Market concentration and the consequences for sustainability2015 Chocoa Conference - March 6, Amsterdam

Lucas Simons (CEO, NewForesight)

Key questions of this presentation

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• How come despite decades of support, cocoa is still considered the ‘poor

mans crop’?

• Are there perhaps systemic reasons that determine the faith of the sector?

• How to get to a more healthy, vital sector?

– The need to move towards more profesional farmers

– The effect of consolidation in the sector

– Large companies co-operating

– And the importance of rewarding quality

Agriculture: one of the most unsustainable sectors.But why?

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The sector shapes model

The challenges in origin and the potential for resilience and sustainability strongly depend on the ‘archetype’ of the sector

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Abso

rptio

n ca

paci

ty fo

r bett

er

prac

tices

Farm scale

Pentagon Inversed pyramidHybridsFlat pyramid

The sector archetype is determined by a set of 4 macro forces

4 forces shape the sector ‘arche’ type

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What is the enabling environment?

What do markets reward?What are barriers to enter and -success?

What are alternatives?

Sector Shape

Recent acquisitions and consolidation in the cocoa sector

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•Cargill buys ADM’s industrial chocolate business s for $440m•The potential take-over of ADM’s global cocoa business by Olam ($1.3b) in

June is under review by the European Commission•Barry Callebaut acquired the cocoa ingredients branch of Petra Foods for

$860m making it the largest player with a fully integrated supply chain• In May 2014, Ecom Trading acquired Armajaro’s commodity trading division

(cocoa, coffee & sugar)

In general, consolidated markets in failing contexts and with little alternatives for farmers leads to:• Increased standardisation of demand• Increased dependency’s• Preserves economies of poverty (flat pyramids)

Aligned Activities of CocoaAction CompaniesCocoaAction company programs and actions are aligned to achieve

coordinated delivery of Productivity and Community Packages..

Results of CocoaAction, plus farm communities, industry, and governmentsover time.

OUTPUTSImmediate, measurable results and effects of the collective actions of CocoaAction companies.ACTIONS

Productivity Package Adoption Community Package Adoption

Good

Agricultural Practices

FertilizerPlanting Material

Education Child Labor Women’s Empowerme

nt

CocoaAction: 11 companies united in a common strategy A rejuvenated

and economically viable cocoa sector providing increased opportunities to cocoa farmers

and their communities

Good Agricultural

Practices

Fertilizer and Soil Fertility

Improved Planting Material

Primary Education

Child Labor

Prevention

IMPACT

Women’s Empowerme

nt

LONGER-TERM OUTCOMES

CocoaAction Companies’ActionsInputsTrainingPrograms

CocoaAction Partners

Productivity Package Activities

CocoaAction Partners

Community Package Activities

Alignment with Governments

Increased cocoa productivity and income for cocoa farmers and their families

Improved quality of life in cocoa farming communities

PRODUCTIVITYTHRIVING

COMMUNITIESNEXT GENERATION

FARMERS

SHORTER-TERM OUTCOMES

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Thank you!

www.newforesight.comwww.scopeinsight.com@Lucas_Simons