Unbeknownst to many consumers, the supply chain that facilitates the delivery of those delectable heart-shaped chocolates is facing significant challenges.  Should these challenges go unresolved, the future of chocolate may not be so sweet. The large majority of cocao is grown on small family farms that often use unsophisticated, labor-intensive farming practices.  Poor yields are demonstrative of poor or inexistent educational systems and inadequate knowledge of modern farming techniques.  Even if farmers do possess the knowledge necessary to improve operations, it’s likely they lack the financial wherewithal to support productivity investment.  As the industry adjusts to the demands of an evolving supply chain, it may be worthwhile investigating the business model of Rausch, a private German chocolatier.  The company works with all stakeholders – governments, brokers, cooperatives, and individual farmers – to establish reliable supply but also to “help the farmer have a better life by earning enough money so that he can enjoy and provide a future for himself and his family.”

Michael Shavel, CFA is a Research & Business Analyst at Cornerstone Capital Inc. and a former Research Analyst on AllianceBernstein’s Global Growth & Thematic team.

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