Episode 6 The Bottom Line

last? And now The Bottom Line with Evan

Davis. Today we are talking about

chocolate. Partly because it is a delicious subject, but also because

if we can understand the business from cocoa bean to consumer

product, we can understand the ways of the world, commodities, trade

between north and south, speculators manufacturing and marketing. It is

all there in that tasty slab. Each week, his nurse leaders gather for

the BBC Radio 4 programme, The Bottom Line, and you can see it as

well as he it. -- hear. I have three gas from different

pieces of the industry. Guests. -- let's learn what their companies

bring to the party and how they add value to the cocoa beans. The

majority of the world cocoa supply is grown in West Africa. My first

guest, Kojo Amoo-Gottfried, travels from Ghana to be with us today.

Welcome. You are the manager for Kargil in Ghana, one of the world

was the biggest companies. Tell us what they do. It is one of the

largest privately held companies in the world, involved in in the food

and energy sector. It is a big agricultural company, isn't it? It

trades, buyers and producers. With sauce from foreigners, we trade and

process. -- farmers. Watt sitting next to you is someone who would

represent one of your customers, Jonathan Horrell, the director of

global sustainability. Another large company that no one has heard of but

people had heard of it, but you changed your name from Craft,

swallowing Cadbury and people have heard those. We have existed since

the end of 2012. It has left us with a different heritage, notably with

products like Cadbury and Toblerone. Not to mention Powell coffee brands

and biscuit rants. -- our. So you by the processed cocoa butter and other

bits and make products that go onto shelves, like chocolate to drink,

eat and snacks. That is exactly right. We use the separate

ingredients produced by companies such as Kojo Amoo-Gottfried works

for. So you are also a bit of a competitor. We wouldn't go into the

level of buying from farms within the countries. Where we buy the

cocoa beans we would buy from exporters such as Cargill. The

question is whether we buy it as a bean or a processed product. Finally

we have Sophi Trancell, who works for Divine chocolate. What was the

story behind Divine? The cooperative in Ghana voted in an annual general

meeting to set up a chocolate company in the UK to gain the value

of the cocoa they grow. We were established in 1998 and apart from

chocolate, what makes Divine special is that cocoa farmers own 45% of the

company, with seats on the board and influence over how the company is

run. They also received 45% of the profit. Two of you sell chocolate in

some form. To understand what your companies do, we need the benefit of

the props that we have. We have vials with stages. We have the cocoa

beans in here, about 1-2 centimetres long. They are long. Tell me about

these Kojo. This is what happens after the cocoa has been fomented

and dried. This is the bean. -- fermented. This is what is bad and

goes to processing. But before you get to that stage the farmers have

done a lot of work. They have prevented it for seven -10 days in

their farms and then dried it in their farm for-7 days. -- 5-7/ we

have these other things here, a chocolate powder that looks like

stuff that you may print out of. It is rather dusty and I will sneeze if

I throw that in. Then we have cocoa liquor which isn't a liquid. It

would be liquid if it was at a different temperature. It is solid

at room temperature. It is beginning to sound -- smell a bit chocolatey.

It begins with the being sent to the factory, then it is roasted at a

high temperature and at that roasting, you get a liquid becoming

the cocoa liquor, and then you can send that for chocolate or you can

take it another step where you apply hydraulic presses to the liquor and

you get butter and powder coming out. So the liquor comes out of the

bean and then you get powder, which we have here, and the cocoa butter

which is white, looking like candle wax. It doesn't smell very nice.

That is what you put in the chocolate. We have one final

product, it is none of yours. It has a mix of butter, powder, liquor,

sugar, milk. You take the combined product and mix it with milk and

sugar, creating the basic chocolate recipe. What is interesting about

this press is that the butter that you create in the powder you create

for our screens and biscuits and drinks, and the markets can be

totally different. What is interesting is that Europe and the

US have 70% of the demand of chocolate. When it comes to powder,

it is worldwide. In emerging countries, they are grabbing onto

the powder is before they get to chocolate. As wealth... As you get

into the chocolate taste, you work towards chocolate. Let's talk about

the relationship between growers and the rest of the industry because,

obviously, as I understand it, shout me down, but, in an ordinary bar of

chocolate like this one, the retail price maybe 5% would actually go to

the grower or farmer. Is that right's is that a lot, or a little?

