Ecuador, the birthplace of cacao, produces some of the world’s very best cacao for producing premium chocolate. But with only a sliver of market share how the business expands in the future is a vexing question.
At the picture-postcard perfect Hacienda Victoria, about an hour’s drive southwest of the Ecuadorian port city of Guayaquil, row upon row of cacao trees line a rolling terrain. Workers pick and gather the ripened cacao pods, which come in warm hues of yellow, red and purple, depending on the variety. Laborers husk the pods, then carry sacks of cacao beans to and from sheds where exacting fermentation takes place in large wooden crates. Finally, the beans are dried in the tropical sun.
These beans will shortly be shipped by container from Guayaquil to Yokohama or Amsterdam where they will be roasted and ground, forming the foundation of some of the world’s most upscale chocolate.
Victoria grows only “Aruba Nacional.” This distinctly Ecuadorian variety is classified as “cacao fino de aroma,” by cocoa’s international governing body. Fine cacao constitutes only about 5% of global production and is considered the world’s top quality beans. They attract enormous premiums, as much as double the price of the mass-grown cacao. One industry estimate a few years back asserted that Ecuador accounts for almost two-thirds of fine aroma beans in the world.
Ecuadorian Cacao
With 700 hectares producing 1,400 tons annually, the decade-old Hacienda Victoria is Ecuador’s single biggest producer of Nacional and its single biggest exporter of this prized variety.
“This is the future of cacao,” said Andres Guzman, Victoria’s co-founder and executive director, as he surveys the farm from an open-air pavilion overlooking a small lake.
The Future and the Past
Ecuador is the birthplace of cacao, tracing a heritage back more than 5,000 years. This South American country that straddles the Equator was cacao’s global epicenter until the early 1900s, when disease ravaged the trees. Bananas eventually replaced cacao as the country’s main agricultural export.
Meanwhile, Ivory Coast and Ghana came to dominate the cacao trade. These two West African nations now produce some 60% of global supply, which amounts to about 4.5 million tons annually. It’s a $15 billion commodity, while chocolate itself is a $100 billion industry.
However, when it comes to quality, there’s no contest. Ecuadorian cacao is far superior to that found in Africa.
“West African cocoa has only a couple of different varieties, while in Latin America, there are hundreds,” explained Marika van Santvoort, who heads the Amsterdam-based cocoa consultancy and logistics firm Moving Cocoa. “Those varieties are very complex. The flavor is much more complicated and layered.”
In recent years, Ecuadorian cacao has made a comeback. Ecuador is now the world’s third ranking cacao exporter. Over the past 1 1/2 decades, Ecuador’s cacao output tripled. Acreage was added, primarily through conversion from other crops, most notably bananas, where there’s a cap on acreage and fear of fungal threat, but also rubber and palm oil plantations. Cacao yields have greatly heightened as well, increasing from 0.2 or 0.3 tons per hectare to as much as 1.5 or 2.0 tons.
There are many elements necessary if Ecuador wants to increase the underlying worth of its exports. Nacional is one important factor. So, too, is the professionalization and sustainability of farms.
Local agro-businesses are improving everything from growing techniques to packaging. They are looking into novel new uses for the plant, including juice from the pulp, and even toothpaste from the bean shells.
“Ecuador is the mecca of technology and innovation in cacao,” maintained Guzman, whose own farm is a model of modern agronomy, social responsibility and exacting technical standards.
Supply chains have been strengthened and solidified. Highways have been built and continue to be well-maintained.
Cacao Shipping
Methods of packing and shipping to insure minimal spoilage have improved. Hacienda Victoria, for one, performs sophisticated lab testing to guarantee no chemical or heavy metal residues that clients don’t want, notably cadmium, which is now prohibited by the European Union.
Ecuadorian ports are now vying for cacao business. The port of Guayaquil, which has served as Ecuador’s primary port, now has competition, including Manta, on the country’s central coast. Most notably, DP World built a $540 million greenfield container port at Posorja, southwest of Guayaquil. With an initial capacity of 750,000 TEUs, it began operations in August. Featuring a 54-foot navigation channel, Posarja can accommodate post-panamax ships and should make shipping rates more competitive.
At the same time, markets for fine cacao are expanding and diversifying from the traditional destinations of Europe and Japan. Guzman cited the US market as one that is poised to grow substantially. He believes China, the Mideast and Russia are markets of the future for premium cacao
In addition to better quality beans, Ecuador offers itself as a more humane and equitable farming environment compared to Africa, which carries the continued stigma of abject poverty, child labor and even slavery.
“The industry is turning to Ecuador” from Africa, said van Santvoort. At the same time, “Ecuador is really promoting itself as a cocoa growing country. They’re saying ‘we were the first to grow this. We have the best beans.’”
Adds Francisco Miranda, the sustainability manager at the Guayaquil-based cacao company Agricola Guangala and the head of Anecacao, the association of cacao exporters in Ecuador: “The [international] market has embraced all cacao coming out of the country for flavor profile, for quality of excellence and for improved standards of sustainability.”
