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Fair Trade? No --Direct Trade Yes!

Fair Trade? No --Direct Trade Yes!

Hello and good day!

One of the questions we get asked all the time is whether we are Fairtrade certified. The answer is no.

A recent conversations have motivated me to talk about this subject yet again. As it stands, Fairtrade certification requires that a company pay at least $240 per ton over the world commodity price to cacao farmers for their cacao. This is noble and has done a lot of good.Any program that helps cacao farmers get more money for their crop is a good thing.

Especially given that the industrial chocolate supply chain will inherently keep cacao farmers dirt poor in its current form. And the fact that cacao farmers are so poor leads to very unsavory practices, like child slavery.

If you can't afford to pay workers and yet you must harvest ever increasing quantities of cacao to survive, then you start looking for whatever options are available. This is especially pertinent if you've turned your farm into a monocrop planation that doesn't produce enough food for your family to survive on.

You have no choice but to plant and harvest more and more cacao to get the money you need to buy the necessities of life.  A person can only work so many hours in a day.I n this context, a $240 premium per ton makes a big difference. A lot of cacao farmers only make $1 a day in income, so that kind premium can double, triple, or even quadruple their income.

But even so, it will still be a hard scrabble life.

And there aren't many opportunities for kids born into that family. When chocolate is expected to be on the shelves in Home Depot, in gas stations, and everywhere else you go, at all times, in every developed country across the world, and everybody wants it super cheap, something's gotta give.

Unfortunately, the folks who bear the economic brunt of this situation are cacao farmers.And the folks who bear the brunt of consuming low quality chocolate are chocolate customers.

There is a way to square the circle, I believe.

You could have high quality chocolate, at fair prices, widely distributed, and give cacao farmers a much, much higher quality of living. You could give their kids a chance to travel internationally, gain a ton of business experience, and view their birthright of owning a family cacao farm as an amazing opportunity to be cherished.

It would require a whole different way of doing things.....but it is possible. Here is how the industrial chocolate supply chain works in general.

First, somebody with a pick up truck shows up on a cacao farm and buys cacao from a cacao farmer.The person with the pick up truck can buy as much as their pick up truck can handle.There are a bunch of people with pick up trucks out and about buying cacao all the time.

In most cases, the cacao has been poorly and haphazardly fermented and dried by the cacao farmers themselves. It doesn't really matter because industrial chocolate companies are going to dark roast the cacao and slather it in vanilla and sugar anyhow.

Second, all the pick up truck buyers in a region will carry the cacao to some central collection point, usually in the closest somewhat big city, and sell the cacao to an aggregator with a warehouse there.They will mark up the price they paid to the farmers, get paid, and drop off the cacao.

The aggregator will collect enough cacao to fill up a freight truck, and then they will ship it off to a big city near a sea port.

Third, in the bigger cities near sea ports, bigger aggregators, with bigger warehouses, will collect a whole bunch of cacao from the smaller aggregators spread out all over the country.The smaller aggregators will mark up their inventory and sell it to the sea port aggregators.

Fourth, big international cacao brokers will make arrangement to buy the cacao from the sea port aggregators, of course after a mark up. The big international cacao brokers manage the logistics of getting all of the cacao on boats and they too have big warehouses all over the world. The customers of the big international brokers are the huge chocolate makers of the world.

Fifth, the big chocolate companies buy cacao from the big international brokers, who naturally mark up their inventory when making the sale. Now these big chocolate companies make chocolate.

Sixth, international distributors buy the chocolate from the chocolate makers and take it to their respective geographical markets. Of course, the chocolate maker takes a nice healthy mark up on their inventory.

Seventh, the international distributor sells the chocolate to regional distributors in their home country.These are the companies who supply the grocery stores, home depot, gas stations, etc.

The international distributor takes their mark up.

Eighth, the regional distributor makes their sale to the retailer after taking a mark up.

Ninth, the retailer sells it to us after taking a mark up.

And of course, we price comparison shop, looking for the bar that appears to offer the best value at the best price. That is a lot of mark ups between the buyer and the cacao farmer.

And the end price of the bar drives all of the pricing back throughout the supply chain.

It determines what each member of the supply chain is willing to pay the previous link.In this context, a $240 premium per ton is a big deal.

Now here is how we do it, and how somebody else could do it on a much bigger scale.

You build a centralized fermenting and drying facility out in your cacao producing region.You have your own pick up trucks and a team who buys cacao out on farms and brings it back to the facility.You have a team, mostly or entirely comprised of folks from cacao farm families, who works the fermenting and drying center.

After the cacao is properly fermented and dried, you manage all of the logistics yourself to get the cacao from the farming region all the way to a chocolate maker. By doing that, you've just cut out about 5 steps and mark ups from the supply chain.After covering your own operating costs, you can give the remainder of the savings back to the cacao farmers.

Instead of selling the cacao to the chocolate maker, you contract them to make chocolate for you. Once you have chocolate, you manage your own logistics to get it to a warehouse in your home country, instead of going through an international distributor.

Then you sell the chocolate directly to your customers instead of going through distributors and retailers. That eliminates about 3 or 4 more mark ups.

This gives you the opportunity to have a sustainable business, produce much better quality chocolate at a reasonable price for your customers, while paying cacao farmers much more. In our case, the cacao farm partners we work with receive a premium that is a bit more than ten times Fairtrade premiums.

We are currently paying about $2,500 per ton over world market prices for cacao and we are happy to do it. It doesn't necessarily behoove me to say this, but there is a lot of good cacao out in the world.

The cacao that we use, pure Nacional, makes delicious chocolate. But properly fermented and dried, there is great cacao all over the world, all throughout the Americas, Africa, and Asia.

All of the logistics that need to be arranged and managed, all of the fulfillment and production that needs to be carried out, these are all jobs that can be done by cacao farm family members.

Our vision for the future is that as we grow, we can help cacao farm youths get educated, but not for the purpose of moving to the capital and abandoning their family cacao business.

Rather, we'd like to see cacao farm kids coming and going from Peru to the United States, helping us with all parts of managing the business.

And if some gutsy entrepreneur wants to put up capital and work this model with other cacao regions on a much larger scale, a great ethical and sustainable approach would be to help farm families educate their children and give them professional jobs working in the business.

This would keep family cacao farms in tact and create a family business atmosphere on a large scale. Of course folks would have to get their chocolate separately, either online, or going into a local chocolate shop.

But isn't that a small inconvenience given that you'd be getting a much better product and doing a lot of good for the world?

this, in a nutshell, is what we'll be spending the rest of our lives trying to manifest. It should be an awesome journey.

I hope that you have a truly blessed day!


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