The Case of Cocoa and Supplier Relationship Management
Who wants to live in a world without chocolate? That’s a trick question. The answer is nobody. But that’s the terrifying possibility as the world travels towards a potentially chocolate-free future by 2050.
Cocoa has been an icon of global supply chains for centuries. It emerged in Europe in the 1500s, a wonderfully luxurious discovery that European traders brought back form the Americas. In the centuries since it has grown from the height of exclusive luxury to an everyday global treat.
More than US$100 billion was spent by chocoholics around the world in 2015. At the root of this internationally delicious industry is the humble cacao tree. Sadly, those roots are at risk of drying out. The story behind that decline offers a cautionary tale of the importance of positive supplier relationship management.
Over 70% of the world’s cocoa is produced in West Africa. That makes this dynamic region of the world an irreplaceable cog in the relentless global chocolate machine. But that machine won’t keep turning if the essential driving force is left behind.
The international demand for chocolate is surging towards unspeakable gluttony. China alone is expected to double its chocolate consumption in the next few years. That means chocolate producers need to increasingly be aware of the need for sustainable economies of supply. Yet in the face of that growing demand, chocolate prices are facing historically challenging conditions, with farmers in the Ivory Coast on the verge of financial ruin. While chocoholics around the world are considering adding another notch to an increasingly uncomfortable belt, the essential cocoa producers are facing an uncomfortable financial pressure to tighten their own.
How does sustainable procurement exist in a world where the producers of raw materials aren’t properly valued for their role in the supply chain? The answer is it doesn’t. Transparency, oversight and fair reward for opportunity are key to a sustainable system. The focus on transparent procurement and oversight must be a core driver of any procurement system, and a crucial element of e-procurement solutions like Procurehere.
In an environment where suppliers are never paid, or must look to illicit means to find compensation for their goods as is the case in the Ivory Coast, the whole ecosystem is at risk of failure. More worryingly perhaps, when it comes to cocoa, the importance of positive supplier relationship management in a challenging ecosystem is more literal than we might think.
While chocolate demand is exploding, prices are tumbling, and belts are being loosened, the long-term sustainability of cocoa is facing a more serious global threat – changing weather. Sadly for cocoa farmers wrestling with the challenges of low prices, it seems that it never rains, but it pours.
2017 saw increasingly erratic weather conditions in some producing regions, resulting in excess rainfall that has contributed to the spread of disease. This issue is compounded by the challenge of farmers unable to afford agricultural products designed to improve crop growth. The particular difficulties of this year highlight the symptoms of a greater disease, as climate change increasingly pushers cocoa suppliers to the edge.
It seems inevitable that climate change will raise global temperatures in coming years. Unfortunately for cocoa producers, that will impact the delicate balance of factors needed to grow their crop. With over half the world’s demand met by the Ivory Coast and Ghana, two countries at particular risk due to changing climate, the future for cocoa supply could be bleak.
What makes this terrifying cocoa threat worse is the relationship challenges between suppliers and producers . Over 90% of the global cocoa crop is maintained by smallholders, often poorly linked to and supported by the cocoa processors and chocolate producers who are ultimately reliant on their crop. Without appropriate support, alongside fair compensation, the changing climate is likely to be cataclysmic for global chocolate addicts and farmers alike.
These challenging circumstances highlight an extreme example of the need for good supplier relationships across your procurement efforts. Suppliers should never be viewed simply as a replaceable commodity, but an essential part of a wider sustainable industry.
Whether you’re dependent on cocoa from West Africa, or microchips from a factory down the road, ensuring you’re playing your part to build positive relationships that are sustainable for all parties involved is key to the continued success of any industry.
If you lose access to your key suppliers, you lose access to a critical contributor to your own business sustainability. It’s in your best interest to nurture positive relationships, and maintain close ties with your suppliers to ensure that both your businesses can continue to run smoothly. The alternative might be losing access to a supplier partnership that ultimately you can’t operate without. As if that isn’t bad enough, the unfortunate truth is that in a few decades time, you might not even be able to afford a chocolate bar to make yourself feel better.