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228 Niels

Journal Fold
of Agrarian Change, Vol. 2 No. 2, April 2002, pp. 228–247.

Lead Firms and Competition in ‘Bi-polar’

Commodity Chains: Grinders and Branders
in the Global Cocoa–chocolate Industry


Like most global agro-industrial commodity chains today, the global cocoa–
chocolate industry is buyer-driven. However, the chain is characterized by the
lead role of a few transnational companies in two different segments: the grinders
(processors of cocoa) and the branders (manufacturers of chocolate), a structural
pattern identified in other so-called turn-key industries consisting of contract
manufacturers and brand-name firms. The paper examines two important spatial
sub-systems of the chain: the national cocoa bean supply system in Ghana and
the regional cocoa trading–storing–grinding complex in the Zaanstreek,
Amsterdam. The structural patterns and relationships in these sub-systems
suggest that the dynamics of ‘bi-polar’ buyer-driven chains is best comprehended
in terms of various types of containment strategies of the lead firms, i.e. efforts
to defend and improve their positions on the global market by creating competi-
tion among their suppliers and expanding their customers.
Keywords: agro-industrial chains, cocoa, chocolate, Ghana, turn-key

During the 1990s, most state marketing boards dealing with cocoa in West Afri-
can producer countries were dismantled as part of structural adjustment pro-
grammes (SAPs). SAPs aimed at a broad liberalization and privatization of
debt-burdened national economies in Africa, which formerly relied heavily on
the use of state institutions for regulatory and expansionary purposes. Most state
marketing boards (or Caisses de Stabilisation, as they were called in Francophone
countries) operationally covered a majority of the commercial activities linked to
one or more closely related export crops, i.e. supply of inputs for crop produc-
tion, extension services, purchase and transport of harvested crops, storage in
ports, and sale of the crop to importers in the industrialized countries. The
intention of the reforms was that efficient private individuals and companies –
local as well as foreign – would take over those activities considered profitable
after the liberalization of the marketing boards.

Niels Fold, Institute of Geography, University of Copenhagen, Oster Voldgade 10, Copenhagen
DK-1350 K, Denmark. e-mail:
The author is grateful to the editors of this special issue for their valuable comments and suggestions.

© Blackwell Publishers Ltd, Henry Bernstein and Terence J. Byres 2002.

Grinders and Branders in the Global Cocoa–chocolate Industry 229

A significant result of such liberalization processes has been the deterioration

of the quality of previously regulated crops (Raikes and Gibbon 2000), a trend
noted in different countries and for different crops. It indicates the existence of
common processes and causes, the most obvious being the gradual disintegration
of public quality-control systems. Former marketing boards have withdrawn
from these activities, while private local traders – some of whom lack any experi-
ence in marketing particular crops, but are lured by the prospect of easy profits
– are uninterested in quality. On the contrary, they are eager to increase the
speed of circulation between purchase from agricultural producers and sale to
exporters. Reduction of time between buying and selling gives smaller operators
the possibility to increase their traded volume and thereby expand revenue. In
addition, most local traders depend on pre-financing of their purchases and such
finance typically carries interest. For local participants, increasing capital velocity
thus also reduces interest liabilities even though this imperative may result in a
scramble for the crop and buying without reference to quality.
In the case of cocoa, complaints from importers and industrial users about
decreasing quality have grown over the last decade and particularly since liberal-
ization started in Cote d’Ivoire in the late 1990s. Côte d’Ivoire is by far the
world’s leading cocoa producer, producing about three times as much as either
of the countries ranked next, Ghana and Indonesia. Apart from Ghana, which is
a special case due to the maintenance of the historic state-regulated marketing
system, quality has also decreased in the two other important cocoa producers in
West Africa, Cameroon and Nigeria. This is in a context where West African
farmers have traditionally spent more time on the proper fermenting and drying
of cocoa beans, before selling them to the marketing board, and West African
beans therefore usually traded at a premium price compared to beans from
Southeast Asia or Brazil. These differentials have been reduced as a result of the
deteriorating quality of West African beans.
However, as Gilbert (1997) points out, quality deterioration is as much a
result of what industrial consumers, i.e. grinders and chocolate manufacturers,
are willing to pay as it is of what farmers are able to provide or shippers are
willing to deliver. In other words, some industrial users of cocoa beans are able
to cope with deteriorating bean quality. Major cost savings have also been
obtained via changes in logistical systems, in a way that reinforces the competit-
ive power of the large grinding companies located at accessible waterfronts
(harbours or river mouths) in Europe. Some of these changes possibly feed back
into the continuation of quality deterioration. Moreover, due to the global
supply/demand imbalance during the last couple of years, the cocoa price has
reached rock-bottom lows and cocoa bean processors can factor in a minor
proportion of wasted beans without seriously harming profitability.
The liberalization process in cocoa exporting countries of West Africa, the
general trend of quality deterioration, and developments in the global cocoa and
chocolate processing industry are inter-linked in complex ways. This paper fo-
cuses most on identifying the new forms of competition and collaboration being
gradually established in the course of the structural transformation of the global
230 Niels Fold

