Evaluating opportunities for enhancing Mondelēz’ sourcing strategies to ensure sustainability of its cocoa supply

Abstract

Chocolate is a multibillion dollar industry with nearly 50 million people along cocoa’s global value chain dependent on the crop for their livelihood. Low productivity, urbanization, climate change, rise of the middle class leading to growing global chocolate demand, and consumer demand for increased transparency have put pressures on the cocoa value chain. By 2020, annual global cocoa demand is projected to exceed supply by nearly 1 million tonnes. Cocoa producers are faced with low incomes, low productivity and poor agricultural practices, leading to a vicious poverty cycle. In many origins, farmers are looking elsewhere for alternative livelihoods. Such factors pose risks to the stability of the cocoa value chain. In light of these pressures, chocolate manufacturers are exploring alternative sourcing strategies. The emergence of industry mechanisms such as third-party certifications, direct trade and dedicated supply chains have ushered in a new wave of business models that hold promise for more sustainable sourcing. As one of the largest chocolate manufacturers in the world, Mondelēz International, Inc. (Mondelēz) has committed USD $400 million over 10 years in a cocoa sustainability program called Cocoa Life. In the past, sustainability programming at origin and sourcing decisions were kept separate; with Cocoa Life, the intent is to create a direct link between the two to achieve supply chain stewardship. Our Master’s Project seeks to leverage insights from global value chain analyses of five key cocoa origins, peer benchmarking, and interviews with industry experts and internal Mondelēz stakeholders to identify intervention points, best practices, and recommendations for Mondelēz’ cocoa sourcing strategies. Given our understanding of Mondelēz’ sourcing approaches and priorities, we recommend the company continue integrating landscape approach elements to Cocoa Life, by building relationships and trust throughout the value chain especially with producer communities and government entities, prioritizing professionalization of the farmer, and engaging in the pre-competitive challenge of eliminating cocoa smallholder and community poverty. Other opportunities include applying financing mechanisms through payment for ecosystem services models. This paper also provides a basic framework that highlights key conditions required for specific sourcing strategies’ viability in order to advise Mondelēz on strategic sourcing decisions.