the incomes of cocoa farmers in Ghana. Our hope is both to share lessons about what does and doesn’t work to improve farmers’ lives – and also to hold big companies to account, as there have been few independent, public assessments of how they have been doing to boost incomes.
‘Only one of the ten companies had a concrete commitment on farmers achieving a living income.’
We analysed the work of ten of the largest companies in the cocoa sector – six chocolate manufacturers (Nestle, Mondelez, Mars, Hershey, Ferrero and Lindt) and four cocoa traders/processors (Cargill, Olam, Barry Callebaut, ECOM). We reviewed sustainability reports, interviewed company representatives and surveyed more than 400 cocoa farmers in 24 communities across Ghana’s cocoa-growing regions.
For full details, read the full report and summary – but here are my top ten takeaways:
1. Sustainability programmes remain the primary vehicle companies use to raise farmer incomes
Sustainability programmes have been around for a while but companies seem to be doubling down on them. Nine of the ten companies we looked at have committed to source 100% of their cocoa from farmers participating in their sustainability programmes. They reportedly already source between 60% to 90% of their cocoa from farmers in these programmes. The number of farmers covered by these programmes is significant: just the four traders/processors in this study alone reach an estimated 429,000 farmers in Ghana through sustainability programmes – approximately half of the country’s cocoa farmers. So, it made sense for our analysis to focus on these programmes as companies’ primary support vehicle for farmers.
2. Companies are using very similar approaches to raising farmer incomes – centred on productivity
One observation that came out early in the research process was just how similar companies’ income interventions are. Once you go beyond branding, they typically involve nearly identical farm-level interventions mostly centred on productivity (98% of farmers). Farmer income strategies have become more holistic – and now include diversification projects and village savings and loans associations (VSLAs) – but farmers participate in these wider strategies to a much lower extent (about 20% of farmers use them). The fact that most sustainability programmes are implemented by a handful of traders/processors helps to explain the high level of similarity between them. As one trader representative told me, sustainability programmes are 80% the same across buyers and 20% customised.
3. Programmes need a clear living income goal
Surprisingly, several companies told us early on in the engagement that that they are currently not working towards delivering a living income in their programmes. This is in stark contrast to companies’ public statements in support of a living income for cocoa farmers. It also was surprising as each company in our sample had made raising farmer incomes a central priority of their sustainability programmes. . However, companies were hesitant about assuming responsibility for farmers achieving a living income. In our sample only one of the ten companies had a concrete commitment on (some) farmers achieving a living income.
4. There is little evidence that companies’ sustainability programmes have meaningfully raised incomes
Companies were candid about their limited success so far in raising farmer incomes. Despite boosts to productivity being seen as the central income lever by companies, low and volatile productivity has remained a challenge. This is reflected in our own analysis, which found low productivity levels – below 400kg/ton – for most farmers we surveyed.
‘Farmers have been hammered by surging production costs, in particular for fertiliser (up 200%), agrochemicals (+43%), and hired labour (+51%)’
Several companies admitted to not meeting productivity targets and highlighted the uphill battle of merely stabilising yields given ageing farms, changing weather patterns and the risk of disease. Companies also expressed humility about how much their diversification interventions could make meaningful contribution to boosting incomes. Beyond anecdotal evidence of positive impact from a few interventions on a few farmers, we found no large-scale evidence of farmers making meaningful progress towards a living income through sustainability programmes.
5. There’s a lack of data on farmer incomes
Our efforts to assess the impact of companies’ income interventions were hampered by a lack of data shared by companies. Only two companies publish farmer income data for Ghana, and only one has published data for more than one year. Companies appear to still be figuring out how to systematically track and report on impacts on income. In contrast to reporting requirements around child labour or deforestation, companies currently do not face enough pressure to robustly and consistently report progress on income.
6. Nine in 10 cocoa farmers say they are worse off than three years ago
As company data was limited, we conducted our own analysis of farmer income trends. The results were sobering. A 20%+ production decline between the 2019/20 and 2021/22 harvesting seasons combined with rocketing costs of production (and living) means many cocoa farmers in Ghana are struggling to make ends meet.
Although government-imposed higher farm gate prices helped to slow income decline, farmers’ net income still decreased by an estimated 16.4% between the 2019/20 and 2021/22 harvesting season. As a result, close to 90% of farmers stated that they are worse off than three years ago.
7. High costs are a major barrier to improving incomes
Farmers have been hammered by surging production costs, in particular for fertiliser (up 200%), agrochemicals (+43%), and hired labour (+51%). High costs were also identified as the primary barrier for higher adoption rates of sustainable farming or “good agricultural practices (GAP)”. In our survey, 80% of farmers stated that applying GAPs also significantly increased their production costs. However, lowering farmers’ production costs has so far not been consistently emphasised by companies as an income lever.
8. Premiums paid to farmers are too low
Companies aren’t really using price premiums to raise farmer incomes. Although, most farmers in our sample reported they got a premium, these are too low to make a meaningful dent into closing farmers’ living income gap. While companies commonly report paying $70 in premiums per ton on average, most farmers stated that they receive between 13 Ghanaian cedi (GHC) and GHC 15 per bag, which translates into $35 to $40 per ton. Only one company appeared to consistently pay GHC 25 per bag, which comes close to $70 per ton.
9. Companies are not focusing on women’s cocoa incomes
Our survey found women farmers’ income have fallen even more than men’s. However, companies’ are not consistently looking at income through a gender lens, as gender sits under the community pillar (not livelihoods pillar) of most sustainability programmes. The main support for women is through non-cocoa related interventions, especially village savings and loan associations (VSLAs). Without a gender-inclusive design focused on strengthening women’s role in cocoa, living income strategies risk helping men rather than women.
10. Companies are reflecting and experimenting
Across companies, interviewees displayed a healthy level of critical self-reflection on the effectiveness of their income interventions. It was refreshing to see companies be open about the difficulty of reliably improving incomes, in particularly of the most vulnerable farmers. Strategy and reflection processes related to farmer incomes seemed to be ongoing across companies. So was the planning and/or implementation of living income pilot projects. The outcomes of these processes will be watched with interest.
HOW CAN WE DO BETTER IN THE FUTURE?
Our analysis very much focused on the status quo, and the next steps will be to ask how we can address the challenges identified in this research. The report suggests we need to see a series of shifts in companies’ prioritisation and approach to enable them to raise incomes in a more meaningful way:
From working on farmer incomes to committing to a living income
From sustainability programmes as primary vehicle to aligning procurement practices
From focusing on farm productivity to focusing on farm profitability
From minimizing sourcing costs to increasing supply chain investments
From data secrecy to income transparency
From fragmentation to collective actions
From focusing on land size to addressing land tenure
From gender as an add-on to gender-inclusive design
From sidelining to strengthening farmer organisations
Want to find out more? Read the full paper, Towards a Living Income for Cocoa Farmers in Ghana: Assessing companies’ efforts to date