Sustainable cocoa and coffee

Long read: the road towards living incomes and thriving cocoa farming communities asks for a sustainable food systems approach

January 21, 2024
Heleen Verlinden
International Communications

I like to think of myself as a mindful consumer. Whenever I can, I’ll buy organic produce, look for a fairtrade certificate or pass by the local farmer store. That is a comfortable position to be in. But I have a weak point: chocolate. Even chocolate that supposedly ticks all the boxes in terms of sustainability … most likely doesn’t. It’s no secret that my – and maybe your – favourite sweet treat is plagued by child labour, deforestation and low incomes for farmers.

Change seems to slowly appear on the horizon. Among chocolate companies, the consensus is growing that living incomes for farmers hold the key to solving these challenges. Investments in sustainable production, forest conservation and eliminating child labour can only be done when farmer households have an income that allows them to live a decent life, in the first place, and enough room to make investments in their farms, in the second place.

Why do farmers cut forests down? Because they feel like they need more land to increase their farms for higher incomes. Why do some recur to child labour? Because they need extra hands to secure their income. Ultimately, the fact is that, if they had an income that covered all their expenses, most of the problems would not exist.

Abdulahi Aliyu | Global Cocoa and Coffee programme director, Rikolto

But, this is where the bubble bursts: cocoa production alone often does not seem enough to provide that level of income… Not even if companies pay a living income reference price.  

“Achieving a living income will require a systemic approach, a systemic change”, reads the 2022 Cocoa Barometer. At Rikolto, we couldn’t agree more. For resilient and thriving farming communities, buyers and consumers need to play their part: it is their purchasing power that decides the conditions under which cocoa is grown. Inclusive business relations between companies and cocoa cooperatives are pivotal… But not enough. For a sustainable food system, we must look beyond cocoa as a crop, towards the farming system in which cocoa is grown. We believe that this food systems approach holds the key for farmers to build up resilient livelihoods and enhance their food and nutrition security.

Fair pricing is central, but higher productivity because of better production practices, income from other (food) crops and off-farm activities, and a strong enabling environment are all part of the solution.

Liesbeth Van Meulder

Cocoa and Coffee Programme Officer – EU Liaison | Rikolto

This is a story about the road towards a living income and sustainable food systems in cocoa producing communities. It’s a path with ups and downs, riddled with questions, and, spoiler alert: the journey is far from over. Tag along to explore the insights of my programme colleagues - our experts on the ground in Ghana and Côte d’Ivoire, and recent project evaluations and impact studies.

The start: two inclusive business models that share risks and benefits

We have been involved in two inclusive business models designed to move towards a living income for cocoa farmers: Lidl’s Way to Go! initiative in Ghana and Colruyt’s living income initiative in Côte d’Ivoire. While the exact setup of both business models differs, they share some similarities. They were both born in a context in which living incomes for cocoa farmers rose to the sector’s agenda, in Belgium under the influence of the Beyond Chocolate partnership. In both cases, the retailers committed to paying a premium to bridge the gap to a living income. In both cases, they were convinced that this would not be sufficient and they looked for ways to invest in additional income sources for farmers. Rikolto is not involved as a value chain actor, but in the income diversification and access to finance activities in West Africa

Lidl’s Way to Go! chocolate bars – Ghana  

In 2019, Lidl partnered with Fairtrade Germany and Africa, Kuapa Kooko cooperative and Rikolto for the launch of Way To Go! chocolate bars in its Belgian supermarkets. These are made from 100% traceable cocoa beans grown by 440 farmers from Konongo society in Ghana’s Ashanti region. What started as a test project in Belgium for which Lidl purchased 60 tonnes of cocoa in 2019, has grown into a chocolate range available in over 25 countries for which 2,500 tonnes of cocoa was purchased in 2022.

Based on the sales of the Way to Go! chocolate bars, Lidl invests an ‘income improvement premium’ for each ton of raw cocoa sourced on top of the fairtrade minimum price for cocoa and the fairtrade premium. Lidl’s ‘income improvement premium’ consists partly of a direct cash transfer to farmers to invest in their communities, and partly of an investment in training farmers in sustainable cocoa production so that they can obtain higher yields, and in the production and marketing of rice, yam, honey and soap. These activities help them diversify and increase their income levels. In addition, Lidl invests in the establishment of Village Savings and Loans Associations, which help farmers mobilise their own capital to increase investments into sustainable cocoa production and income diversification opportunities available in cocoa farming communities.

