The company is hoping to raise £6.4m ($10m) on the AIM Market of the London Stock Exchange to extend its planted operations in Peru from 320 hectares today to 2,000 hectares by the end of Q4 2015. It hopes to become the first publicly listed pure-play cocoa plantation company globally.
Speaking to ConfectioneryNews Dennis Nicholas Melka, founder, chairman and CEO of United Cacao said: “We’re offering something that is unique. We’re offering large scale production of well-fermented beans – fermented to the buyers’ standards.”
The vast majority of cocoa beans are grown in West Africa by impoverished smallholder farmers. Cocoa fermentation - a process to help beans develop chocolate flavor - is usually done by farmers covering piled cocoa beans in banana or plantain leaves for six to seven days.
“The current standards of fermentation are quite primitive,” said Melka. “Sometimes chickens sit on the pile and you have rats running around. It’s not changed in 100 years and we’re hoping to bring it into the 21th century.”
He said that United Cacao would ferment beans to customer demands and cater to requests such as preserving flavonoid content.
Peak production in 2020
United Cacao will begin selling cocoa beans from its plantation in Iquitos, northern Peru next year, but won’t hit peak
production until 2020. It will cultivate the high-yielding CCN 51 tree, which has been credited for helping Ecuador double its cocoa production over the last decade.
United Cacao also hopes to apply for third-party certification in 2016. The company currently employs 400 people at its plantation and expects the workforce to grow to 800-1,000 people by 2020. Melka said the plantation offered much needed employment for Peruvians. “This is taking people out of poverty – there are no jobs in this area,” he said.
The trees will be grafted – a technique to reproduce exact copies of a particular tree cultivar in order to improve disease resitance and yields – which is not common practice in West Africa.
Meeting chocolate demand in China
According to Melka, commercial plantations are not a threat to smallholder cocoa farmers in West Africa, many of whom are among the 20% of the global population living on less than $1.25 a day. He claimed that poverty among cocoa farmers was perpetuated by high export taxes set by buying boards in West Africa.
United Cacao hopes to cater to an anticipated spike in demand for cocoa in China. Chinese consumers ate an average of 0.5 kg of cocoa in 2013 - compared to 2.46 kg per capita in the US, according to Euromonitor International. That leaves huge scope for growth and Euromonitor forecasts that the Chinese chocolate market will grow 40% from 2013 to 2018 to reach RMB 21.2 bn ($3.4bn).
“Asia is strong on demand but the supply is not going to happen there,” said Melka.
He said that Indonesia, Asia premier cocoa producer, had become a net importer of cocoa beans as the country’s own crop suffered from pest and diseases and competition from palm oil.
Peru is the eighth largest global cocoa producer and accounts for 1.6% of the global supply, according to the International Cocoa Organization. The country’s forecasted production for cocoa year 2013/14 was 70,000 MT, making it Latin America’s third largest producer behind Brazil (205,000 MT) and Ecuador (200,000 MT).
Melka said Peru was better placed than even West Africa to fulfil future cocoa demands because African cocoa was difficult to trace, fermentation techniques varied wildly and child and forced labor was rife.
In contrast, cacao is indigenous in Peru, where there is consistent rainfall and zero export or corporate income tax, he said.
According to the United States Department of Agriculture (USDA), cocoa production in Peru is set to rise 5% in calendar year 2014 and increases in planting will see the country become a top 10 cocoa exporter in the coming years.
United Cacao has placed 5m shares on the London Stock Exchange at 128 pence. The company will also list on the Lima Stock Exchange in the first half of 2015.