Meanwhile, a growing number of Ecuadorian entrepreneurs are focusing on finished products, notably upscale chocolate. (See sidebar on this page) They “have started experimenting with different fermentation techniques and different cocoa varieties,” said Miranda. “They’re expanding into different areas and getting stronger as companies year by year, which is great for everybody, not just for the export market.”
What’s Next for Ecuadorian Cacao?
There are disagreements within Ecuador’s industry on what direction to go. For one, a sizable percentage of cacao grown in Ecuador — the exact percentage is a matter of debate — isn’t Nacional at all, but a hybrid variety known as CCN-51. Developed by an Ecuadorian agronomist in the 1960s, this plant is resistant to many of the common diseases that plague cacao, and has elements of Nacional. But its flavor profile is nowhere near that of the premium bean. It usually garners the same price as mass-grown African cacao.
Most larger-scale farms in Ecuador to date prefer CCN-51, because yields are so great. When Victoria first planted its Nacional trees, other producers “thought we were crazy,” said Francisco Aray Roca, Victoria’s avuncular director of Agriculture.
Ecuador is wrestling with a dilemma common among commodity producing countries: Do they gain share through simply ramping up production of the most durable and easy-to-grow plants, grabbing what the market offers, or do they attempt to add value in other ways, such as focusing on premium varieties or more processed products?
“There is a tension between increasing the volume of export vs. the quality and price paid per ton,” said James Le Compte, CEO of the super-premium Ecuadorian chocolate maker To’ak.
This issue is heightened because cacao production in Ecuador has stagnated over the past three years, at around 300,000 tons. But the country has ambitious plans to up that output to 500,000 tons over the next five to ten years.
Some worry that in a race to gain market share, the quality of Ecuadorian cacao will suffer.
“There’s concern in the industry that if we keep focusing principally on the CCN 51 strategy, Ecuador risks losing that comparative advantage based around quality,” said Le Compte.
Guzman disagrees. He believes big investments will drive development and new farms will be designed more along the lines of Hacienda Victoria model. He also cites two new varieties of highly productive, fine flavor cacao that the Ecuadorian government launched last year, with another two varieties due to be offered over the next year.
Uncertainty has grown as the coronavirus spreads. The worldwide price of cacao has plummeted over the past six weeks. Premium quality chocolate has been hard hit as well (see sidebar on page 4). Ecuador, and especially Guayaquil, has been walloped by the pandemic, with afternoon and nighttime curfews to enforce shutdown orders.
(Hacienda Victoria, for one, initiated a self-quarantine within the farm. Those above 60 were moved out. Other workers agreed to stay on the farm for 60 days, with food and lodging provided to them. According to Guzman, his farm was able to ship containers to Yokohama, Amsterdam and Oakland.)
Global Cacao Trade
The global cacao trade remains highly dependent on multinational behemoths who dominate purchasing. Three companies — traders Cargill and Olam and Swiss cocoa giant Barry Callebaut constitute some 60% of the global marketplace. They are taking advantage of low prices to stockpile inventory, which means that the cacao trade might stay depressed for some time.
Even in the best of times, a transformation to value add and quality isn’t easy, either. Among persistent difficulties: Most farms in Ecuador are small, with its impoverished farmers still wholly dependent on a series of middlemen.
At the other end of the value chain: Competition among high-end chocolatiers for marketshare is fierce. The equipment to process cacao is expensive, with success dependent on economies of scale. Ecuador must compete not only with the giant global cocoa processors, but with countries such as Malaysia and Indonesia, where governments have subsidized equipment costs.
Some large-scale growers of CCN-51 maintain that they can add value, as well, although not to the degree Nacional brings, and export in far greater quantities. “What is achievable is to differentiate the production of these very uniform, very transformative beans into something that’s very good,” said Miranda, whose operation grows CCN-51.
One differentiator, said Miranda, is an emphasis on exacting fermentation and drying processes, which increase the value of the beans. Another is the focus on environmentally and socially sound growing practices.
“As demand for sustainable cocoa has been growing in the world, we have found our niche,” said Miranda. This “gives it a value add compared to what West Africa is currently doing.”
Better working conditions mean that farmers and their families gain more income, become better educated, and benefit from improved infrastructure, said Miranda.
The diversity of the Nacional bean makes for deep, complex flavors so prized by chocolate connoisseurs, can be problematic for larger-scale chocolate makers. The Port of Guayaquil offers container consolidation for beans coming in from smaller shippers. Guzman estimates it could take 70 small-scale growers to fill up one 20-foot container. In theory, that could mean 70 different varieties of Nacional, since the bean is actually not one genetic variety, but a combination of hundreds. What Victoria offers, Guzman continued, is uniformity of bean type as well as quality. “We’re giving the chocolate makers consistency,” he said, then adds: “Single estate cacao is the future.”
Follow us on social media: