Unveiling Cocoa Processing's Global Embeddedness
Revealing global dynamics, colonial legacies, and corporate influences that shape the embeddedness within the cocoa processing node in the chocolate value chain
Cocoa, the beloved bean that brings us chocolate, undergoes a fascinating transformation on its journey from farm to finished product. At the heart of this metamorphosis lies cocoa processing or grinding, a vital stage where cocoa beans are turned into an array of semi-processed cocoa ingredients. These components, such as Cocoa Liquor, Cocoa Butter, Cocoa Cake, and Cocoa Powder, form the cornerstone of chocolatiers, bakeries, and cosmetic companies' creations.
Yet, have you ever wondered why cocoa processing became so deeply embedded in the West, particularly in Europe and North America? Was it due to a lack of resources or capabilities in cocoa-producing regions like Ghana? The answers to these questions reveal a tale of global division of labour, colonial legacies, and power dynamics that continue to shape the cocoa industry today.
The West's Strategic Embedding of Cocoa Processing
The decision to embed cocoa processing in the West was not a matter of happenstance. While cocoa-growing regions like West Africa possessed the necessary resources and infrastructure for processing, geopolitical interests guided a different path. The West strategically positioned itself to control the high-value segment of the cocoa value chain, harnessing cocoa's transformational potential.
This geographical embedding allowed the West to develop unparalleled expertise in cocoa processing. The adage, "practice makes perfect," holds true here. With continuous practice came not only mastery in cocoa bean conversion but also the design and maintenance of the intricate machinery required for the process. Furthermore, it bestowed upon the West the authority to dictate what constituted "quality" in cocoa beans and semi-processed cocoa products.
The Shifting Landscape: Cocoa Processing in Producing Countries
While the historical stronghold of cocoa processing lay firmly in the West, there have been perceptible shifts in recent years. Cocoa-producing countries like Ghana and Ivory Coast are increasingly emerging as cocoa processing hubs. This shift seems like a positive development on the surface, bringing cocoa processing closer to the source of supply and potentially offering economic benefits to producing nations.
However, a closer look reveals that this transition is not solely driven by a desire to empower producing countries. It's a strategic move by multinational corporations to maintain dominance in the cocoa industry regardless of geography.
Proximity to Supply and Cost Savings
Establishing cocoa processing facilities in producing countries offers several advantages to multinational corporations. Firstly, it reduces shipping costs significantly. Processing cocoa locally means that companies can avoid the exportation of waste products like cocoa husks, which are typically discarded in the production process. Instead, only the concentrated, high-value products such as cocoa paste and cocoa butter are exported, reducing shipping volume and costs.
Additionally, shifting processing operations to producing countries often comes with lower labor costs. This cost-saving strategy enhances profit margins for these corporations.
Maintaining Dominance and Appeasing Critics
Multinational cocoa companies are keen on maintaining their dominance in the industry. Establishing a foothold in producing countries allows them to assert control over the entire supply chain, from bean to bar. This vertical integration ensures that they remain key players, regardless of where cocoa is grown or processed.
Moreover, this expansion serves as a strategic move to quell criticism about their perceived lack of investment in producing countries. The assumption is that the presence of large processing facilities will create a multitude of jobs in these nations. Consequently, governments often offer enticing incentives to attract these companies, ranging from corporate tax exemptions to import duty waivers and the full repatriation of profits.
The Hidden Costs for Cocoa Farmers and Citizens
While the relocation of cocoa processing to producing countries may indeed make economic sense for corporations, it comes at a hidden cost to cocoa farmers and the citizens of these nations. The burden of funding the development of an enabling environment for these multinational corporations often falls squarely on the shoulders of the local population.
Citizens end up shouldering the responsibility of replacing the corporate tax exemptions granted to these multinationals. This means that while cocoa processing becomes cheaper for corporations, it places an increased tax burden on farmers and citizens alike. This paradoxical situation sees the very individuals who cultivate the cocoa beans funding the corporate-friendly business environment.
In effect, the benefits of this shift in cocoa processing remain elusive for cocoa farmers and citizens of producing countries. As the industry undergoes transformation, it's imperative to critically examine who truly bears the costs and benefits of these changes.
The Colonial Connection: Setting Prices and Rigging Markets
The colonial legacy cast a long shadow over cocoa production and trade. Colonial powers, which also functioned as cocoa bean buyers, played a pivotal role in defining the rules of the game. They introduced the concept of commodity markets, where cocoa prices were determined not by the farmers but by the forces of supply and demand.
This arrangement, while appearing equitable on the surface, granted substantial control to cocoa processors. They could manipulate the system through tactics such as hoarding cocoa stocks or implementing well-intentioned but ultimately detrimental sustainability programs in African cocoa-producing regions. Consequently, cocoa bean prices became increasingly susceptible to external market forces, with little regard for the farmers' plight.
The Power of Ratios: Setting Cocoa Prices
In the world of cocoa processing, ratios reign supreme. These ratios dictate the price of cocoa products such as cocoa butter in relation to prevailing cocoa bean prices. The industry adjusts these ratios to align with their competitive landscape, production costs, and profit margins.
Unlike cocoa processors, cocoa farmers lack the luxury of ratios to negotiate prices. They are left at the mercy of government bodies like Ghana Cocoa Board (Cocobod), which, in turn, navigate the complex web of cocoa commerce to engage with buyers. This power asymmetry perpetuates a system where the farmers have minimal agency in determining the value of their beans.
Cocoa, the source of chocolate's delight, undergoes a remarkable transformation from bean to product. The heart of this process, cocoa grinding, unveils a story of global division of labour, colonial legacy, and corporate influence in the cocoa industry.
Initially embedded in the West due to strategic choices, cocoa processing's shift to producing countries holds hidden costs. Multinational corporations seek proximity to supply and cost advantages but shift tax burdens to local populations.
The colonial legacy further complicates cocoa pricing, as colonial powers influenced commodity markets, affecting cocoa bean prices. Ratios determine cocoa product prices, giving processors an upper hand over farmers.
Understanding this complex narrative is crucial for a fairer cocoa future.