In this business model, the retailer takes on the commitment to invest not only in a price premium, but also in other factors that are expected to influence farmers’ incomes, based on the sales of the Way to Go! bars. As such, this relationship creates a win-win. Lidl is receiving higher quality and traceable beans and is able to buy the tonnage they require, while farmers feel that they are involved in a business relationship in which their efforts are respected, valued and rewarded accordingly.

Photo: Philippe Weiler

Boni Chocolat Noir 72% tablet – Côte d’Ivoire  

In 2020, Rikolto joined forces with Colruyt Group, Entreprise Cooperative de Saint Paul (ECSP), Puratos, Access Agriculture, Agro Insight and Fairtrade Belgium. Colruyt buys 100 tonnes of chocolate for its Boni Chocolat Noir 72% tablet from 102 farmers living in Daregba and Colonel, two communities in the San Pedro area.

With the funding of IDH and Colruyt, as part of Beyond Chocolate initiative, the alliance jointly developed an integrated approach towards a living income and tested several parameters identified as crucial to achieving a living income. One of them is pricing. The 102 cocoa farmers whose cocoa is transformed into chocolate bars for Colruyt Group, receive premiums and bonuses on top of the farm gate price fixed by the Conseil du Café-Cacao in Côte d’Ivoire: a fairtrade premium and Cocoa Trace premiums by Puratos. Additionally, Colruyt Group committed to paying a premium to farmers which is equivalent to the difference between the official farm gate price and the living income reference price. Other parameters that we considered in the design of the integrated approach, are productivity and quality improvements, income diversification, access to finance and agroforestry. Farm size was added as an additional parameter during the preliminary evaluation of the model by the Impact Institute.  

Also in this model, the selling price of the product enables the retailer to cover its production costs and premium costs. Next to that, the 3-year project funding from Beyond Chocolate plays an important role, as this is invested in the additional income diversification activities and facilitating access to finance for cocoa farmers.

Read the Impact Institute's impact report.

The first step is crucial, but not enough: a living income reference price

Colruyt’s living income pilot project ended in June 2023. A preliminary impact study of the project was done by the Impact Institute, diving deeper into the premise on which the project was built: that a living income reference price alone would not be sufficient. This gives some interesting insights.  

The study found that the current set-up of the value chain offers a financially viable business case for most of the value chain actors. The cocoa farmers, processor Olam, chocolate maker Puratos, bar maker Q-chocolate and the retailer Colruyt Group can successfully offset their costs via the sales of the bar. The cooperative, however, is dependent on premiums and project funding. Without the project funding, the cooperative might not be able to provide the same amount of services to cocoa farmers, which would in turn influence farmers’ production costs. And it must be added that farmers’ current ability to offset their costs is fragile as it is influenced by the Living Income Reference Price paid to farmers under the project, the availability of in-kind benefits (e.g. fertilisers) offered by the cooperative, the impact of climate change on yield and productivity, and the capacity to implement good agricultural practices.

Bottom line: the fairly new business model is financially viable and promising. However, what does this mean at the level of the income of the 102 cocoa households? By the end of the project in  June 2023, the average farmer household income had increased from USD 2,394 (without premiums) to USD 3,132 yearly (with premiums) . This is a significant increase of 31%.

Unfortunately, this average income is nowhere near the living income benchmark of USD 6,904 per year in cocoa producing areas of Cote d’Ivoire. While the average living income wage gap decreased, it is still USD 3,772 per year, meaning that the average farmer earns 45% of a living income. Therefore, 94% of the 102 households earn a yearly income below the living income benchmark, and 33% of the farmers continue to earn an income below the extreme poverty line.  

Afbeelding met tekst, Lettertype, grafische vormgeving, schermopnameAutomatisch gegenereerde beschrijving

The conclusions of the preliminary evaluation are clear: “the payment of premiums alone is not sufficient for farmers to reach a living income. Increasing productivity levels and income from other sources are necessary conditions for farmers to reach a living income.”  

In Ghana, in 2022, Rikolto in partnership with Fairtrade Germany supported 500 farmers to start using a farm record-keeping tool of fairtrade so they are better able to monitor their income and expenditures. For the year 2022, the records farmers have included show that their average income is USD 833, while their average expenses (including agri-inputs, hired labour and so on) are situated at USD 251. This leaves a profit of USD 589. According to the farm records, income improvement premium payments account for 0.9% of the total income from cocoa.  

While no full impact study has been done yet in the Way to Go! case, these data do seem to show the same tendency: an income from cocoa alone, even if a living income premium is paid, may lead to improved incomes, but not to reaching a full living income.

