The Cocoa Business Model

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Cocoa is a bean that is in high demand all over the world, especially by developed countries. Africa is the largest producer of cocoa (73%) to the international market, which are normally in Europe and America. From Africa, Cameroon, Ivory Coast, Ghana and Nigeria share the largest contribution to the world market, with Ivory Coast by far the largest contributor, with a total of 39% of world output (UNCTAD, 2004). While the contributions of Nigeria and Ghana is 19% and 6% respectively.

Cocoa production in Nigeria is done in the South West of the country especially in Ondo State, Osun State, Oyo State and Ogun State. The South-South state of Akwa Ibom is also a producer.

This report will in brevity describe the following some operation practices, potential of growth on a 10 hectares farm, challenges faced and the possible export earnings.


Basically, the production chain of cocoa stems from the farmer down through to the companies that make use of cocoa for their products. As simple as it may look there is a lot of complexity in between, especially regarding the planting, nurturing and harvesting of the crop. Activities of each member of the chain is explained as thus:Cocoa production in Nigeria is done in the South West of the country especially in Ondo State, Osun State, Oyo State and Ogun State. The South-South state of Akwa Ibom is also a producer.

Farmer: It is the farmer’s responsibility to make land available and suitable for crop production. Being a crop with a lot of specificities like necessity for covering, temperature, humidity, regular weeding and fertilization all these have to be considered by the farmer. Also type of see used is considered, with natural options like Criollo, Forastero or Trinitario. Hybrid seeds like CCN-51 are also available. Upon growth, harvesting, peeling and drying, the seeds are sacked and sold.

Retailers/Export Companies: They serve as the link between farmers and the global market. They locate farmers and negotiate purchase of their produce. Upon conclusive talks, the packaged materials are bought and exported to the companies that make use of the product, thus, bridging the gap between the farmers and their money. This stage involves the sales of cocoa in the global market. The foreign market deals in the Intercontinental Exchange (ICE) and trade on the following floors; London Future, International Cocoa Organization (ICCO) and New York Future Exchange in Pounds Sterling per kilo and Dollars per kilo respectively. It is in this centre that the main money is made in the industry because it is at this point that finances come to play.

Production Companies: The production companies basically purchase the Cocoa and process it into finished confectionaries. The companies like Nestle, Cadbury and the Swiss Chocolate Companies are major buyers of Cocoa as they are involved in the processing of cocoa into chocolate and beverages.

There are different production typologies carried out by farmers and these processes are dependent on factors like land size, capital availability, technical know-how and technological availability. There are basically 3 typologies:

High Class:

Medium Class:

Medium Class:

Low Class:


The International Institute of Tropical Agriculture (IITA) list a 10 hectare farm as large scale when it comes to sizing farms by the cocoa plantation index. A hectare is made up of 2.47 acres of land. The output gotten from a piece of land is dependent on a number of factors like annual rainfall, temperature and the nature of the seed, whether hybrid or natural.

Depending on the variety of cocoa planted, it is possible to find between 20-50 beans in a pod. A hectare could take up to 1000 to 1200 trees, depending on the planting pattern. With this calculation, a hectare of land could annually produce between 350 to 400kg of beans. Thus 3 hectares could produce about a ton. Hybrid seeds have been recorded to give 1.5tonnes per hectare.

Thus, 10hectares should approximately produce about 3.5tonnes of cocoa beans annually if using natural varieties or in the case of usage of hybrid seeds, about 15tonnes of beans.


Each enterprise has its challenges and each of the production practices has their peculiar challenges. The cut across challenges experienced in the industry, locally are basically due to negligence or under-investment in the industry.

Many farmers have virtually abandoned their cocoa trees, only investing the bare minimum of time and money to maintain the crop. This neglect has exacerbated many pest and disease problems such as cocoa capsids, cocoa swollen shoot virus (CSSV), and black pod disease.

Globally, there are many hundreds of insects and pathogens recorded on cocoa. Diseases, rather than insects, are the biggest pest problem. Black pod is an important fungal disease in Africa, responsible for estimated losses of about 44% of global production every year, and attacks pods at all stages of their development. Cocoa swollen shoot virus (CSSV) in Africa is transmitted by sucking pests, mostly mealybugs. Insect pests Cocoa capsids in West Africa are the most important insect pests; in outbreak years losses can be up to 75%.

Pest and disease management in cocoa has been heavily reliant on chemicals but most farmers cannot afford to treat their cocoa, or make only one or two applications a year.

Also, chocolate consumption is growing faster than cocoa production and this has implications for the smallholder farmers who produce the cocoa. In 2011, trading volume of cocoa futures on the Intercontinental Exchange (ICE) was 4.95 million tons, exceeding production by 750,000 tons. In Africa, growth in the cocoa sector has been achieved by increasing the area cultivated rather than by improving yield leading to the near disappearance of the West African rainforest. The challenge today is to enable the farmers to have a viable living whilst protecting the environment.


The cocoa industry is very viable, no gain saying that yet there has been a global downward slide in the market. The global recession and general increase in price has created a downward sloping trend in the market worldwide.

In Nigeria, it was reported as at the first quarter of the year 2016, there was recorded a 5.2% reduction in cocoa exportation due to under production.

The selling price of cocoa on the global trading market has seen an up and down fluctuation, spiking to a 30-year high of 3625USD/tonne in January 2010 to a low of 2200USD/tonne in December 2011. The greatest spike observed in the market was between January 2008 to February 2011, with figures reaching as high as 3600USD/tonne.

The most recent trading figures put sales of cocoa at 2773.22USD/tonne as at the 29th of September of this year on the ICCO market. The New York Future traded at 2710USD/tonne. As at the last day of trade of the month of September, NASDAQ Futures traded cocoa at 2761USD/tonne.

Thus at the global market. This puts the price of cocoa at an average of about 2750USD/tonne. Though an enviable price but those watching this industry would confess that this is a far cry from the era of cocoa selling for as high as 3000 to 4000USD/tonne but the future reflection looks promising.


The objective of the model is simple, to achieve posterity and prosperity for all involved in the cocoa story, stemming from the farmers to the high end companies that purchase from them to produce the chocolates we all enjoy. In order to keep the market buoyant and above the pits, it is important we are actively involved in the production and protection of this cash crop that serve as livelihood to about 40-50 million people, including the 5 million that are small holder cocoa farmers.

Further research is ongoing to increase the availability of hybrid seeds, thus, closing up the yield gap and satisfy the present void experienced in the market.

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