Generating Profits through Cocoa in Aceh, Indonesia

June 17, 2010

In 2004, Aceh, Indonesia was the site of one of the most devastating tsunamis which took the lives of 230,000 inhabitants.  Five years later…during December 2009, I had the opportunity to experience how this developing economy is struggling to recover from the natural disaster and the indestructible will of the local population to thrive in their homeland. For two weeks, I participated in a Young Leaders Program sponsored by the Hong Kong-based think tank, the Global Institute For Tomorrow (GIFT). I was among a group of 18 academics, corporate employees and NGO workers from Malaysia, China, Thailand, Australia and India learning about and experiencing the international business environment of Asia and the application of social enterprises.

The program began in Hong Kong with a week of MBA-style classes. My time in Hong Kong was quite similar to how I envisioned learning about Islamic banking and the entrepreneurial environment in Asia.  We had a special lecture given by Hugh Evans who leads the UNDP’s (United Nations Development Programme) APED (Aceh Program for Economic Development) on the complex ecosystem of aid in Aceh and how market opportunities can enhance the aid that is given in Indonesia.

Three flights later, our team headed to Aceh, Indonesia to apply what we had learned in the classroom to the cocoa industry. Through a series of interviews with local farmers, government officials, and NGO leaders, we learned that there was a substantial market opportunity in a global demand for cocoa that could be aligned with poorly equipped local farmers who lack bargaining power in cocoa prices and access to local markets. The rugged SUVs which brought us from the cocoa farms to the centralized collection centers brought to reality the transportation constraints of the famers in Aceh and why they are disconnected from the market. To address this, we researched a business plan for an enterprise which would connect cocoa farmers to the market. The core goal of the business plan was to increase the quality of cocoa beans being produced and harvested by the farmers, empowering the farmers to move up the supply chain through various solar technologies that can be used in the drying process and in turn, directly connect the farmers to international cocoa exporters to allow them to realize a majority of the profit.

 Here’s a quick picture of the current cocoa drying process in Aceh: 

  • Farmer grabs bucket of cocoa pods from the field behind his house.
  • 4 hours later, the pods are shed and the cocoa beans are exposed.
  • The cocoa beans are required to dry for 1 day before the fermentation process begins. Ideally, this is done inside of a processing facility. However, in Aceh, farmers do not have access to such technology and instead lay the cocoa beans outside on a tarp usually in the same vicinity as the chickens or next to the road.
  • At the convenience of the collector, the cocoa beans are collected from the farmers for a price dictated by the collector—the price decreases based on quality of bean and if they have not been dried long enough.
  • The cocoa beans are brought to a processing facility where they spend 8-10 days in the fermentation and drying process.
  • These dried beans are then sold from the collector to an international exporter at a price determined by LIBO (what is this?).

Due to a lack of transparency in the system and a lack of appropriate tools at the farmer level, the farmers in Aceh rarely see any of the premiums received by the collectors for the cocoa beans. How can we change that? As part of the supply chain and operations team, we explored:

  • Simple technology and agricultural techniques that can be implemented at the farmer level to produce high quality cocoa beans and increase production.
  • Distributed processing centers equipped with solar driers for low operating cost, to be used by a group of 15-20 farmers.

After 6 days of developing a business plan, we presented the opportunity at an Investors Conference in Medan, Indonesia, where cocoa collectors, exporters and NGO leaders were present.  I came back from Indonesia with an incredible experience of working in multi-cultural teams, a new appreciation for M&Ms, and plenty of ideas for how simple solar technologies can support cocoa farmers!

Posted by | Filed Under Global Health 

Comments

One Response to “Generating Profits through Cocoa in Aceh, Indonesia”

  1. cly on August 9th, 2010 10:31 pm

    very interesting. Great work!

Got something to say?





Tax Deductible Donations to Salud del Sol


The Salud del Sol Vision

Most Recent Posts