cocoa–chocolate industry. In the light of these findings, it reflects further on the

theoretical and methodological framework found in most examples of global
commodity chain (GCC) analysis. I argue that the crude dichotomy between
producer- and buyer-driven chains (Gereffi and Korzeniewicz 1994; Gereffi 1999;
Raikes et al. 2000) fails to acknowledge the more complicated patterns of power
relations between lead firms in global chains – or, at least those for agro-
industries. Even though the distinction can be considered a useful heuristic
device, it does not help specify the dynamics of ‘driven-ness’ in certain global
chains. More specifically, it does not enable us to grasp the complexity of
commercial strategies in so-called turn-key industries where lead roles are played
by both merchant contract manufacturers and brand-name firms (Sturgeon 2000).
The paper is based on data from interviews with companies in two important
territorial sub-systems of the global cocoa–chocolate chain. Firstly, I examine
liberalization in Ghana’s cocoa sector to identify the core drivers and key rela-
tionships determining the nature and future of the ‘traditional’ chain, including
its quality-control system. The uniqueness of the cocoa supply chain system in
Ghana can be considered a relic of the past as the only national system in which
state regulatory power continues to exist. The socio-economic forces supporting
this, however, constitute an important element in structural differentiation within
the governance system of the global cocoa–chocolate industry.
In the second section, I map the companies in different segments of the indus-
try located in one of the ‘cradles’ of the European cocoa–chocolate industry,
namely the Zaanstreek/Amsterdam area in the Netherlands. Grinding companies
in this region constitute an important part of the global chain, both in quantitative
and qualitative terms (ITC 2001). The range of players and their inter-relations
in this regional complex of the cocoa–chocolate industry are in many ways rep-
resentative of the downstream part of the ‘new’ chain, and demonstrate the
emerging forms of competition and collaboration between its different actors.
The complex is dominated by three transnational companies with the techno-
logical and financial resources necessary to exploit economies of scale in the
manufacturing of cocoa products.
Third, the outline of these two sub-systems – a traditional national supply
system and a regional manufacturing complex – then serves as the starting point
for a discussion of contemporary competitive and collaborative relationships on
a global scale between brand-name chocolate manufacturers and cocoa bean
grinders. I conclude with some theoretical reflections on the conceptualization
of the dynamics of ‘bi-polar’ chains (i.e. those pertaining to turn-key industries),
and with a brief discussion of the consequences and policy implications for
cocoa systems and smallholders in West Africa.


Ghana is one of the world’s largest and most important producers and exporters
of cocoa. As early as the 1920s, when West Africa replaced the Americas as the
Grinders and Branders in the Global Cocoa–chocolate Industry 231

