Kuapa Kokoo

Kuapa Kokoo wants to be the world’s premiere cocoa cooperative. It sees evidence of progress in the number of national and international visitors who come to learn about how the business runs. But despite its successes, the company continues to struggle with a number of serious challenges:

• Competition for Suppliers: Within Ghana, competition for farmer sales is increasingly tough, bidding down the priced fetched by cocoa growers. While the government’s CocoBod is the only authorized purchaser of bulk cocoa, there are now more than 20 Licensed Buying Companies (LBCs) that purchase from farmers and sell to CocoBod. What’s more, the largest private LBC in Ghana has a 30% market share and is owned 100% by CocoBod itself.
  
  
• Cash Benefits: Over the past several years, demand has grown among Kuapa Kokoo’s member farms for cash payouts from fair trade premiums rather than social investments in infrastructure and community. When Kuapa Kokoo can’t provide any significant cash benefits, or when it has delays in delivering dividends, it further undercuts its competitiveness and helps drive members to sell to other LBCs.
  
  
• Managing Debt: Although Kuapa Kokoo has paid off its original loan from Twin Trading, it still occasionally takes out smaller loans from local banks for various projects. Sometimes the loan terms are not favorable, such as a current loan at 27-28% interest for buying cocoa from farmers. What’s more, the Kuapa Kokoo Credit Union is facing a credit crunch as farmer demand for loans has dropped in response to the going interest rates. Like many small businesses in developing countries with unstable currencies, Kuapa Kokoo has to balance the need for capital with the accompanying shifting debt burden and their ability to loan to farmer members. Finally, no matter how successful Kuapa Kokoo may be, it remains vulnerable to Ghana’s weak currency.
  
  
• Expanding Fair Trade: Although Kuapa Kokoo was one of the world’s first fair trade-certified cocoa companies, it only sells about 18% of its output at fair trade prices. Growing this market share will allow more Kuapa Kokoo farmers to reap more benefits from fair trade premiums. But the fair trade system is imperfect. The premium has remained constant at $150 per ton for a number of years, even as costs have increased. Further, the cost of fair trade labeling is high at €15,000 (US $22,000) per year, and Kuapa Kokoo will need to implement expensive traceability standards to meet new EU regulations.
  
  
• Organic Market: Kuapa Kokoo would like to expand into organic production given the increasing international demand for organic cocoa and chocolate. But CocoBod has yet to acknowledge organic certification or a willingness to purchase organic cocoa at a premium price. Until CocoBod allows for organic premiums in the Ghanaian marketplace, Kuapa Kokoo won’t effectively be able to capitalize on this growing international demand.
  
  
• Domestic Processing: Currently all of the processing of Divine Chocolate’s cocoa happens in Europe, but the company’s leaders are interested in the potential for primary cocoa processing domestically. This would require new capital to invest in needed plant, technology, skills, and infrastructure, and is not yet a realistic aspiration given the current structure of the global cocoa industry.
  
  
• Integrating New Leadership: Much of the leadership of Kuapa Kokoo recently changed, and the new managing director has been in his position only about a year. The new slate of leaders is taking stock of past challenges and future opportunities.

In much of the world, cocoa production means nearly slave labor and absolute poverty. Kuapa Kokoo has demonstrated that it is possible to produce this commodity both competitively and responsibly. In the Ghanaian language of Twi, Kuapa Kokoo means “Good Cocoa Farmers Company,” and the company motto of “Pa Pa Paa” means “the best of the best.” Despite some serious challenges, Kuapa Kokoo is living up to both admirably.