A bump in the road: farm sizes and productivity

How come a living income reference price alone is not enough? The Côte d’Ivoire preliminary evaluation identified the size of the average cocoa farm as crucial in determining the ability of cocoa farmers to earn a living income. When the land size is too small, cocoa farmers will never be able to produce enough cocoa to earn a living income- even if they receive a fair price. The Living Income Reference Price for Côte d’Ivoire, calculated by Fairtrade International as the price that farmers should receive to obtain a living income, presupposes that farmers have at least a viable farm size – estimated at 5.3 hectares of which 4.4 hectares as productive cocoa area – and a yield of 800 kg of cocoa per hectare per year.  

However, in the case of the communities of Daregba and Colonel, farm sizes are around 2.2 hectares, and the average yield is 649 kg cocoa per hectare per year. So, increasing productivity alone also does not provide a straightforward answer: even if farmers succeed in producing at least 800 kg of cocoa per hectare per year, they still would not be able to reach a living income. And increasing land size poses its own set of risks. Cocoa is a key driver of deforestation, and expanding the farm size might lead to additional bumps in the road: farmers might need additional labour, leading to an increased risk of child labour or additional hired labour costs. In the Ghana case, this is more promising: farmer records seem to show that the average area of a cocoa plot is 3.9 hectares, while the viable farm size to earn a living income is estimated at 5 acres, i.e. approximately 2 hectares.  

How are our colleagues navigating the challenges of small plots?

We work towards increasing productivity, but not overall cocoa production. That’s why we are looking at intensifying the current production systems, so farmers can produce more cocoa on their current land, and even free up a part for crop diversification activities that can provide additional income.

Alphonse Amani | Rikolto cocoa programme manager in Côte d’Ivoire, Rikolto

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One strategy we have been adopting both in Côte d’Ivoire and Ghana, is training and equipping young community members to set up agricultural service provision units. In Côte d’Ivoire, by the end of 2022, 63 youth were organised into 10 of these service provision units, that are providing affordable and professionalised agricultural services to farmers, for example pruning and weeding, that benefit productivity. They worked on the plantations of 74 producers involved in the project, and another 28 producers from Colonel and Daregba not belonging to the project. This has contributed to increasing the average producer’s productivity per hectare by almost 20%, from 525 kg/ha at the beginning of the project to 649 kg/ha at the end of the project. Also in Ghana, 32 pruning and spraying groups were set up by the end of 2022 – they provided services on 302 cocoa farms last year.

These service provision units do not only provide young people in cocoa farming communities with specialised knowledge and an additional income. They also counter child labour, as the lack of affordable and quality hired labour services is often what pushes producers into that direction. And they make sure that the best possible production practices are being used.

Marshall Anala | Cocoa and Coffee Programme Manager, Rikolto  

Other factors that lead to higher productivity levels are the training of farmers on the adoption of good agricultural practices, facilitating access to quality agro-inputs and the availability of new trees to replace the ageing ones. As part of the Way to Go! initiative, Kuapa Kokoo was able to establish an agro-input shop, which provides quality agro-inputs to 676 members of the cooperative living in Konongo society. The shop also provides education to farmers on the proper usage of of these agro-chemicals. To facilitate regular access to approved agro-inputs, a collaboration with Callighana, a major agro-inputs dealer in Ghana was established. In addition, two cocoa nursery sites were set up in 2022, contributing to the rehabilitation of overaged cocoa farms. A total of 300,000 cocoa seedlings are being produced and will be distributed to farmers of Kuapa Kokoo within Konongo society. “At this point, we have to be extra careful to prevent any encroachment to protected forest areas with seedlings provided to farmers under the project”, says Victor Anasara Abugre, cocoa programme officer, Rikolto.

Ghana cocoa seedlings nursery

A promising turn: income diversification

About half of the average West-African cocoa farmer’s household expenses are linked to food. Growing food for their own consumption as well as selling it, is key for increased nutrition security, an extra income for farmers, and more sustainable local food systems.  

In the Côte d’Ivoire initiative, income from other crops already amounts to 18% of the household income. We have been working with 88 women from the Daregba and Colonel communities to produce, process and market other products than cocoa, such as cassava. They grew cassava and processed it into placali or attiéké, two foods that Ivorians consume a lot, and recently also started selling freshly harvested cassavas as there is an increasing demand for it on the local market. A total of 56 young people have set up two poultry farms that allow them to produce and consume chickens and eggs, but also sell poultry products within their communities.  On top of that, they are now producing compost from chicken droppings – less expensive and intrusive than chemical fertilisers.  

In the Ghana case, income from other crops is smaller, at just about 2% of the average income. In the first project years, we focused mainly on supporting farmers to start producing new crops, such as yams, or rice intercropped with okra. Most of the harvest was for own consumption, so while this doesn’t show in the income figures, it is important because it affects household expenditures related to food. For instance, only in 2023 farmers started to sell yams to markets in Accra, through communal selling: they get better prices in bulk.  

The fact that, in both initiatives, buyers co-invest in these income diversification activities and not purely in cocoa, is appreciated by the cooperatives and farmers: “they feel that people care, not just about them selling cocoa, but about them and their society”, explains Victor Anasara Abugre, cocoa programme officer, Rikolto. In this way, these inclusive business models not only contribute to a more sustainable cocoa sector, but more sustainable local food systems as a whole.

Access to finance doesn’t have to be a roadblock

Farmers, through their activities and practices, contribute to the sustainability of the food system: they create labour opportunities on their farms, engage buyers, create access to good food for consumers in their communities and can safeguard local biodiversity. But there is a precondition: investments in sustainable production, forest conservation and eliminating child labour can only be done when farmer families have access to affordable finance. And there you have a major roadblock. Or not?

In both Ghana and Côte d’Ivoire, we have supported communities to set up Village Savings and Loans Associations (VSLAs). Through these VSLAs, farmers can mobilise their own resources to invest in their farms, food or non-food side-businesses or regular family expenses. Members of the VSLAs are being trained on financial literacy, and on joint decision making and risk mitigation within their groups.

In Ghana, we supported the establishment of 35 VSLAs to date, with a total membership of 830 farmers. 56% are women. In the year 2022, the total amount of loans disbursed by VSLAs amounted to USD 7250, about 50% of which was already repaid in the same year. 9 VSLA groups ended the year with zero outstanding loans, and they jointly realised about USD 12,000 from the share out, increasing their ability to disburse loans in the years to come.

Of all loans, 67% of the loans were used on their cocoa farms such as purchasing agro-inputs and paying for other farm services. The rest went into supporting their children’s education, and health care among others

Victor Anasara Abugre | Cocoa programme officer, Rikolto

In Côte d’Ivoire, we supported the establishment of 7 VSLAs with a total membership of 197 farmers, 41% of which are women. A total of USD 8,081 in savings were made. Members of the VSLAs have also been encouraged to open up bank accounts and start using mobile paying systems. 30% of these loans were invested in cocoa farms, for example for the purchase of agricultural inputs, and 70% were invested in income-generating activities like setting up poultry farms.

Once the VSLAs are well established, we connect them to financial institutions or other savings and loans schemes, for instance of the cooperative. This way, farmers can access higher amounts of financing to improve their farms and businesses. In this process, training farmers to keep their farm records plays an important role too.

By keeping farm records, farmers start to understand how much they invest in their farms through inputs and products, and also how much is coming out. They are beginning to see farming as a business, not just as an activity you do because that’s just the way it is. This is a big change mentally, and it’s also crucial for the long-term sustainability of the project impact.

Marshall Anala | Cocoa and Coffee Programme Manager, Rikolto

The road ahead remains long and curvy

It is no coincidence that both initiatives are merely working towards a living income for cocoa farmers: it is simply not the case that the involved cocoa farmers are earning a living income at the moment. So many factors are at play. The ones we took a closer look at in this story - price, farm size, productivity, income diversification from other food crops and access to finance. But there are so many other elements too, tackled in one way or another in both cases: the importance of literacy and farm record keeping, the importance of increasing cocoa quality, the role of agroforestry systems, off-farm businesses such as soap-making or sewing as extra income sources, and so on.  

And then there’s another big turning point: the role of governments, both in cocoa-producing and chocolate-consuming countries. While companies might struggle to match sustainability and competitivity in the market, governments have the power to create a level playing field so that competition does not outweigh sustainability. And making that happen without systemic collaboration between all stakeholders is, if you ask us at Rikolto, impossible.

Credit hero image: Puratos

I’m a chocolate lover, no cocoa and food system expert. My colleagues are though. So, if you have any questions about the work we are doing in Côte d’Ivoire and Ghana, or want to explore possible collaborations, don’t hesitate to reach out to:

  • Abdulahi Aliyu, Global Cocoa and Coffee programme director
  • Liesbeth Van Meulder, Cocoa and Coffee Programme Officer – EU Liaison, Rikolto
  • Alphonse Amani, Cocoa Programme manager in Côte d’Ivoire, Rikolto  
  • Marshall Anala, Cocoa and Coffee Programme Manager, Rikolto  
  • Victor Anasara Abugre, Cocoa programme officer, Rikolto

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