Should we be shocked? Was that a reasonable return the grower? The

question of returns, proposed as the proportion of the end price might be

less significant than whether the grower is actually thriving as part

of a thriving community. In cocoa, increasingly, that has not been the

case. Whether or not farmers have been able to invest in their farms

and whether or not they have the right skills or access to higher

yield varieties, or whether the community is a good place to live,

all of these factors come together. The experience in cocoa has been

that the formula has been wrong, out of kilter. A lot of people are

concerned about the future of cocoa supply because of the pressure on

farmers. Companies that are operating like Cargill are doing

very well. And farmers over the last 20 years have been doing badly. So

badly that lots are dropping out of cocoa farming, hence why there has

been a deficit in the crop for four out of five years. Big companies

recognise the problem in terms of securing cocoa and they begin

investing in making it more productive. But are they focusing in

making it more productive or ensuring farmers are paid enough to

carry on doing it's that was a very interesting critique. Come on then

Kojo. Low if you look at Cargill, we have been doing this for a long

time. If a farmer feels, the chain feels. We can point fingers, but it

is critical for the farmer. If white American men were growing cocoa

beans, the price of cocoa beans... I offer this as a hypothesis, the

price of cocoa beans would be higher and they would get more than 5%.

There is something about the structure of the industry, with

power in the middle and the company is in the middle, and small guys at

one end, meaning the little guys have little market power and the big

people have a lot of market power. Why has it ended up in that way? In

a place like Ghana and the Ivory Coast, where the government has

stepped in and the government sells a head and takes care of the farmer.

But as we know, Ghana is a large income earner from cocoa. It is

critical the farmer -- that the farmer is taken care of. People have

few choices. We need to look at it from that context. They will switch

to other crops, for instance in the Ivory Coast where people switch to

rubber when prices aren't great. We understand that will happen.

Something that is important in the difference between the European

farmer in the west African farmer is the scale of the operation. The

average cocoa farm is one heck care and very few farmers in that area

have that scale. -- hecatre. --hectare. All those things need to

change and develop to enable it to thrive. We talk a lot about

productivity in the cocoa sector and concerns of the future cocoa supply,

but if you view it as a productivity problem you miss half of the issue

because it is a community issue. Does the community does the

generation coming want to have a cocoa farm? They might want to go to

the city. A lot is happening altogether. Sophie, you gave us the

original idea that got us into this but what do you feel about the

responses you have heard? Part of it would come back to the fact that the

palmers R4 because they have tiny farms. It is interesting because

Cadbury has been involved in cocoa for a long time. Perhaps 100 years.

It is not a big scale crop. It is dominated by small holders. The

exploiting and primary processing is concentrated, and it is incredible

how concentrated. Tell us how the price fluctuates? What has Obama get

free tone of beans? In Ghana he gets about $70 per bag at the moment. Bag

is not a time? 64 kilograms. That is the government price. A dollar per

kilo. What is your capacity? 2 million tonnes? We are below

700,000. We are not in the 50% market. We make no. -- no. We are a

very large company and we have some of the world 's biggest chocolate

brands. In fairness, if he did not have people who are successfully

marketing chocolate, perhaps more successfully than you are, they have

been at it longer and have been successful because they sell very

large amounts of it. If they weren't doing that, the farmers would not be

better off. Ultimately the income of the farmers depends on people like

me buying the product and eating it. You want the big companies. We

buying cocoa and so it is processed by Kargil. These are hugely

profitable companies while farmers have not done well at all over the

past 20 years. What I'm saying is that if you want farmers to carry on

farming July to give them a voice and give them better pay. These to

recognise that. We depend on thriving cocoa communities to give

us a sustainable supply and what you need is effective investment,

training, activation. A decent return to encourage people to do

that. You need transparency over what those returns are. There is a

question about the price but does the farmer know what the world

market price is? The chain is Ray Long, what share of it are they

getting? -- very long. What proportion of chocolate as can be --

is consumed as chocolate as a chocolate bar or what proportion is

as a snack bar? Most of our chocolate is chocolate. We make

chocolate bar type things but across most of Europe most of our chocolate

business is making chocolate tablets or buyers. -- buyers. People get

very attached. Dark chocolate has become more popular here in the UK.