leading cocoa-producing region, Ghana was the largest producer on a global

scale. Its supply importance peaked in the early 1930s, when it accounted
for about 40 per cent of global production. Due to political turmoil and low
producer prices in the late 1970s and early 1980s production declined, but subse-
quently regained some of its former importance, partly because of the introduc-
tion of higher yielding hybrids (Dand 1999). During the late 1990s, the country’s
annual production of about 400,000 tonnes was second only to Côte d’Ivoire’s
(1,100,000 tonnes) and about the same as Indonesia’s (350,000 tonnes). Ghana’s
production is far larger than that of countries in the next two tiers of major
suppliers, Cameroon, Nigeria and Brazil (all between 130,000 and 180,000 tonnes),
and Ecuador and Malaysia (70,000 –100,000 tonnes).
In 1992, a programme to liberalize and privatize the cocoa chain in Ghana was
implemented as part of a series of structural adjustment measures (Onumah and
Shepherd 1997). Until then, extension services to farmers, purchase, handling,
transport, grading, processing, marketing and shipping of cocoa beans were
carried out by various subsidiaries of a state-controlled marketing board
(Cocobod). In a restructuring process still in train, it is planned that each of these
subsidiaries will be transferred to other state regulatory bodies (e.g. extension
services to the Ministry of Agriculture) or privatized after removal of their
monopolistic or monopsonistic position in the chain.
So far, however, only the monopsony of the purchasing arm of the marketing
board has been removed and about 20 private companies, so-called licensed buyer
companies (LBCs), have obtained a licence to buy beans from farmers (data from
company interviews, February–March 2000). About half of these are (to varying
degrees) actively buying beans, while the rest are dormant due to lack of financial
and/or managerial capacity. Exports are still fully controlled by CMC, the
marketing company of Cocobod. Although in principle the LBCs have been
allowed to export a minor share of their purchases since October 2000, all sold
their cocoa beans to CMC in the 2000/1 season.
Despite the initiatives towards liberalization, a pan-seasonal and pan-territorial
producer price is still determined in advance of the harvest season starting with the
light crop (May–June). Participants in the price-setting procedure include repres-
entatives of farmers, LBCs, transport companies, and Cocobod’s marketing com-
pany, as well as the Ministry of Finance (tax revenue) and the Bank of Ghana.
Each group of key agents is struggling for margins. Processing companies (local
and foreign grinders and food processors) are not invited to the negotiations.
It is possible to set a pan-territorial and pan-seasonal price because of Ghana
beans’ special position in the world market. They earn a premium – of about £60
per tonne compared to beans from Côte d’Ivoire – as a result of their high fat
content and rich flavour. International customers are willing to buy the beans
8–16 months in advance of harvest and the CMC sells forward a large part of the
expected harvest at known prices. This revenue combined with price forecasts
constitutes the basis for the domestic producer price.
The premium is based on careful fermentation and drying processes carried
out by farmers and a well-established quality-control and standardization system
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throughout the chain. Control starts at buying posts where trained clerks (or
agents) accept beans from farmers only after inspection for dryness, smell, colour,
infestation and size consistency. After weighing and re-bagging into ordinary
sacks, Cocobod’s quality-control division takes samples from piles of 30 bags.
Beans are checked for moisture content, size consistency and for defects by the
cut test. Depending on the extent of mould, slaty (under-fermented) beans and
other defects, beans are graded into two grades and the sacks sealed so that time,
location and grader can be determined at a later stage; beans of substandard
quality are rejected completely. After this, beans are transported to regional
depots from where they are taken to ports at a later stage. Quality control is also
implemented on arrival at ports and again before overseas shipment.
Even though all the key actors support the maintenance of the quality-control
system in principle, movement towards a more flexible and less rigid system
seems inevitable. This is primarily a result of pressure from the LBCs which
wish to speed up circulation time by reducing the number of quality checks
along the chain and to increase the number of licensed quality-control companies
– at present there is only one, namely the Quality Control Division (QCD) of
Hence, the LBCs seem to be becoming the main movers in restructuring the
domestic part of the chain, although they still operate under the restrictions set
by the CMC. The extent of these restrictions depends on the balance of forces
between, on one hand, the World Bank and bilateral donors’ pressure for full-
scale price competition throughout the chain and, on the other hand, alliances
between domestic and foreign pressure groups to maintain or change only slightly
the present system.
In the liberalization of domestic trade in cocoa beans, the LBCs currently cut
their operating costs by externalizing primary purchasing operations: individual
agents are contracted to supply the companies on a commission basis, i.e. paid a
fixed price per bag of cocoa purchased. Most of the managers of LBCs are
former employees of the Produce Buying Company (PCB), the previously
monopsonistic subsidiary of Cocobod, and the new practice is a result of experi-
ence gained during the 1980s when agents were hired as salaried workers. LBCs
are private companies and the business interests of their owners often extend to
the haulage companies that transport cocoa beans from up-country depots to
ports at pre-seasonal fixed rates. Cocobod’s own PCB is the buyer of last resort
and covers all the cocoa districts in the country, whereas the LBCs can choose
the districts in which they want to buy beans with the proviso that they operate
in a minimum of three regions.
At present, LBCs are pre-financed with loans from Cocobod’s own overseas
borrowing. Access to working capital from domestic banks is otherwise diffi-
cult, and Cocobod loans are also at relatively favourable rates compared to those
of domestic banks. Loans are supposed to be repaid at the end of each season,
and the size of the following year’s loan determined on the basis of past repay-
ment performance and expectations for the next season. Even though complaints
over Cocobod’s pre-finance practices are few, most LBCs would still prefer to
Grinders and Branders in the Global Cocoa–chocolate Industry 233

enter into some kind of contractual relationship with an overseas customer, so

that they could combine obtaining pre-finance with gradually building up export
market experience and eventually get direct access to foreign exchange.
External support for maintaining the present structure of the Ghanaian part of
the chain comes from those companies in the Northern chocolate industry that
depend on the specific quality parameters and consistency of Ghana beans and
thus on specific practices in the national supply system. For instance, Cadbury,
which claims to use Ghanaian beans in all its chocolate products sold in the UK,
is highly dependent on the ability of the chain in Ghana to grade, sort and pack
beans in specially designed containers for its factory in Birmingham. Hence, the
present organization of the chain provides logistical support for its customers, in
addition to origin-specific flavours. If these companies are willing to pay a
suitable premium in return, then they may stimulate the LBCs to maintain a
somewhat changed but still coherent and efficient quality-control system. Main-
taining traditional industrial standards is, in turn, the basis for the present local
price system, although this also has had to be modified to accommodate changes
in the size composition of harvested beans following recent planting of hybrids
with no clear seasonality.
On the other hand, most transnational grinding companies that produce cocoa
liquor, butter and powder (see next section) now depend much less on tradi-
tional origin parameters of bean quality. For many industrial customers using
cocoa products, quality of raw material or intermediate goods is no longer
directly linked to the crop’s physical conformity to some general defined ideal.
Rather, quality is linked to how well the intermediate product adapts to specific
technical requirements in the manufacturing process of final goods. The basic
principle of processing cocoa beans into various products has not changed for
many years, but knowledge of critical control points in the production process
and capability to apply automatic process control have increased considerably.
This means that, within certain limits, it is now technically possible to com-
pensate for variations in bean quality without compromising customers’ demand
for intermediate goods with specific properties (ADM 1999). Hence, the demand
from transnational grinders diverges from traditional standards for cocoa beans.
In a situation where export marketing is liberalized, this could lead to the gradual
breakdown of the quality-control system in Ghana by stimulating the LBCs to
emphasize circulation time and volume in preference to traditional industrial
At the same time, transnational grinders are the most likely participants in
a future functional upgrading of the chain in Ghana, as is reflected in the pro-
spective commissioning of a new grinding factory in Tema by Barry Callebaut.
Together with the joint venture between Cocobod and the German grinding
company Hosta-Hammester in Takoradi, this will represent the lion’s share
of the cocoa processing industry in Ghana. The Cocobod-owned Cocoa Process-
ing Company (CPC) in Tema runs at low capacity, in both its grinding and
chocolate plants, and has (so far unsuccessfully) been offered for sale to private
234 Niels Fold

