Why your chocolate bar could become a luxury purchase.

Global warming is putting the chocolate supply chain at risk. Here's how Mars is tackling the problem.

 

How Mars is tackling a global-warming-induced decrease in the world’s supply of cocoa 

Global temperatures are rising and that could mean problems for the chocolate industry. Mars – the world’s largest chocolate maker and manufacturer of Halloween favorites like Snickers, Twix and M&Ms – is facing severe supply chain issues as global warming threatens its supply of raw materials. [1]

Cacao trees – the key ingredient in many of Mars products – require very specific rainforest-like conditions to survive. The best area for that is a narrow strip, 10 degrees above and below the equator. [2] Unfortunately, raising temperatures (more specifically, the it’s impact on the increase in evapotranspiration in cacao growing regions) and reduced rainfall are shifting and shrinking the area of land sustainable for growth. Furthermore, munch of the land expected to be suitable in the future lies in government protected preserves. [3]

 

Ghana, Indonesia and Cote d’Ivoire produce half of the worlds cocoa. [3] In the 2015 growing season, Ghana’s production dropped 18%. Even more daunting in the face of this decreasing supply, demand for chocolate continues to rise; spurred by a growing population and new wealth in countries such as China and India.

Cocoa was actually the best performing commodity on the S&P in 2015, demonstrating the gap in supply in contrast to other commodities. [4]

 

To keep up with demand, growers must farm their land with greater efficiency. Through their Sustainable Cocoa Initiative, Mars is partnering with farmers to provide better materials and access to training. Furthermore, they’ve built Cocoa Development Centers across Africa to  provide resources on the ground level. These centers allow farmers to connect on best practices and provide a place for them to learn how to mange their crops efficiently, to receive high quality plants and fertilizers, and to learn business practices.  And at the top of the supply funnel, Mars’ Cocoa Genome project has helped to pave the path for improved plant quality by isolating the traits that breeders need for healthy plants. [5] It’s estimated that these efforts could lead to a 3x increase in output per hectare of farm land. [6]

In addition to the problems faced due to plant growth, Mars faces a threat of decreased labor supply. Farmers are seeing little value in their struggling crops and younger generations are moving into the cities to find work. [7] Mars is attempting to expand their workforce by partnering with CARE International to empower women and bring them into the cocoa production workforce, from which they had previously been excluded. [8] Furthermore, Mars has made a commitment that by 2020, one hundred percent of its cocoa will come from certified sources. Fare Trade premiums can have the added benefit of increasing farmers income, allowing them to invest in their farms and their communities and keeping them in the business. [9]

As part of a more forward thinking initiative, Mars has allocated $1 Billion to fighting climate change. [10] Mars has committed to a number of initiatives , which aim to slow the onset of global warming. Amongst them is a pledge to eliminate greenhouse gas emissions related to transportation by 2040. They plan to achieve this goal through consolidated shipments, driver training and new technology. [11]

While Mars is making impressive strides to save their chocolate production, there is more that they could do. In addition to bringing women into the workforce, they need to increase the appeal of cocoa farming amongst the younger generations through education and proof of success. Additionally, they should consider diversifying their product portfolio to rely less heavily on cocoa. They could target their new, growing consumer base with alternate products. That is a complicated task, as many of the world’s crops are facing climate-change related issues, but it’s a necessary step in the face of uncertainty. Finally, they should consider the impact that their packaging has on global warming and take measures towards sustainable production. [12]

As I struggle between the desire to save the chocolate industry and the jobs and livelihood of the people that farm them, I cannot help but wonder if that is the right thing to do. Cacao planting (and planting of many of the other raw materials in chocolate) encroaches on rainforests, leading to a whole cascade of additional global warming problems. Even as moves are made towards sustainability, there are so many unsustainable factors involved. Where is the line drawn? Can mass-produced cocoa be farmed in a truly sustainable way? Does stopping production hurt more than it helps?

 

(Word Count: 735)

 

[1] “Mars Calls For Business To ‘Double Down’ On Climate Action.” Huffington Post, 06 Nov 2017, https://www.huffingtonpost.com/entry/mars-calls-for-business-to-double-down-on-climate_us_5a0053a9e4b05e3e1f0a02b9

[2] “Cocoa Growing Countries.” Cadbury, www.cadbury.com.au/About-Chocolate/Cocoa-Growing-Countries.aspx. (Accessed 14, Nov. 2017).

[3] Scott, Michon. “Climate & Chocolate.” Climate.gov, 10 Feb. 2016, www.climate.gov/news-features/climate-and/climate-chocolate.

