Smallholder Agriculture Makes Waves in the Pacific

Name:Vanuatu Cocoa
Country / Territory:Vanuatu
IP right(s):Patents, Trademarks
Date of publication:October 30, 2014
Last update:March 12, 2015

Vanuatu Cocoa, Vanuatu

Made up of over 80 islands and situated about 1,700 kilometers (km) northeast of Australia (CIA Factbook), the remote islands of the Republic of Vanuatu (Vanuatu) at first might not seem like an ideal place for the cultivation of cocoa, the bean that is indigenous to South America and the basis for chocolate (World Cocoa Foundation). Colonial plantations flourished from the 1800s (United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), 2014), but as they declined in the twentieth century small scale cocoa production dramatically increased (Pacific Agribusiness Research & Development Initiative (PARDI), 2014).

The islands of Vanuatu are a perfect climate for cocoa cultivation (Photo: Flickr/Phillip Capper)

By late 2013 Vanuatu had the third largest cocoa industry in the South Pacific (UNESCAP, 2013), providing essential income for 25 percent of households in the country (United Nations Conference on Trade and Development (UNCTAD), 2014). Despite challenges the industry has faced such as high overhead costs and adverse weather (Cardno Agrisystems Consortium (CAC), 2013), with the help of various organizations and international chocolate companies - who protect their brands and innovations through the intellectual property (IP) system - Vanuatu cocoa farmers are improving the quality of their cocoa beans, attracting foreign investment, and raising their income (The Lead South Australia, 2014).

Research and development

With the dramatic increase of smallholder cocoa producers came decreased government regulation of the industry. As a result, funding from France and the European Union (EU) through the auspices of the Projet d’Organisation des Producteurs pour la Commercialisation Associative (POPACA) resulted in the formation of the Cocoa Grower’s Association (CGA) of Vanuatu, which purchases cocoa directly from the cooperatives (eliminating middlemen) and provides farmers with previously unavailable research and development (R&D) tools.

For example, the CGA provides regular training initiatives on how to increase cocoa bean quality, learn about the international cocoa market and current prices, and receive education on better farm and business management, all of which help growers develop cocoa beans of a higher quality and thus command higher prices from foreign companies (UNESCAP, 2014).

Shortly after the launch of the CGA, interest and demand increased in the international cocoa industry for Vanuatu cocoa beans. Coinciding with this, in early 2010 the University of Queensland in Australia, funded by the Australian Centre for Agricultural Research (ACIAR), an entity that operates the agricultural portions of the Australian foreign aid program, launched PARDI, which undertakes R&D into sustainable livelihood development in South Pacific countries (PARDI).

To that end, PARDI’s project in Vanuatu focused on research addressing local cocoa farming issues and an in-depth study of the value chain of Vanuatu cocoa, which found that smallholder farmers could retain a competitive market advantage by producing premium organic cocoa (ACIAR). Through this project, investor confidence and industry interest in Vanuatu cocoa has increased (ACIAR).

The CGA is helping smallholder farmers make the most of their produce (Photo: Flickr/World Bank)

Integral to PARDI’s R&D work in Vanuatu is linking smallholder farmers directly with worldwide cocoa bean buyers to provide technical and quality support. Well-known participants include Australian chocolate companies Haigh’s Chocolates (Haigh’s) and Bahen & Co. (Bahen), who assess Vanuatu cocoa bean quality and provide recommendations to PARDI researchers (who work to implement these recommendations) for how quality, desirability, and prices can be increased (ACIAR, 2014). The PARDI project also implements its R&D findings through a series of capacity building training sessions and the introduction of new production strategies, which have been able to help Vanuatu meet international standards and attract the attention of the international cocoa industry (PARDI, 2014).

In addition, in an email interview with WIPO international cocoa expert Mr. Ed Seguine explained that as Vice President of R&D and then adviser to the American chocolate company Guittard Chocolat (Guittard), he positively evaluated cocoa samples (separately from PARDI initiatives) from Vanuatu on a number of occasions between 2000 and 2010. With various R&D initiatives working to improve the quality of Vanuatu cocoa, many of these samples fared well. For instance, Vanuatu cocoa beans were submitted to the first edition of the Cocoa of Excellence program in 2009 and were part of the 2010 German Confectionary Atlas (according to conversations with Mr. Segune via email).