Whether it is beneficial for Ghana, and other cocoa-producing countries, to

establish such ‘origin grinding’ facilities is an open question. Clearly, low quality
(residual) beans rejected by quality-control procedures as unsuitable for export
can be transformed to an exportable value-added product (Fry 1995; Dand 1999).
But, as explained in a moment, the reputation of this product is generally poor.
For the grinding companies the benefits are clearer, although they are not all
directly economic. Generous tax exemptions linked to easy and ‘closer’ access to
raw materials, as well as the possibility of securing political goodwill, are import-
ant benefits for companies investing in origin grinding. In addition, grinders in
importing countries are able to transfer lightly roasted cocoa liquor to more
advanced plants in the North, where technological developments now allow
further roasting and flavour modification, to yield the intermediate goods in
demand by food and chocolate manufacturers (Heemskerk 1999).
But there are clear limits to the advantages that this offers. If the main result-
ing product, cocoa butter, is shipped from the origin in solid form, then buyers
have to include an extra processing stage (that of melting), resulting in a discount
on the sales price. Moreover, the range of products offered by origin processors
is necessarily limited as their products are based on only one type of bean, i.e.
the locally grown variety, whereas end-market processors usually have the
opportunity to blend a range of beans with different quality parameters. This
explains why the premium on Ghana beans is lost if exports are transformed to
processed goods: cocoa butter is more or less a standard product and Ghana
cocoa cake is of inferior quality.
Nonetheless, during the last 20 years about a third of global grinding has been
carried out in the cocoa-producing countries, where most of the factories are
owned or controlled by the big Northern grinding companies. During this
period, the share of West African grindings increased rapidly, particularly in
Côte d’Ivoire. Only the large and best-established grinders in the North have
invested in West Africa. This certainly reflects the high barriers to entry, but it
mainly shows that market access is absolutely vital to the grinding segment.


Dutch merchant capital in Amsterdam was already dominant in the European
cocoa trade when the demand for drinking chocolate rapidly increased during the
seventeenth century. The grinding of cocoa beans took place in one of the
cradles of European industrialization: the area along the River Zaan about 10 km
north-west of Amsterdam. Low local agricultural productivity stimulated
investment in inland and external trade and shipbuilding, followed by timber
processing and activities related to the fitting-out and provisioning of ships (e.g.
flour milling for ship’s biscuit bakeries). By the end of the sixteenth century,
windmills used for flour milling were modified to drive vertically mounted saw
blades and later, during the seventeenth century, adapted to power hammers,
rams and paddles. This stimulated a tremendous growth of food processing
Grinders and Branders in the Global Cocoa–chocolate Industry 235

activity, including cocoa grinding. After 1850, productivity was substantially

improved by the installation of steam engines and the opening of the North Sea
Channel, which particularly boosted the processing of tropical crops (Lambert
1971; Pinder 1976). The Zaan manufacturing industries developed increasingly
sophisticated products and the Dutch chocolate industry was born in the late
nineteenth century, when chocolate started to become a common consumer good
in most larger European countries. Historically, the processing industry was
divided into two filaments:
(1) the ‘traditional’ grinding line, specializing in roasting, de-husking and grind-
ing of beans into a liquid paste, and successive pressing of this cocoa liquor
into cocoa cake (with a low fat content, used for hot beverages) and cocoa
butter (a vegetable fat); and
(2) chocolate manufacture, specializing in chocolate production based on ‘dedic-
ated’ cocoa liquors – the ‘soul’ of specific chocolate products – mixed
with additional cocoa butter (purchased from the grinders), sugar and other
During the inter-war period and after the Second World War, the cocoa and
chocolate industry expanded with growing demand, so that some 15–20 cocoa
processing and chocolate companies existed in the Zaan area in 1980. Today
nearly all have ceased to grind and some have also ceased chocolate production in
what seems to be a localized but comprehensive process of centralization. On the
other hand, the Zaanstreek/Amsterdam area is now the world’s most important
region for cocoa grinding and export of processed cocoa products. The follow-
ing section provides a brief overview of the remaining actors in the region’s
cocoa and chocolate chain (based on company interviews, May–June 2001).

