Cocoa has been cultivated in Latin America for thousands of years and is referred to as “the food of the gods.” It grows on the Theobroma Cacao tree – which inspired our name! It’s found naturally in the rain forest in the understory and is a small, shade tolerant tree.
Today, the majority of cacao is grown on small farms within 10 degrees of the equator, mostly in Latin America and Africa. In fact, though cacao originated in Latin America, today about 70% comes from West Africa. The farmers who grow cacao typically grow it “monocultured,” meaning it’s the only crop in the field. Theo supports farmers to utilize an agroforestry system, meaning they grow cacao alongside other crops like bananas which tower over it for shade, and squash or beans that cover the floor under it, perfect for this understory tree! Through growing other crops, farmers are able to diversify their incomes, increase their food security, and maintain healthier farms, while benefiting the environment and long-term productivity of their land.
Farm diversity is important because globally, the majority of cocoa farmers do not make enough money through the sale of cocoa for their families’ well-being. There are a number of reasons – low and fluctuating cocoa prices, lack of farmer organization and market power, old farms that produce little, and lack of access to training and markets.
And growing cocoa is hard work! All year farm families manage the trees – pruning, inspecting for disease, fertilizing, and watering. Depending on the location and type of tree, farmers harvest the cocoa pods off the tree every two weeks for about 8 months of the year. Once pods are harvested, they’re split open to remove the “pulp” which contains the prized beans.
The pulp gets piled together to be fermented into cocoa and then dried. This process takes about 10-14 days and is where the majority of quality control can take place. Farmers who sell to Theo learn how to tell when beans are properly fermented and dried. This is very different than the commodity market which views all cocoa as equal and doesn’t pay more for better quality. Under the Theo pricing model, better quality beans means the farmers earn significant quality premiums.
Farmers are now ready to sell the cocoa, most likely on the local market to people who buy it to then sell to the next level until it gets exported to a trader or processor. All of the people in the middle need to get paid, so farmers are getting even lower prices than if they could collect larger volumes through an organization and sell it directly. Farmers aren’t able to negotiate with these buyers and only capture a small percentage of the overall value of the cocoa. Making matters worse, the prices the exporter is willing to pay is set on a global level based on a number of factors farmers can’t influence. A farmer could do everything the same and receive half the price of the year before, simply because the global market changed. In addition, if farmers did invest on their farms to improve their quality, the current commodity system doesn’t pay more for quality cocoa. This volatility and lack of control makes it hard for farmers to plan or invest in their farms and families.
Theo’s model works to address the challenges facing cocoa farmers in the areas where we work. We provide training to increase the amount of cocoa that trees produce and for farmers to learn about farm diversification, use a unique pricing model that is consistent year over year and values quality and engage in transparent, direct relationships. We hope to inspire other companies to do the same!