Underlying business model
Private companies, like Mars, are confronted with an end-market demanding high quality cocoa. Another challenge for these companies is how to secure the supply over longer periods, knowing that there is an increasing demand all over the world and a decreasing cocoa production due to declining soil fertility and neglected genetic resources. Long term relationships with producers and their organizations, and investing in farmer organisations to ensure quality, sustainability claims and sufficient supply in the future, is crucial for their own survival.
At Mars, sustainability of the cocoa industry is part of the strategy and business practices, with focus on the viability of smallholder farmers and the needs of communities. Many issues threaten the sustainability and the livelihoods of smallholder cocoa farmers that can only be addressed through large programs in which industry collaborates with governments of producing and consuming countries, as well as institutes and NGO’s. Furthermore, consumers around the world are increasingly concerned about the origin of their food and aware that the cocoa they consume is produced with little consideration for the well-being of cocoa farmers and the environment. This requires the traceability of cocoa and Mars now demands traceability of the cocoa beans from farmer organizations. In April 2010, Mars Inc. announced that by 2020, all of their cocoa beans would be from sources certified as sustainable.
VECO, Mars and other stakeholders in the cocoa chain share a common interest in assisting Indonesian farmers to reach this goal. On farmer level, farmers will need to organize themselves into farmer organizations, since certification of small individual farmers is not cost efficient. In collective marketing, availability of working capital at level of the farmer organization, is crucial to buy cocoa from farmer members. Improving the members’ skills and knowledge in good cultivation techniques, on collective marketing, and post-harvest processing of cocoa is also very important.
PT Mars, along with Business Watch Indonesia (BWI), Armajaro, VECO Indonesia, Cocoa Sustainability Partnership (CSP), the Rainforest Alliance and UTZ Certified, announced in May 2010 the launch of the national indicators for the certification criteria of sustainable cocoa production. They set out the criteria to be used for certification of sustainable cocoa, enabling farmers, trainers and auditors to follow a uniform set of criteria for growing and certifying this crop.
It is important for PT Mars to get good quality and sufficient volume of cocoa beans from the farmers. Therefore, they set up pilots to train cocoa farmers in Indonesia to improve soil nutrient supplies, trim tree canopies to manage light and nutrients, rehabilitate and rejuvenate older trees, reduce post-harvest losses through processing and storage improvements, and diversify their farms to include other crops. By reducing production costs, raising productivity, and removing market and policy inefficiencies, farmers are able to substantially increase their income.