International Grinders
The Zaanstreek is now the hub of not only European but world cocoa grinding.
The biggest grinders (Gerkens and ADM) each process about 200,000 tonnes per
year. ADM and Cargill are two of the world’s biggest agro-industrial transnational
companies with a broad range of activities in various commodities, most notably
grains, feeds and food ingredients. The much smaller Barry Callebaut factory
grinds about 30,000 tonnes; this company has most of its grinding capacity
located in Belgium and France. Roughly 450,000 tonnes of cocoa beans are
processed in the Zaanstreek/Amsterdam area, constituting about a third of total
European grindings and 15 per cent of world production of intermediate cocoa
products (The Manufacturing Confectioner 2000).
The presence of Cargill and ADM in cocoa is fairly recent. In the early 1980s,
Cargill took over the cocoa trading company General Cocoa and its processing
subsidiary (Gerkens), as well as other related subsidiaries: a compound chocolate
manufacturing company (supplying the food industry) and a vegetable oil refin-
ery. Other Cargill companies in the cocoa chain are processing plants located in
Brazil, Cote d’Ivoire and the USA. Its activities in the USA include a compound
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chocolate factory like that in the Netherlands. Output from the Gerkens main
factory is about 10 –20 times bigger than production in plants belonging to small-
or medium-sized chocolate manufacturers. According to the company, Gerkens
has established a good reputation among its customers due to its large and efficient
factory and 20 years of collaborative experience with chocolate manufacturers.
ADM entered the cocoa-grinding business only in 1997 when it acquired the
huge US-owned Grace Cocoa, which came up for sale when the multi-faced
conglomerate it belonged to was unbundled. Grace Cocoa had built up substan-
tial grinding capacity in the USA and Canada, and had acquired a company
resulting from a 1986 merger between Barresfort and Cocoa de Zaan in the
Netherlands, itself the result of a number of earlier mergers involving about 15
smaller companies in the Zaan area. In 1988/9 the Dutch company acquired
another grinding company and a compound chocolate manufacturing company
in Germany, but the latter has since been sold by ADM, which is no longer in
the chocolate business in Europe. In the late 1990s, ADM also bought ED & F
Man’s plants in Hull and Poland. Besides this, ADM has factories in Singapore,
PR China and Brazil, although its former facilities in Ecuador have been sold.
On a global scale, ADM is now the largest grinder, processing about 500,000
tonnes of cocoa annually. Recently, the largest locally owned grinding company
in Côte d’Ivoire (SIFCA) has been taken over by ADM and split into two
different companies, one grinding company and a bean buying and exporting
company (cf. Losch, this issue).
The benefit to Cargill and ADM of locating such large grinding operations in
north-western Europe is their proximity to the major chocolate manufacturers.
It is thus easy to supply blended and treated cocoa products on a JIT ( just in
time) basis. Both companies have separate plants for batch production and for
customized cocoa products. Outsourcing the supply of intermediate products
has become more widespread in Europe than in the USA, just as bulk transport
only takes place to EU ports. Cocoa liquor is also transported over long distances
in Europe. As a corollary, grinding statistics at a national level do not reflect
national market demand, as large volumes of intermediate products are traded on
an intra- as well as inter-company basis.
Barry Callebaut, which resulted from a merger of Belgian and Swiss companies,
is a somewhat different firm, as it is the world’s largest producer of ‘generic’
industrial chocolate in addition to producing its own brands. According to
industry sources, the company’s market share for industrial chocolate is around a
remarkable 50 per cent. It is able to produce more than 1000(!) different types of
industrial chocolate. The product range is also tuned towards smaller quantities,
including chocolate mass for ‘artisanal’ manufacturers of products for luxury
niche markets. Apart from grinding the majority of its own cocoa liquor re-
quirements, Barry Callebaut also buys cocoa butter from the two large grinders
as its demand far exceeds its in-house capacity. The main market remains prod-
ucts destined for mass consumption. The company’s success is to a large extent
related to the surge in consumer preference for sweets and snacks covered with
chocolate during recent decades (see next section).
Grinders and Branders in the Global Cocoa–chocolate Industry 237

Two other, much smaller and more specialized, grinding companies are still
left in the Amsterdam area. Dutch Cocoa (the former Droste chocolate manufac-
turer) is a licensed supplier of cocoa liquor for Mars (25,000 tonnes per year) in
addition to other kinds of ‘toll grinding’ for smaller chocolate manufacturers,
including chocolate sold under the Max Havelaar brand. The company, which
emerged from a management buy-out following the sale of the Droste brand
name to a German company, has invested in new processing equipment. The
other grinding company is Jan Shoemaker, which transforms all kinds of cocoa
waste (imported as well as local) into intermediate goods for the pharmaceutical
and pet food industries.
The large grinders have established an edge in relation to their competitors,
hence a more dominant position within the chain as a whole, on the basis of
taking advantage of economies of scale and scope in different ways:

