The cocoa ingredients supplier is trialing its ‘Chocolate Bonus’ system in Vietnam in collaboration with select Japanese customers. Under the arrangement, participating farmers are paid $170 per metric ton on top of the London market price and a certification premium.
Chocolate VAT
“It’s like the VAT system,” Gricha Safarian, managing director of Puratos Grand-Place told ConfectioneryNews at the recent Asia Choco Cocoa Congress in Singapore. “We take some money at the consumer level and it goes up….and rather than reaching the state it reaches the farmer – so the farmer is really the ultimate beneficiary.”
How does it work?
Puratos Grand-Place pays the London market price – currently £1,972 per MT and a certification premium on top of that from its own Cacao-Trace program, which ranges from $50-150, depending on the quality of the cocoa. A Chocolate Bonus of $170 per MT is then passed on from the company directly to farmers twice a year. The bonus is financed by retailers upping the price of finished products in store by a few cents.
Puratos Grand-Place is currently experimenting with a few Japanese customers that are using the Chocolate Bonus as a marketing tool.
“It’s like we’re doing two invoices. One invoice that we sell to the industry and then there’s another invoice which is this chocolate bonus. We collect it, we don’t touch it and we distribute it twice a year to the farmers who have signed the agreement with us,” said Safarian.
Consumers pay more
For 100 g of chocolate, this will mean consumers pay an extra $0.12 cents. “The idea is to ask the end consumer to pay,” said the Puratos Grand-Place chief
“The consumer wants everything to be perfect, sustainable and green, but they don’t want to pay an extra penny.”
“Social media is making everything transparent, so the people in the street don’t want to see that chocolate is linked to extreme poverty, so why don’t they pay and extra cent when they know it will go up to the farmer and will reduce the poverty level. It’s an anti-extreme poverty tax.”
Puratos-Grand Place also provides training and communication to the farmers and the Chocolate Bonus can also be paid in fertilizer.
Raising income via pricing is key
“The biggest problem of the industry is farmers’ income….the industry can dance around and build hospitals and schools, but at the end of the day we need to increase the farmer’s income by a combination of price and yields,” said Safarian.
“So far we have limited this experimentation with Japanese customers and they are extremely enthusiastic….My dream would be that all our competitors imitate this and it becomes a system that is beneficial for the industry.”
Battling competing crops
But Vietnam is very different to West Africa. Safarian said: “Farmers are not poor. The issue is not fighting extreme poverty, child labor, slavery or deforestation – these things are not happening in Vietnam. But what we are fighting is competing crops like palm oil, rubber and cashew nuts.”
He said the premium could be higher in other origins such as Côte D’Ivoire, where farmers only receive around 60% of the market price due to taxation.
“So far it’s working. Is it expandable? The future will tell,” he said.