Evaluating the True Cost of Cocoa Production & the Viability of Mondelēz International’s Farm of the Future Model

Abstract

This report examines and seeks to identify how the total costs of cocoa production, inclusive of environmental externalities, can be valued in dollars through impact quantification and monetization. It explores how Mondelēz’ proprietary Farm of the Future (FotF) model could mitigate impacts and recommends continued investment in the project given its potential to create significant true cost savings. Global cocoa demand is changing and bolstered by significant increases in emerging markets – is projected to outpace global supply by as much as 1 million tons as early as 2020. This is a critical challenge for chocolate producers, including Mondelēz International (Mondelēz), one of world’s largest snack companies. The cocoa supply chain is complex the existing fragmentation of the production landscape, declining soil fertility, diseases, pests as well as the generally poor socio-economic welfare of the millions of smallholder cocoa farmers all present difficulties and concerns. While Mondelēz has invested heavily in the mitigation of these challenges, the organization recognizes the future challenges that will impact their organization and the industry as a whole, if something does not change. This Masters project endeavors to provide a deeper understanding of the scope of these impacts and value creation generated by their mitigation. This study utilizes an adapted system of true cost assessment, incorporating concepts from systems thinking, life cycle assessment (LCA) and whole life costing (WLC) to monetize these impacts.  The first chapter examines the global cocoa production landscape, highlighting impacts associated with the current system.  The second chapter delves into the developed monetization methodology and defines the concepts.  The third chapter presents a cocoa case study that employs the above methodology as well as traditional cost assessment measures to highlight the costliest impacts.  The fourth chapter examines the proprietary Farm of the Future model, developed by Mondelēz, forecasting its efficacy in mitigating existing environmental and social issues as well as creating economic gains.  The fifth chapter applies the conclusions of the case study and demonstrates the decreased societal cost burden that the FotF model facilitates.  The final chapter provides a brief conclusion of the primary learnings.