(1) Their R&D (research and development) and production organization experi-
ence in food ingredients (which is quite different from consumer goods):
large grinders with this expertise have the capability to transfer advances
between technologies, and can also easily transfer process advances in electronic
automation so that their factories run at an almost constant output all year
(2) Using buying power in one business to cross-subsidize supply of technology
to another: for instance, Gerkens worked together with one of the techno-
logy suppliers of Cargill to develop a certain type of equipment for cocoa
processing. A similar type of equipment had been used in another of Cargill’s
business lines (specifics not revealed to the author). This kind of interactive
procedure has also been used in cooperation with a generic supplier of paper,
who developed a new package concept for cocoa powder. In general, joint
ownership of patents and/or exclusionary agreements concerning the use of a
specific type of equipment or intermediate good are increasingly becoming a
standardized way of dealing with global technology suppliers for the agro-
industrial giants.
(3) Access to logistical capacity and expertise developed in other bulk commod-
ity businesses: Gerkens was the first company to introduce trade in bulk
based on Cargill’s experience from the grain trade; the innovative manager in
Gerkens came from one of Cargill’s grain companies in Amsterdam. Previ-
ously, when international flows of cocoa were mainly mediated by commod-
ity traders, beans were usually transported in sacks from producer countries
to warehouses and grinding companies in the North. Containerization of
beans in bulk or sacks was gradually introduced during the 1990s and started
to gain importance on some ‘origin’-destination routes. However, in the
mid-1990s, Cargill adapted their bulk trade logistical systems from grain to
cocoa. Only the largest grinders are able to make use of the resulting bulk
shipments of between 3000 and 10,000 tonnes of beans. Ships go directly to
the quay-side of the factories or beans are transported by barge to avoid
costly road transportation and spillage. The beans are taken by grab from the
238 Niels Fold

hold of the vessel and fed, via gigantic funnels, onto conveyor belts that go
into the warehouses as in grain systems. Hence, synergetic effects are created
on a cross-commodity, intra-company basis.

As a result of transport in bulk, grinders’ main point of control has moved

from the point of reception to the point of loading (Heemskerk 1999), albeit
within the general context of a loosening of quality requirements. However, the
risk of contaminated beans destroying large shipments is high and parcels can be
sorted according to specific intra-company criteria. Besides, labour costs are
much lower in producing countries, and the three dominant grinding companies
have gradually established their own purchasing, grading and shipping com-
panies in the producer countries. All the grinders are actively involved in Côte
d’Ivoire and Cameroon, and also buy from the state-controlled Cocoa Marketing
Company in Ghana and from the open market that prevails in Nigeria.
The purchasing system in each producer country is adapted to the specific
context. However, beans are never bought directly from farmers but from local
trading companies, some of which are pre-financed over 24 hour cycles. In Cote
d’Ivoire, price and quality requirements are said to be communicated directly
to merchants and cooperatives. However, company-owned buying posts may
be established in places where existing intermediaries perform ‘unacceptably
inefficiently’. Quality control of purchased beans is never transferred to other
companies, not even internationally approved ones like Cornelder (see below).
The grading system varies slightly from those used by international trading
associations and also differs from country to country. It may even change from
year to year depending on climatic variations in different regions. Local subsidi-
aries carry out the necessary separation and drying before shipment. Some beans
are rejected at this stage; others that do not meet specifications (size, moisture
content, mould percentage or other defects) are purchased at a discount.

International Trading Companies

Until recently, a key role in the global cocoa commodity chain was played by
international trading companies, a number of which were based in Amsterdam.
Their number has declined from about 50 small- and medium-sized companies
around 1980, to the present handful, of which only one is of international signific-
ance in volume terms. Some traders previously also owned warehouses, but no
surviving companies run this specialized business. One reason so few trading
companies have survived is related to the changing economies of scale and result-
ing centralization in the grinding segment. The large grinders now source most
of their beans via subsidiary companies in producing regions and only they can
bear the risk and finance the now very high volume bulk trade. Few trading
companies are able or willing to take the risk of being involved in raw material
purchases on this scale.
One of the remaining international trading companies of considerable import-
ance is Continaf, with annual purchases of about 250,000 tonnes of cocoa beans.
Grinders and Branders in the Global Cocoa–chocolate Industry 239