Goods with specific geographical origin

Cocoa - technically known as theobroma cacao - originated in South American millions of years ago (International Cocoa Organization (ICCO), 2014). It can only grow in a narrow belt around the Earth’s equator - between 10º North and 10º South - and requires high temperatures (a maximum annual average of 30–32ºC), between 1,500 millimeters (mm) and 2,000mm of rainfall per year, high humidity (up to 100% during the day and 70% at night), and access to at least 4.5 hours of daily sunlight (ICCO, 2014). Cocoa also requires coarse soil filled with nutrients but that is not waterlogged, and a pH (a measurement of acidity) range of 5.0 - 7.4. Optimal soil also needs to have over 3 percent organic matter and a nitrogen to phosphorus ration of 1.5, and should be planted in an area that does not experience extreme winds (ICCO, 2014).

For the most part these requirements represent over 40 percent of the total land area suitable for cocoa cultivation in Vanuatu (Food and Agriculture Organization (FAO), 2009). Although the isolated country is one of the most cyclone prone regions in the world, it is mostly free of environmental pollutants and rife with requisite nutrients and soil characteristics (such as acidity) (FAO, 2009) for cocoa cultivation, making it a unique and desirable source of cocoa in the industry (PARDI, 2012).

In line with the geographical location and features of Vanuatu cocoa, the country’s government enacted the Cocoa Act [Cap 139] in 1981 (revised in 2006) to ensure that it is cultivated in a manner that results in a high level of quality and also meets certain export standards. With this legal framework in place, and the help of projects such as PARDI, smallholder farmers in Vanuatu have been able to ensure that Vanuatu cocoa is not lost in a sea of other cocoa producers.

Traditional knowledge

With over two hundred years experience in cultivating cocoa, smallholder farmers in Vanuatu have a long tradition of skill in producing cocoa beans (CAC, 2012). When cocoa was first introduced to the country, the population quickly added it to their rain-fed food gardens, using the traditional knowledge that was passed down over generations on successfully growing crops in their regional climates (CAC, 2012). As demand for cocoa increased, families and smallholder farmers perfected cultivation and fermentation techniques, which has remained virtually the same as the country’s agricultural systems follows certain traditions and uses almost no chemicals (CAC, 2012).

Vanuatu has a long history of cultivating cocoa beans for export, and today new commercialization practices have helped Vanuatu cocoa enter niche markets (Photo: Flickr/Tom Hart)

After harvesting fresh bean pods, they are fermented using centuries old techniques (such as placing the beans in a wooden box covered with leaves) and then dried, either by using the sun or wood-fire heated blowers (a practice that some international producers are trying to dissuade due to smoke’s ill effect on the taste of the beans CAC, 2012). These beans are then shipped to processors such as Haigh’s or Guttier for use in chocolate products. Fusing their traditional cultivation, drying, and fermentation techniques, smallholder farmers in Vanuatu have been able to use their traditional knowledge to produce a steady flow of cocoa beans that have been successfully exported for hundreds of years.

Trademarks and patents

As Vanuatu smallholder farmers continue their craft they continue to attract the attention of multinational chocolate companies, particularly to close markets such as Australia and New Zealand, and to a lesser extent Europe, the USA, and Japan, which are steadily growing (according to FAO).

Growers in Vanuatu predominantly sell their cocoa to chocolate companies outside the country, from large companies to SMEs, and a well-developed brand is important for these companies because the IP system can serve to protect their brands in major markets. If the cocoa was sourced in Vanuatu, a number of these companies market products along with the Vanuatu cocoa name adorned on product packaging (Haigh’s, for example). Along with their IP-backed brands, this can serve to benefit the Vanuatu cocoa industry by building brand awareness and recognition and, for those that enjoy the taste of Vanuatu cocoa, customer loyalty.

Indeed, many of the companies that Vanuatu smallholder farmers work with have protected their brands via the IP system. In 2001, Haigh’s applied for a trademark for their corporate name with IP Australia, and it was registered in 2003. Likewise, Bahen made a trademark application for their corporate name in 2012, which was registered the following year.

Beyond trademarks, certain companies have been able to utilize patents to protect innovations in the chocolate industry, which can be used in products with Vanuatu cocoa. For example, although Guittard does not currently purchase Vanuatu cocoa, in 1997 the company registered a patent with the USPTO in the USA for cocoa/chocolate liquor syrups with improved flow properties for products that contain a high amount of cocoa. The patent application was also made in Canada. Vanuatu cocoa typically has a high concentration of cocoa, and such an innovation could be useful if Guittard choses to purchase Vanuatu cocoa in the future.