[4] Wexler, Alexander. “Chocolate Makers Fight a Melting Supply of Cocoa.” The Wall Street Journal, 13 Jan, 2016, https://www.wsj.com/articles/chocolate-makers-fight-a-melting-supply-of-cocoa-1452738616.

[5] “Cocoa.” Mars, http://www.mars.com/global/sustainable-in-a-generation/our-approach-to-sustainability/raw-materials/cocoa. (Accessed 14, Nov 2017).

[6] Wexler, Alexander. “Chocolate Makers Fight a Melting Supply of Cocoa.” The Wall Street Journal, 13 Jan, 2016, https://www.wsj.com/articles/chocolate-makers-fight-a-melting-supply-of-cocoa-1452738616.

[7] DesMarais, Christina. “Hershey’s and Mars Sweeten Market For West African Cocoa Farmers.” GreenBiz, 20 Mar. 2017, https://www.greenbiz.com/blog/2014/03/20/hersheys-mars-sweeten-market-cocoa-farmers

[8] “Cocoa.” Mars, http://www.mars.com/global/sustainable-in-a-generation/our-approach-to-sustainability/raw-materials/cocoa. (Accessed 14, Nov 2017).

[9] DesMarais, Christina. “Hershey’s and Mars Sweeten Market For West African Cocoa Farmers.” GreenBiz, 20 Mar. 2017, https://www.greenbiz.com/blog/2014/03/20/hersheys-mars-sweeten-market-cocoa-farmers

[10] Bach, Natasha. “The World’s Largest Chocolate Maker is Committing $1 Billion to Fight Climate Change”, Fortune,com, 6 Sep. 2017, http://fortune.com/2017/09/06/mars-pledge-one-billion-fight-climate-change/.

[11] “Product Transportation.” Mars, http://www.mars.com/global/sustainable-in-a-generation/healthy-planet/climate-action/product-transport. (Accessed 14, Nov 2017).

[12] https://www.forbes.com/sites/simransethi/2017/10/22/the-life-cycle-of-your-chocolate-bar/#5e1a5cb266d8

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12 thoughts on “Why your chocolate bar could become a luxury purchase.

  1. What role do you think GMO cacao beans could play in the future, for example being more drought-resistant?

  2. Great article Michelle. I find your point on Mars’ need to diversify its product portfolio to rely less on cocoa particularly relevant in light of the investments made by food giants on startups specialized in “alternative manufacturing”. As an example, in 2016, Tyson Foods acquired a 5% stake of Beyond Meat, a startup focused on replacing animal products / proteins with plant-based alternatives to promote environmental sustainability. Their flagship product, a 100% plant-based hamburger, has been praised by the media for its juiciness, tenderness and flavor that seem to truly resemble that of real beef. Similarly, in August 2017, Impossible Foods (a competitor of Beyond Meat) raised $75 M from investors, including Bill Gates. I wonder if we will see similar R&D / investments in startups to discover suitable low-cost replacements for chocolate driven both by environmental concerns and economics arguments as cocoa becomes harder to source. A key challenge will be how to communicate and advertise those products to consumers when authenticity seems to be highly valued.

  3. Thanks for the write up. This post reminds me of IKEA and the significance of using FSC certified wood. As I am no expert on cocoa, it will be interesting to hear more details on what ‘certified sources’ truly means. In this day and age, it is unfortunate that many companies have used commitments to using sustainable materials as a form of marketing when these certifications do nothing (or do little) to save the environment.

  4. Interesting article Michelle! Considering that main producers of cocoa are developing countries, I wonder if modern agriculture techniques such as mechanization and the extensive use of fertilizers could help improve yields even further. However, implementation could be challenging as it may reduce work opportunities for local population.

  5. Michelle – what an interesting, and potentially devastating, article for chocolate lovers. I was left wondering what alternatives Mars and other chocolate producers have if the overall population of cacao trees continues to decline over time. While improving yields could help to blunt this decline, at some point it won’t be able to overcome the natural decline. I wonder if Mars is trying to find ways to plant and develop cacao trees in other climates and environments that may not have historically been viable but because of global warming could be. I think Miguel also has a good point about developing cacao alternatives, similar to what is occurring in the produce industry today. Either way, hopefully they will find a solution!

  6. Fascinating topic, Michelle! I have been thinking about food tech a bit lately, and I wonder if there can be a win-win situation. There is a growing number of indoor farming companies that is has much higher yields with lower input and have the ability to impact taste by adjusting the microclimate, soil, etc. If this can be applied to cacao or other crops, it can really help the environment aspect on not encroaching on rainforests. With the increasing prices, sounds like the economics might be viable.

  7. Michelle – thanks for sharing! One of the points you brought up that I found most intriguing was the lack of labor supply that is coming out of less fruitful crops. What MARS is doing specifically with empowering women through CARE International to develop more labor supply is really interesting. I frankly am surprised to have not learned of it before, as I would expect this is a good “PR” play for MARS as it is social-impact driven but also potentially good for their bottom line. I hope this problem is solved for all of the chocolate lovers out there!

  8. Insightful article raising a topic I am not very familiar with. This is a complex issue, and I do agree that an initiative such as the Sustainable Cocoa programme is an efficient way of addressing the issue at one of its root causes. I do however remain slightly skeptical towards the Cocoa Genome Project since non-GMO food is a strong focus area in many of Mars’ key markets. In general, I worry about the many unintended consequences that can arise from introducing modified seeds to the ecosystem and this worry is particularly acute in an area as sensitive as the rain forest around the African equator. Additionally, I would also commend Mars for the work their are doing in empowering women by introducing them to the workforce. I am not familiar with the extent of vertical integration within Mars’ supply chain, but if Mars is able to also influence third-party suppliers to enact the same policies, the effect would be even greater. Lastly, I would also like to say I agree wholeheartedly that Mars (and other packaged goods suppliers) need to take a very serious look at their product packaging and just how much this impacts on the environment. This is a directly controllable input for the firm, and would contribute to a more holistic approach to tackling the threat of climate change.

  9. As the climate continues to change, the cacao trees will have to adapt too. New cacao trees can be planted in an environment suitable for growth. However, there are other substitutes for cacao that provide a very similar taste, and these opportunities will continue to increase with the development of technology.

    1. Thanks for a very interesting article Michelle! It was especially enlightening to learn that Mars is actually facing threats of decreased labor supply given that the unemployment rate in many Sub-Saharan countries, including Ghana and Cote d’Ivoire, is so high. I applaud the companies efforts to expand the workforce by empowering more women. It seems that opportunity cost is a big reason as to why laborers have tended to move out of rural areas and into the cities (which on average pay higher and provide a better quality of life), so do you think that Mars can capture and retain even more of the workforce if they just increase their wages?

  10. Thanks Michelle – I am fascinated by this topic! It is interesting to me that the cacao trees that Mars is trying to preserve are located in areas that are also marked by deforestation and climate change caused by palm oil cultivation (Indonesia in particular). Given that many of Mars products’ have palm oil in their ingredients, Mars may be, in small part, contributing to the problem that it faces! As such, similar to the company that I wrote about, Bunge, Mars is in a perplexing position as it could be both impacted by and contributing to global climate change. While I appreciate that Mars has committed $1B to fighting climate change, I am skeptical if fixing its transportation and packaging systems will be enough. Allegations came out recently about Mars and other multinational foodservice companies are continually pushing back their sustainable palm oil targets. [1] It needs to take action across its entire raw materials supply, including its cacao and palm oil inputs, for the long-term preservation of its business.

    1. “Nestle, Mars, and Hershey Breaking Promises,” The Guardian. https://www.theguardian.com/environment/2017/oct/27/nestle-mars-and-hershey-breaking-promises-over-palm-oil-use-say-campaigners. (Accessed December 1, 2017).

  11. Hi Michelle,

    I really enjoyed reading your article but at the same time – couldn’t help but feel guilty as well. A lot of the pressure to find alternative ways to produce cacao seems to falling on the farmers and producers of the product when in fact, they are not the issue. We as consumers are the issue. The only true solution I see to the issue’s facing the world chocolate market is for consumer tastes to shift away from such heavy consumption of the good. I find it interesting that when natural shifts start to impact or agricultural industry – our first reaction is to solve for the supply instead the demand element of the issue.

    I myself am a chocolate lover a consume at least one piece of chocolate a day (x5 most days). After reading your article, however, I feel a moral obligation to cut back on frequently consuming a growingly scare commodity. Similar to the way consumer tastes are shifting away from consuming meat and instead to consuming more vegetarian options, I think that we should look for more sustainable sweets to consume.

    Here is interesting article I read about try to shift consumer chocolate tastes in the wake of it’s scarcity phenomena:
    https://www.theguardian.com/lifeandstyle/2014/nov/21/cocoa-crisis-world-chocolate-stash-melting-away

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