Together with ED & F Man in London, this is the only specialized trading
company left on the global scene since Andre & Cie of Lausanne went bankrupt
in 2001. Competition is considered stiff and high risks are associated with every
aspect of the trade. However, these two international trading companies have
a reputation for stability, and many big chocolate manufacturers are regular
customers as they acknowledge the need for independent trading companies
with an ability to buy and sell beans in volumes appropriate for their production.
Besides, Continaf also sell beans to large grinders, depending on temporary
demand and supply conditions.
The company has established local export subsidiaries in all the major cocoa-
producing countries (plus Togo) and is one of the biggest buyers from the state
cocoa-marketing company in Ghana. The local companies are set up in rented
buildings and equipped with pre-shipment drying facilities. Beans are purchased
from middlemen or cooperatives, and graded and shipped according to contracts
or stored in warehouses. The company continuously tries to maintain good
relationships with large local suppliers, to whom they offer pre-finance. As mar-
kets are liberalized, however, the value of such personalized business connections
is eroded as a result of daily price movements on the world market. Because of
access to information on those price movements and easy communication with
local exporters via mobile phones, local traders direct their lorry drivers to the
exporters offering the highest price on a given day.
Darnhouwer, another Amsterdam-based international cocoa trading firm, is
owned by the same holding company as Continaf. The company, taken over in
1996, has a long history in the cocoa trade of Amsterdam and Hamburg, but
specializes in trade with so-called fine and flavoured cocoa from Latin America or
the Caribbean. In contrast, Continaf only deals with bulk cocoa (and coffee), the
usual type of cocoa traded internationally. Fine and flavoured cocoa constitute
only about 5 per cent of the total volume of cocoa traded globally, but unit
prices are much higher due to the sophisticated flavour of the resulting cocoa
liquor. Few trading companies are involved in the international trade with fine
and flavoured beans used in chocolate goods destined for the luxury market. In
this line of the cocoa business, access to substantial volumes of capital is necessary,
since small- to medium-sized chocolate manufacturing customers are promised
supplies up to two to four years in advance. Staying in business as a trading
company requires that supplies are stable and price agreements can be made to
‘stick’. Reliable business partners in exporting countries are sometimes helped
financially to buy stocks in order to keep them in business so they can retain
their export licences. The company also organizes bean trading and storing for
Max Havelaar products, but so far this trade is very small in volume terms.
The increasing necessity for smaller international traders to specialize in order
to survive is illustrated by the activities of a third (and independent) company,
Theobroma. This company used to trade primarily in cocoa beans, but its vol-
ume now fluctuates, generally below 50,000 tonnes per year. It now concentrates
its commercial activities in producer countries where it is relatively difficult to
trade, such as Nigeria and Sierra Leone, as well as buying in Côte d’Ivoire. The
240 Niels Fold

company has not invested in financing local export companies, as risks are con-
sidered too high and profits too low. Consequently, its activities are substantially
reduced as there are only small volumes of beans left for traditional trading
companies of this type that do not pre-finance. Instead, Theobroma is focusing
on trading in processed cocoa products, primarily in Europe.

Traditionally, international traders sold cocoa beans to grinders, who contracted
independent warehouse owners to store them on their behalf. Grinders did not
want to store beans on-site because of the risk of infestation of processing plants.
Amsterdam was one of the most important cocoa warehouse centres in Europe,
particularly for cocoa beans from West Africa. Amsterdam is close to industrial
customers and the climate is ideal for storing cocoa beans as the free fatty acid
content in the beans remains at a minimum during storage (bean quality easily
deteriorates in humid tropical climates). Warehouses in Amsterdam handled about
500,000 tonnes of cocoa beans a year during the 1990s, primarily serving the
large grinders in the region, but also grinders and chocolate manufacturers in
Central and Eastern Europe.
In the mid-1990s, the introduction of bulk transportation and flat storage
reduced labour costs tremendously, to around a fifth of the levels associated with
traditional logistical systems. This reinforced the competitive power of the large
grinding companies located at accessible waterfronts, i.e. harbours or river mouths.
In the 1980s, around ten warehouses in Amsterdam were engaged in cocoa stor-
age, but only six of them are now capable of handling bulk cocoa. Bulk cocoa
transport is associated with ‘flat’ storage, i.e. storage in large piles of 10–12 m on
the floor of warehouses (Dand 1999). Flat storage requires less space than storage
of an equivalent volume of bagged beans and is relatively easy to organize with
the use of bulldozers, a practice that shocked many industry observers who were
used to regarding bean handling as a process requiring much more care. Some
warehousing companies chose not to enter the flat storage business and tried to
remain in bag storage. The importance of the latter, however, is rapidly decreas-
ing and is now estimated at only some 5–10 per cent of stored beans. Much of
the ‘open’ trade in bags has disappeared since the large grinders started in-house
sourcing from producing countries. It is expected that within the next couple of
years only three or four warehousing companies will remain. The present three
big companies are Cornelder, Ter Haak and Unicontrol.
Due to new handling equipment and changed work organization, a mega-
bulk vessel now can be fully unloaded in 24 hours. The same volume in bags
previously took about one week, involving about 60 workers. The obvious
result is high labour and time cost-savings. Meanwhile, freight costs remain
almost the same as ten years ago: container vessels (with containers holding
about 16 tonnes of beans) have reduced freight charges to compete with bulk
carriers. But competition for freight between bulk and container vessel complic-
ates the planning for warehouse owners, since they never know in exactly what
Grinders and Branders in the Global Cocoa–chocolate Industry 241

