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Chocolate Supply Chain Potpourri

Chocolate Supply Chain Potpourri

Hello and good day!

Half a dozen people over the last week have told me about a recent segment done by John Oliver.

The topic was chocolate supply chains, which of course is a subject very near and dear to our hearts here at Fortunato Chocolate.

A wonderful customer and friend of ours, Jim Elliot, sent me a link to the video and I had the chance to review it over the weekend.

I didn't know who John Oliver was and I must say off the top that I found him to be very funny, and I appreciate anybody who discusses problems in the chocolate industry.

Using humor to tackle serious and challenging problems is, in my opinion, frequently much more effective than lecturing with doom and gloom.

A tip of the cap to John Oliver for excellent execution in making his points.

As to the content of the segment, it looked to me to be mostly taken from the Netflix documentary Bitter Chocolate, which is part of the Rotten series.

Sometime during the last couple of years, I wrote a 5 or 6 part commentary on that documentary and everything I wrote in that series would apply to the information presented by John Oliver.

My written series is posted somewhere in the blog section of our website.

Instead of rehashing the whole thing, I'd like to offer you a potpourri of thoughts on the chocolate industry, using Oliver's segment as an inspiration.


I could feel it coming about 7 minutes before it actually happened.

I knew that Tony's Chocolonely would be mentioned, because they were also the star of the Bitter Chocolate documentary.

If you are in the grocery store buying chocolate, Tony's Chocolonely is probably a pretty good option.They do their best to eliminate child slavery from their supply chain. They do their best to pay higher prices for cacao.

Their chocolate is as good as it can be given their business model.

Their prices are very decent. If you are looking for an impulse chocolate fix on the run, you can feel good about Tony's Chocolonely.

Here are the problems with Tony's as I see it and it has nothing to do with their intentions. They have good intentions, and they are a noble company.

Before proceeding further, let me say this.

While our business model does a lot more good for each individual cacao farm family with whom we work, our scale is pretty small.

It is an interesting philosophical conundrum to ask which is more beneficial, to do a lot of good for a relatively small group of individuals, or a little good for a much larger group.

I've always held that our model can be scaled.

We're not the ones to do it because we're dedicated to working with a single variety of cacao growing in just one small region of northern Peru.

However, the fundamentals of our model could be carried out on a large scale.

It would take a lot of capital to get going, but it would also be a highly profitable venture that could help millions of cacao farmers around the world.

I'd be willing to consult on a project like that if it came up, but Fortunato Chocolate wouldn't be the company to run the operation.

Here are the problems with a company like Tony's.

This is not a criticism at all by the way.

These are inherent problems with the goal they are trying to solve, not problems having to do with the company itself.

The quality of their chocolate will never be optimal. It will never taste as good as the best tasting chocolate.

There are three key factors that determine the flavor of chocolate.

They are genetics, post-harvest processing, and roast.

Between 60% and 70% of the world's cacao comes from just two small countries in West Africa: Ghana and Ivory Coast.

If you are going to run a scaled-out chocolate company, you will have to buy cacao from those two countries.

It is a fait accompli.

As such, you must ask the questions. How are the genetics?

The vast majority of trees in those countries are industrial hybrids planted in burned out soil on mono-cropped farms.

How is the post-harvest processing?

Almost all of the world's cacao is processed by individual farm families on their farms.

They don't get paid more for producing well fermented and dried cacao.

And since they kill themselves with hard work all day every day and are paid on volume, not the quality of their processing, they are completely disincentivized to do a good job on fermentation and drying.

What about roast?

If the first two factors are poor, what remains is to roast cacao in a way that minimizes the negative impact, not in a way that accentuates the natural flavor notes of the cacao.

We are of the opinion that to optimize the flavor of any chocolate, there must be centralized post-harvest processing run either by the chocolate company, or by a cacao growers' co-op that is overseen by the chocolate company.

In a place like West Africa, which has hundreds of thousands of cacao farms, this would require significant capital investment and a lot of managing logistics.

In fairness to Tony's Chocolonely, they hang their hat mostly on eliminating slavery from the supply chain, not on making the most delicious chocolate that they can possibly make.

Where we operate, slave labor isn't a thing.

Children are not abducted and forced to work on farms against their will.

Also, because cacao is native to the Amazon jungle, there are many more interesting heirloom genetic varieties in South America than there are in West Africa.

It is a place much more conducive to setting delicious chocolate as your goal.

The poverty of cacao farmers seems to be universal everywhere though and is the result of geographical and supply chain similarities.

I think it's official.

I'm too verbose to do a potpourri style message.

This ran long and I am out of space.

I will continue with this line of thought tomorrow.

Specifically, I will address economics, distribution, poverty, the root of slave labor, and government price control boards versus free market pricing.

I like the idea of using Tony's Chocolonely as a comparison because I do think that they are a good company and the gold standard of a particular type of model.

I'd like to end this message by pointing out that our product prices and Tony's Chocolonley's product prices are very similar.

In the John Oliver segment, the former director of sustainability at Tony's mentions that their company pays the difference between government set prices and what he refers to as a living income price as a premium to the cacao farmers with whom they work.

Based on that it is easy for me to calculate that the premiums we pay to cacao farmers are many multiples higher.

They have more scale, but our farm partners are much better paid.

The genetic variety we use is special.

And we manage all of our own post-harvest processing.

This is a really good way to compare business models, especially when you take the good intentions of both parties as a given.

Again, sorry that this was not even close to being a potpourri.

And sorry, one more last thing.

A lot of West African cacao is showing high levels of toxic heavy metals.

Here are our test results.

Here are the results of many popular brands including Tony's Chocolonely.

Click here to see the John Oliver segment.

More to come tomorrow.

Thank you so much for time today.

I hope that you have a truly blessed day!


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