It says its model of setting fixed farm gate and export prices annually helps farmer incomes grow more meaningfully than cocoa in the commodity market or via fair trade certifications.
What is a B-Corp?
Uncommon Cacao is B-Corp certified. B Corporation grants B-Corp status to for-profit companies that meet its minimum standards for social and environmental performance. There are 2,221 B-Corps worldwide across 130 industries, including ice cream maker Ben and Jerry's.
The Berkeley, California-based B-Corp was set up two years ago by former employee of Dandelion Chocolate Maya Granit and her business partner, CEO and founder Emily Stone.
Uncommon Cacao is today supplying Dandelion and around 130 other chocolate businesses such as Valrhona, Lake Champlain Chocolates and Dick Taylor Craft Chocolate.
The startup’s revenues doubled year-on year in 2016 to reach $1.3m. It recently began supplying beans from Colombia, adding to its offer from Belize, Guatemala, Bolivia, Haiti and the Dominican Republic.
Price systems too low to eradicate poverty
Speaking to ConfectioneryNews, managing director Maya Granit, said the company is aiming to provide a transparent alterative to commodity exchange and certified cocoa, which she argues struggle to substantially improve farmer incomes.
"[Certification] is still based on the commodity price system, which is just intrinsically too low for farmers to come out of poverty.
"Consumers are becoming more savvy and chocolate makers of all sizes are questioning how effective certifications are,” she said.
Maya Granit, formerly of Dandelion Chocolate, and her business partner Emily Stone started trading high quality, traceable cocoa beans via 50 smallholder farmers in Belize in 2010 through a company named Moho River Cacao. The business was renamed Maya Mountain Cacao in 2012. This business has expanded operations to work with 300 farmers in Belize and Granit and Stone started a similar direct-sourcing operation in Guatelama (Cacao Verapaz as demand grew among America's thriving craft chocolate segment. The pair established parent company Uncommon Cacao around two years ago when they acquired a US sales and distribution business with existing partnerships in several countries. Their cocoa sourcing expanded via the acquisition to Bolivia, Haiti, the Dominican Republic and Colombia, where Uncommon works through exporters. Maya Mountain Cacao and Cacao Verapazas are today subsidiaries of Uncommon Cacao.
Premiums for UTZ - the market-leading certification program making up 56% of global certified cocoa in 2015 - are paid on top of the world market price.
Certified premiums don’t address poverty, argues MD
World market prices crashed to a four-year low earlier this year and with a global production surplus expected for this crop year, analysts forecast prices will remain low for the next cocoa year (October 2017 – September 2018).
Granit said this may worsen farmers incomes and render certification premiums even more ineffective in combating poverty.
She added since certified premiums were typically paid to cooperatives, they did not always reach farmers in cash.
UTZ estimates around 50% of its negotiated cocoa premium - averaging €89/MT cocoa beans in 2016 - is paid in cash to farmers.
But Granit argued premiums don’t go far enough to improving farmers livelihoods.
Misguided focus on yields, says Uncommon Cacao
The Uncommon MD added efforts are underway across the chocolate industry to enhance farmer incomes by concentrating mainly on improving yields.
"In recent years, there have been a lot of groups advocating that the best way to increase incomes for farmers is by increasing yields, rather than touching the price lever.
"And yet, we've seen farmers remain in poverty throughout this time,” said Granit.
She said as cocoa prices decline and the market enters a surplus, "farmers who have been listening to these advocates, working on increasing their yields, have less or no market for the cocoa they've been encouraged to grow".
Alterative pricing system
Uncommon Cacao's prices are not based on premiums over the commodity market price.
"They’re based on farm gate price paid to farmers (with an understanding of cost of production), quality of the cacao, and market potential,” said Granit.
"In other words, rather than giving farmers back an additional bonus, we’re building a system that enables them to get paid more from the outset....We don’t use premiums, and farmers and suppliers don't have to pay to participate in our system," she said.
Uncommon Cacao sets fixed annual farm gate prices following community meetings with farmers for its direct supply chains in Belize and Guatemala.
In the other origins, it works through suppliers and sets fixed FOB (Free On Board export prices) with its suppliers each year following negotiations. These discussions are based on farm gate prices the supplier pays to farmers, the quality of cocoa and risk profile of the cocoa.
"Farmer incomes across our supply chain [direct and through suppliers] have increased over +60% [calendar year 2016 compared to 2015],” said Granit.
The company's average farm gate price in 2016 was $3.16 per kg, 67% higher than the average West Africa farm gate price of $1.89 per kg (Côte D’Ivoire and Ghana only).
Uncommon’s exporters also earnt 103% more than the average commodity price in 2016.
The startup is now developing location-specific living income standards for its origins.
Improved incomes, but more work to do
Annual farmer income for farmers in the Uncommon network grew +61% in 2016 to an average of $604. This equates to $1.65 a day – below the World Banks $1.90 poverty line. Granit argued farmers in Uncommon Cacao’s supply chain still receive a significantly higher price than most farmers.
She added cocoa was the main source of income for Uncommon Cacao farmers, but was generally supplemented via other activities. Many farmers supplying Uncommon also supply others, but the $604 figure relates only to Uncommon volumes.
“Many of the farmers we work with – especially the smallholders – are producing low yields of <500 kg per hectare, and on very small plots of land. Many of them have significantly increased their livelihoods through our increased pricing model; that said, we recognize there is still a long way to go,” said Granit.
Around 80% of chocolate makers working with Uncommon Cacao are based in the US, but it also sells to companies in Canada, Europe, Australia and Japan.
"We just shipped our first containers from Guatemala to Europe last week," said Granit.
The majority of Uncommon Cacao's customers are artisan bean-to-bar chocolate makers, but it is looking to also target medium-sized companies currently buying certified cocoa or from the commodity market.
"We would really love to start working with larger chocolate makers...We're slowly growing and we're hoping the trends we're seeing in craft chocolate are indicative of larger trends in the industry,” said Granit.