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More dynamic marketing is key to growth in Jamaica cocoa sector

19 February 2012

According to press reports, change is underway in the Jamaican cocoa sector. The Jamaica Cocoa Farmers’ Association (JCFA) is emerging as a competitor to the state-run Cocoa Industry Board (CIB), ‘which functions both as a regulator and marketer of cocoa’. JCFA is currently offering producers J$2,500 (€22.13) per box, 25% more than the CIB, with payments being made within five working days. However only 10% of cocoa growers are members of JCFA, while the CIB claims that it is still responsible for the marketing of 98% of Jamaica’s cocoa.

Jamaican cocoa fetches premium prices, since only fine-flavoured cocoa is produced. Demand for fine-flavoured cocoa is rising, and according to JCFA President Clayton Williams, ‘a price in excess of US$4,000/tonne’ is being obtained.

JCFA is seeking to play a greater role in marketing Jamaican cocoa, both through representation on the CIB and through its own marketing efforts. According to reports, Mr Williams believes the CIB ‘is doing a poor job of marketing the Jamaican product’: the CIB is accused of adopting the practice of ‘automatically renewing contracts without due diligence being done’. This, it is argued, contributes to Jamaican cocoa farmers ‘receiving the lowest farm-gate price in the Western hemisphere’.

However, according to Steve Watson, general manager of the CIB, ‘prices paid internationally for the Jamaican bean fell consistently in 2011’, down 30% over the year to US$2,109/tonne.

At present, ‘half of Jamaica's premium cocoa is shipped to France to makers of premium chocolates, and the rest is distributed through a broker who sells the beans to Italian, Swiss and Belgian companies.’

JCFA for its part is seeking to establish direct trading relationships with producers of quality chocolate products. New direct commercial relations with Hershey in the USA are being established, with this having been given ‘a high-end price valuation’, which was described by Clayton Williams as ‘comfortably above the current market price’.

JCFA is currently exploring similar relationships with buyers in Asia, Europe and North America. According to Mr Williams, the aim is to obtain ‘the highest value for our cocoa’ by building ‘lasting commercial relationships through fair pricing of our cocoa’. Competition among buyers is seen as an important element of any marketing strategy aimed at maximising producer revenues from the marketing of fine-flavoured cocoa.

Pursuit of this strategy will however require JCFA to considerably expand the volumes of cocoa it markets. This accounts for the importance attached to US- and EU-supported programmes to boost both yields and overall cocoa production (moving from 300 to 1,500 tonnes by 2014). Cooperation with Transmar Commodity Group is also seen as important for enhancing the production of high-quality, fine-flavoured cocoa. In the longer term JCFA also has aspirations to increase production ‘to sustainable levels to make a value-added cocoa-processing facility viable’.

Editorial comment

The need to adopt innovative and dynamic marketing strategies is an increasingly important feature of the challenge facing ACP producers of quality-differentiated products. Criticism of the state marketing boards needs to be seen in the context of the increasing price volatility and the emergence of much larger price differentials between ‘necessity purchase’ and ‘luxury purchase’ products consumed in OECD and advanced developing country markets. This has created a new context which ACP producers and exporters need to respond to.

In order to improve marketing, it is critical to maintain close relations with the users of inputs into quality-differentiated products, as a consistent, high-quality supply needs to be guaranteed if premium prices are to be secured on a sustainable basis. This requires continuous dialogue on market requirements and the introduction of necessary innovations in production techniques and handling.

For farmers’ associations, this can come to constitute a major management challenge unless programmes of capacity-building support are successfully implemented. Even where capacity is developed, as the recent experience in Jamaica’s Blue Mountain coffee sector illustrates, constant innovation is still required if over time the development of ‘comfortable’ commercial relationships are not to undermine the sector’s capacity to respond to dynamically changing market conditions.

While the Jamaican Cocoa Farmers’ Association appears to have a clear vision of what it wishes to achieve, there are considerable challenges to meet if the long-term vision is to be realised. This is particularly the case for value-added processing. While examples of adding value to cocoa and exporting high-end consumer products exist in the region (e.g. in Trinidad and Grenada), these are mostly driven by private initiatives. This raises the question: what policies should governments set in place to support private sector marketing and product development initiatives capable of redefining the development path for the Caribbean cocoa sector?

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