You see a strong attachment to the chocolate you had as a kid. That is

something which you see that people hold on to that. With love chocolate

because it melts at body temperature which is a nice experience. We eat

twice as much chocolate as the Americans and we all know what

American chocolate is like. What is it like? It is temperature

resistance so it makes it more difficult to eat it because you end

up with a mouthful of it. European chocolate is better than chocolate

iPad in the US but I did not know that it melted at different

averages. America has huge climate differences if you move chocolate

around you to be challenged if you have products that melt a lot. That

is fascinating. We have a lot of challenges moving chocolate around

America because these difficult to move it around. You have to keep it

in, not refrigerated, but controlled temperature. We do not want it to

freeze but we do not want it to get hot. If it has been too hot to cold

that comes with a white on it whether that has come out of the

product. That is fascinating. What you observe is that the core

chocolate consuming nations are North European. Belgium,

Switzerland, Germany, the UK, and some of France. How much chocolate

is consumed in Ghana? They do but it all has to do with a luxury. About

1% chocolate consumption on the continent is the norm. It is a very

hard bar of chocolate. It is the heat resistant part of it. Access to

refrigeration is low. If you are selling it on the road or not

refrigerated it is difficult to carry some of these brands. Emerging

markets, Brazil, China and India must become convergent with the

Europeans and the US? Yes. We have a rise in sales of 20 to 30%. They are

a powerful force. Customers are asking us to be in these markets. We

are building a factory in Brazil and Indonesia and we're getting closer

to the customers because they are getting these markets. It is all

about scale. At some point you in to the risk of consumers not being able

to pay for it if it is too niche. You are anticipating a growing

demand. We have seen it. 3.5 million tonnes ten years ago and now we are

talking about 4 million and more than that. It is not grow in many

places, it need specific climate, good moisture and temperature all

year. It grows well in the rainforest and it grows 10 degrees

above or below the equator. It flourishes in the rainforest and

there is less rainforest. We have a lot of demand in the Asia-Pacific

region. We want more grown in Indonesia because of liquor sauce

more of it there than it will be easier. They can grow almost

anything in Indonesia. Demand is growing, supply will need to grow,

but about what climate? Is climate something that you all thinking

about? A lot of studies say that by 2050 half of the cocoa belt will be

too dry. You should be having nightmares about that. There is a

lot of research going on concerned about this. I am personally from a

cocoa farming family. My parents went to school based on cocoa income

and they see the yield dropping since my father stopped looking

after the farm. Even on my own farm, we are looking out for the seed

varieties. In Ghana the Cocoa Board will tell you that they have

migrated 6% of the seedlings -- 60% of the seedlings to more productive

ones. What we forget is that technology is important. We took

about the seed varieties where the industries investing in technology

to make sure that we can stand the heat. Resilience is key. Two nobody

knows what will happen to whether in West Africa. You cannot predict

accurately what will happen but you can help farmers to become more

resilient. Increasing the number of shade trees, those things help in

managing a less reliable climate. It worries me that you are doing

intensive farming where you are using more inputs and it delivers an

increasing yield but it is worrying whether it will do it in the

long-running? It is not in our interests that doesn't but it is a

worry if it does not. The farmers will be devastated and so that sends

of those intensive farming work in the long-running? The trees used to

be productive of 30 years but the new hybrids are 20 years which means

that as a farmer if you invest in planting these new plants and grow

them, you have an income coming in for 20 years when you use to have

one for 30 years. You will have to replant when you are quite old.

Those things are quite challenging. There are new techniques so that

trees can come into production more quickly. Now it might produce pods

in a year or two. There is then a balance between productivity and

long-term yield. You need to be able to produce... Land is light running

out -- running out. Coming back from seeing sugar in Malawi, they were

getting the yield up but you are concerned about what will be like in

ten years time when you have been irrigating for so long. What will

the soil like? We do not have that problem in cocoa. But to make

chocolate win need sugar. When you look at Indonesia and West Africa,

there is a big difference in yield. On the same land you can do more and

so that is why it is critical that we scale up. Price will not do it

all. To any of you feel that at some point humans will fall out of love

with this product? We have liked it for millennia, it goes back quite a

long way but it is kind of good for you but it is not good for you in a

quantity that we eat its? It is not a health product. It is a joy

product and people will not fall out of love with it. People will

continue but they might be to cherish the moment more because of

the good of their health they might need to eat smaller amounts of it.

Whenever we talk about food of this programme, it makes me hungry so

this is a good point on which to draw to a close. Thank you to all of

my guests. Thank you all for listening and I will be back with

more guests next week. Downloads are available on our website and you can

always listen to it on BBC Radio 4. We like to get your e-mail Sue drop

us a line -- so drop us a line.