With brands and innovations protected by the IP system, companies that use Vanuatu cocoa in their products - and organizations that are assisting growers in the country - are able to increase market access and further promote commercialization of Vanuatu cocoa.

Commercialization

Vanuatu Copra & Cocoa Export Limited (VCCE), which purchases cocoa of any quality from smallholders for sale to multinational companies (such as the United Kingdom based Cadbury Limited), traditionally dominated Vanuatu’s cocoa industry. With the shift to developing Vanuatu cocoa as a high quality, niche product, and with the help of external assistance through projects such as PARDI, in the early 2000s additional commercialization avenues emerged (ACIAR, 2008).

For example, many farmers became aligned with the CGA through cooperatives formed by the POPACA project. This alliance helps smallholders secure a premium for their cocoa beans and establish direct links with companies in Australia, the EU, Singapore, or New Zealand, among others (PARDI, 2013). The Association for Alternative Trade in Vanuatu (ACTIV) also focuses on working with smallholders and supplying the niche market with Vanuatu cocoa. By 2014, there were approximately 9,000 growers engaged in commercializing cocoa in the country through such cooperatives and internationally backed projects (UNCTAD, 2014).

In cooperation with PARDI, Vanuatu producers have access to some of Australia’s premiere chocolate brands, such as Haigh’s (Photo: Flickr/Liza Lagman Sperl)

Commercializing Vanuatu’s cocoa as a niche product can also promote tourism and in turn more sales, as it has been proven to be one of the country’s most popular souvenirs (UNCTAD, 2014). One way this is achieved is by getting the word out about Vanuatu cocoa. As of 2014 and with the help of the PARDI project, Vanuatu cocoa was marketed internationally to chocolate companies particularly in Oceania, such as Haigh’s and Bahen in Australia. Small and medium-sized enterprises (SMEs) have also invested in Vanuatu cocoa, such as Spencer Cocoa and African Pacific, also in Australia. Domestically, smallholders have been able to sell their cocoa to Gelato, a local ice cream maker, and Lapita, a domestic company that specializes in gluten-free products. In addition, through the work of ACTIV a new chocolate factory for the use of smallholders to add value to their products was opened on the island of Epi (ACTIV).

Although Vanuatu might never become a world leader in the export of cocoa, through various international and domestic initiatives the country’s cocoa is not only exported for use in multinational companies, but is also increasingly being exported and marketed as a niche, high quality product (The Lead South Australia, 2014).

Business results

Thanks to the increased price that smallholders can command for their cocoa beans, average earnings per kilogram nearly doubled by 2009 (UNESCAP, 2014). This has allowed them to invest in equipment upgrades and further training to make their cocoa beans better and more attractive to the international market (UNESCAP, 2014). This has been effective, as from 2000 to 2010 the prices for Vanuatu cocoa beans increased sharply (Government of Vanuatu, 2012) and average annual exports reached approximately US$ 5 million from 2009 to 2013, accounting for 5 percent of the country’s total exports (UNCTAD, 2014).

Smallholder farmers are learning more about how to better manage their cocoa crops, control pests, and introduce new drying techniques. Although there is still work to do, these efforts have paid dividends. Describing Vanuatu cocoa to WIPO via email, Mr. Seguine said “Well prepared Vanuatu cocoa delivers a pleasant moderate chocolate with an attractive low bitterness and astringency. This is accented with a rich browned fruit/raisin character and traces of fresh red fruits.”

By targeting a niche market and increasing the quality of their cocoa, it is estimated they could go from earning US$ 1.25 per kilogram of cocoa to between US$6 and US$8 per kilogram from upscale chocolate companies (In Daily, 2014). This significant increase in income could help better the livelihood of smallholders and their families and communities, which can contribute to increased access to education, food security, and poverty reduction.

Thanks to increased income from cocoa sales, smallholder farmers and their communities have more access to services such as education (Photo: Flickr/World Bank)

Islands of progress

Not native to the country, once introduced cocoa production in Vanuatu has become a centuries long tradition. Using their traditional knowledge of farming under environmental conditions unique to their islands, smallholders have been able to work with organizations and international companies to successfully commercialize Vanuatu cocoa in a niche market. With these companies’ robust IP portfolios and protected brands, which further builds confidence in Vanuatu cocoa, smallholder farmers and their communities have been able to further utilize their traditional knowledge to increase their economic prosperity.

This case study is based on information from: