From Cocoa Pod to Chocolate Bar: Exploring the Investment Opportunities in Nigerian Cocoa Farms

Cocoa Farms in Nigeria

Cocoa is a cash crop and a critical export for producing countries and a key import for consuming countries which typically do not have suitable climate for the production of cocoa. Africa (Cote d'Ivoire, Ghana, Nigeria and Cameroon) dominates the global cocoa market by 70%.

Cocoa trees grow in tropical environment with an ideal climate of hot, rainy and tropical with lush vegetation to provide shade for the cocoa trees. This simply describes the climate in Nigeria. The Western region of Nigeria is predominantly reputable for cocoa production in Nigeria. The cocoa house at Ibadan is a monument to show for.

According to Oyedele 2007 "between 1950 and 1960, cocoa was the highest source of foreign exchange in the country". Today, oil and gas tops the list but cocoa production has remained Nigeria's largest non-oil export earner by 28%. This Day on 7th June, 2011 announced that "primary non-oil export from cocoa, one of the nation's foreign exchange earners fetched Nigeria the sum of $822.9 million in 2010"

Products from Cocoa

A pod of cocoa can be translated into a variety of products, among which are;
·         Animal feed- cocoa pod husk, can be used as an animal feed.
·         Production of soft drinks and alcohol - In the preparation of soft drinks, fresh cocoa pulp juice (sweatings) is collected, sterilised and bottled.
·         Potash from cocoa pod husk - Cocoa pod husk ash is used mainly for soft soap manufacture. It may also be used as fertiliser for cocoa, vegetables, and food crops.
·         Jam and marmalade - Pectin for jam and marmalade is extracted from the sweating by precipitation with alcohol, followed by distillation and recycling of the alcohol in further extractions.
·         Mulch - Cocoa bean shells can be used as organic mulch and soil conditioner for the garden.
·         Cocoa butter - Cocoa butter is used in the manufacture of chocolate. It is also widely used in cosmetic products such as moisturising creams and soaps.
·         Cocoa powder - Cocoa powder can be used as an ingredient in almost any foodstuff. For example, it is used in chocolate flavoured drinks, chocolate flavoured desserts such as ice cream and mousse, chocolate spreads and sauces, and cakes and biscuits.
·         Cocoa liquor - Cocoa liquor is used, with other ingredients, to produce chocolate. Chocolate is used as a product on its own or combined with other ingredients to form confectionery products.
All the products from cocoa are sought after but the global chase for chocolate sustainability is a concern that should interest investors.

The Global Chase for Chocolate
Exploring chocolate, just one of the products from cocoa; Chocolate is highly consumed product among children and adults alike. It is a very big business and one of the bestselling global products. Chocolate is although considered a naughty addiction for consumers but its demand is ever on the rise. As a matter of fact, the demand for cocoa for chocolate is so high that experts warns that there will shortage of affordable cocoa supplies within 20 years if active measures are not taken to sustain cocoa production. 

Why should Investors be interested in Cocoa Business?

There are a couple of reasons why investors should find the cocoa business a viable opportunity to dip into;
1.      Nigeria (Africa) has a huge plus in cocoa production- Cocoa plant is not peculiar to Nigerians though, but Africa now dominates the production of cocoa towering with 70%. The temperate and climate of Nigeria, especially the South-West region favours the growth of cocoa production. Nigeria is a sweet spot for cocoa production. It makes its sustainability limitless.
2.      The is a present and future demand for the production of cocoa- As long as chocolate and other cocoa products are consumed, the market remains profitable. Aside chocolate, Cocoa beverages are heavily consumed (especially by growing children and young adults) in developing regions of the world like Africa. Beverages like Milo, Ovaltine, Bonvita etc. is a household name in Nigeria. Nigeria has a one of the fastest growing population in the world with about170, 000,000 million people. As a result of this explosive population growth, more people will depend on cocoa farmers to produce the valuable beans used for producing these beverages. And because cocoa can be grown in only a few other places outside Africa, Nigeria precisely, the high demand for cocoa products will provide a steady and lucrative market for cocoa producers.

3.      Increased Investment Support for Farmers- Through agricultural credit support schemes and policies, the Nigerian government is actively supporting agriculture. Even organisations are now making huge efforts to make cocoa production more lucrative for African farmers because they are one of the important value chains in the entire process.
For example, Nestle and Cargill, two of the world’s largest food companies that sell a lot of chocolate products are investing millions of dollars to train African cocoa farmers and providing disease-resistant and high-yielding varieties for farmers.

Nestle’s Cocoa Plan is an initiative that will invest over $120 million in cocoa development over the next ten years. Cargill calls its program the Cocoa Promise. The program has trained over 90,000 farmers in Cote D’Ivoire to improve their skills in cocoa cultivation. Also to increase the amount of money farmers can make from the cocoa business and encourage sustainable cocoa production, NGOs like Fairtrade, Rainforest Alliance and UTZ have set up certification programs to protect cocoa farmers and increase the profit potential of their produce.

Insightful Tips on how to get into Cocoa Business
Cocoa passes through a number of interesting stages. It goes from the farms where they are cultivated and harvested to the big manufacturing plants that use them to manufacture chocolate and beverages. The cocoa value chain starts from the farmer and ends with the global brands like Nestlé, Cadbury and Hershey that produce chocolate and several other cocoa products.
But if you would like to enter the cocoa business, you must first decide the role you want to play in the cocoa value chain. Would you like to own a farm or plantation for cultivating cocoa trees? Or would you rather act as a middleman who buys the harvested and dried cocoa beans and sell them locally or export to processors overseas? You could also be a grinder or chocolate maker but these will require huge capital investment and lots of technical knowledge and skills. This is though what Nigeria needs. Just like its sister nation Cote d’Ivoire who not only plants but processes cocoa.

If you also intend to become a farmer and cultivate cocoa trees, getting the land with suitable characteristics is important. Cocoa grows well in well-drained soils and a variety of soil types. Because cocoa is sensitive to water deficiency, the area should have plentiful rainfall which is well distributed throughout the year. Using new and hybrid varieties of cocoa is also very important. These new varieties mature earlier, produce more cocoa pods and are resistant to diseases. Nigerian soil is pretty favourable for cocoa plant but the South-Western part of Nigeria seem to be a more proven viable soil.
If your preference is to trade in cocoa beans and possibly become an exporter to cocoa grinders and processors overseas, there are a couple of things you must know. Internationally traded and export grade cocoa usually have specific requirements and high quality standards. If cocoa beans do not meet these standards, they are often rejected by the customers and you’ll lose a lot of money. In addition to quality, price is also another important factor you must follow closely. International cocoa prices change very often based on market supply and demand, poor harvests or political instability in cocoa producing countries. To avoid any losses, cocoa traders must always consider the effect of pricing on their trading business.
Above all, there are usually cocoa research and support programs run by NGOs or government offices in cocoa producing countries. Joining these programs and visiting the offices will provide you access to quality information about the cocoa business in your country. You could also make some connections that will help your learning and teach you more about the business.

We do hope you find these pieces of information helpful.

Written by
Ryta Moemeke.