How African cocoa-growers are moving upstream into chocolate

FUN though it is to pretend that a magic bunny provided the chocolate in your Easter basket, it is much more likely to have been grown by smallholders in West Africa, the region that produces 70% of the world's cocoa. The crop is an important source of income for many countries--the largest producer, Côte d'Ivoire, earns over 20% of its export revenues from cocoa. But although global sales of chocolate amount to some $75 billion a year, growers capture only a tiny fraction of this: around $4 billion a year from the sale of cocoa beans.

The money, in short, is in chocolate, not cocoa--and African farmers are not really in a position to expand into chocolate-making. Or are they? Divine Chocolate, founded in Britain in 1998, counts cocoa farmers as its biggest group of shareholders. Kuapa Kokoo, Ghana's largest co-operative, with a membership of 45,000 cocoa growers, owns 45% of Divine and has two seats on its board. The chocolate is made in Germany and sells alongside more familiar chocolate brands, "and not at a super premium price," says Sophi Tranchell, Divine's boss. The company's sales were £9m ($18m) last year, and this year Divine launched an American affiliate that is one-third owned by Kuapa Kokoo.

This is a startling expansion of growers' purview. Before becoming owners of Divine, most members of Kuapa Kokoo had never tasted chocolate, and many had never even heard of it. But commercial skills honed in local African markets seem applicable to Divine's business and the farmers take a keen interest in their company: the design of Divine's new packaging was a recent topic of conversation in villages across Ghana's cocoa-growing regions. "The farmers are very proud that they own something like this outside Ghana," says Erica Kyere, Kuapa Kokoo's head of research. "And they are very proud that they employ some white people--that makes them laugh."

Could this step into the consumer market expose growers to unanticipated risk? Not so far. Divine bought 1,200 tonnes of cocoa from Kuapa Kokoo last year, all of it on Fairtrade terms. But 98% of the co-op's production is sold at commodity prices to Ghana's state-run marketing board. So Kuapa Kokoo's cocoa finds its way to supermarket shelves under many brand names besides Divine's.

Ms Tranchell says Divine's structure has proved its strongest asset, distinguishing it from competitors, attracting high-profile endorsements and mobilising activists to insist that supermarkets sell it. It has also unlocked non-traditional sources of finance. Divine has received investment from charities and development lenders and loan guarantees from aid agencies. Without Kuapa Kokoo, says Ms Tranchell, "it would have been implausible to set up a chocolate company in this very competitive, very mature market with so little money." (In Britain, Cadbury, Nestlé and Mars account for over 80% of the market.)

Other companies are pursuing similar strategies. Agrofair, a tropical-fruit distributor based in the Netherlands, is half-owned by producers. It in turn owns a part of Oké USA, which markets Fairtrade bananas in America. Pachamama, a federated co-operative of Latin American coffee growers, has just completed its first year roasting coffee in America. With the help of in-kind loans of green coffee from its members, the firm has not had to solicit outside investors at all. And Coffee Pacifica, a coffee importer that is publicly traded in America, is one-third owned by the Papua New Guinea Coffee Growers Federation, which represents 120,000 farmers. In 2006 the firm's sales doubled to almost $3m in America and Europe.

But Anna Laven, a researcher at the University of Amsterdam who has studied Kuapa Kokoo, cautions that this approach is not always possible for producers. Without support and advice from charities, formal organisation and reliable export channels, she says, moving upstream through "functional upgrading" is not feasible for most farmers. Divine, however, is a busy exception to this rule. And this month the Easter bunny may even bring something for the members of Kuapa Kokoo: at a meeting in a few weeks' time Divine's board expects to announce its first-ever dividend.