form beans might arrive. Warehouses are on relatively short (one-year) contracts
with grinders, which amplifies the risk of investment in new equipment; for
instance, a new grab is useless for handling containers.
The volume handled by Amsterdam warehouses has decreased lately because
many large customers (particularly grinders) prefer to reduce freight costs by
bulk import of beans in a single vessel. The rapid increase of origin grinding in
Cote d’Ivoire is another reason. The result is a huge overcapacity in storage space
in Amsterdam, particularly at times in-between harvests, and because of increased
competition between the warehouses in Amsterdam and further reductions in
storage charges. In addition, the average length of storage periods has fallen
sharply, to about one year as against about five years in the mid-1990s.
One of the warehousing companies, Cornelder, acquired an approved quality-
control subsidiary when it took over the cocoa section of the international
company SGS. Cornelder tried to establish branches of this subsidiary in pro-
ducer countries, but with mixed results. In Nigeria, the activity was closed
down ‘due to insurmountable problems with domestic politics and corruption’.
In Cameroon, there was not enough cocoa (only 100,000 tonnes) for all the
buying companies present and operations were not profitable for companies
restricted to trade in only one crop. However, Cornelder’s branch in Côte d’Ivoire
is still operating.
In sum, all the dominant companies in each segment of the cocoa–chocolate
chain in the Zaanstreek/Amsterdam area (grinders, international traders, ware-
houses) have established purchasing activities in the major West African pro-
ducer countries, except Ghana, where exports are still controlled by a parastatal
company. The move towards upstream vertical integration seems to be most
successfully implemented by resource-rich grinding companies, whereas only
one of the surviving international trading companies has had the capacity to do
likewise. Warehouses have either closed down their operations or run them at
sharply reduced levels of capacity utilization.


During the 1990s, there were notable changes in the processing segments of the
global cocoa–chocolate industry. The number of independent grinders and choco-
late manufacturers in Europe decreased, resulting in a pronounced and rapid
concentration of the industry. It is now dominated by cocoa processors, which
supply the chocolate manufacturers with standard or customized intermediate
goods. Some large-scale chocolate producers partly grind their own beans for in-
house use for certain products requiring a specific quality of cocoa liquor, but
most of their activities are focused on the production and marketing of global
brands (Heemskerk 1999).
The largest six chocolate companies are now estimated to constitute about
60–70 per cent of the world market; the US market is apparently even more
concentrated with an estimated market share of the top three companies of about
242 Niels Fold

60 per cent (Dand 1999; Rabobank 2000). This degree of concentration of choco-
late production in the EU and in the US, the two major chocolate consuming
markets, is mainly a result of two inter-related factors. Firstly, total market
volume is increasing only slowly and company growth therefore takes place
primarily through mergers and acquisitions of smaller companies with strong
local brands in national markets. The increasing attention to share value –
‘financialization’ (see, for instance, Froud et al. 2000) – leads to management’s
preoccupation with financial performance and cash management. On the one
hand, this may further strengthen the incentive to mergers and acquisitions by
targeting companies whose shares are undervalued relative to their asset values.
On the other hand, the trend has also forced or motivated chocolate producers,
including large brand manufacturers, to reduce their grinding activities and
outsource lower-profit liquor, cocoa butter and even standard (intermediate)
chocolate production to large grinding companies. For example, Nestlé has
sold off or closed grinding operations in Italy, Spain and Portugal. New and
stricter sanitary rules are important for the decision to outsource grinding pro-
cesses, as this allows problems involved in handling beans (dirt, dust) to be
removed from chocolate factories.
There are some notable exceptions to this trend, largely due to considerations
of commercial secrecy about specific recipes for cocoa liquor, and to the nature of
firm ownership. The relative importance and value-orientation of traded share
capital appears to be a crucial factor in company decision making. For instance,
one of the large global players (Ferero, a family-owned Italian company) has
recently invested in in-house grinding facilities near Frankfurt (Germany) with a
capacity of 30,000 tonnes, around the level considered to allow operation on a
break-even basis. Similar strategies have been pursued by other, smaller companies
like the Swiss Lindt & Sprüngli who have also invested in new equipment,
although this relates to grinding for products based on fine and flavoured cocoa.
At the same time, a fear of complete dependence on the large grinders and thereby
vulnerable to take-over attempts is also far more manifest among companies
whose core business is chocolate products. Other companies with a diversified
product range (like Nestlé and Kraft) are not in the same exposed position and
therefore can cut costs by outsourcing suitable intermediate goods production.
A second foundation for outsourcing is that, as a consequence of fierce
competition among the leading global firms, larger investment than hitherto in
product development and brand marketing is needed for chocolate firms to con-
quer or maintain a strong position in consumer markets. According to Rabobank
(2000), the highest growth segment in major markets has been in premium
chocolate products like filled tablets, boxed chocolate, pralines and organic tab-
lets with their imagery of individual expression of consumer taste and ethical
concerns. Hence, there is a current trend towards targeting innovations on
specific groups of consumers, not only stratified by age as previously. Also,
product innovations seek to exploit the increased ‘impulse purchasing’ of snacks
and functional foods with chocolate content (Pullia 1999; Viviano 1999).
Grinders and Branders in the Global Cocoa–chocolate Industry 243

Competition is highest in the segments producing tablets and countlines (e.g.

Kit-Kat, Mars, etc.) and weakest in high-value or luxury products like boxed
chocolate. Branding is extremely important in the more globally standardized
product segments, where it enables companies to exploit increasing uniformity
in global demand. Branding, including extension into other chocolate segments,
may also serve to strengthen chocolate manufacturers’ position in relation to
supermarkets, the major retail outlet for these types of chocolate products.
Competition with private labels is so far of minor importance, although the
establishment of specific brand vending machines is a means to create alternative
retail outlets and strengthen positions vis-à-vis the supermarket chains.
Confronting the chocolate manufacturers is a strongly consolidated grinding
segment, dominated by three transnational giants: Cargill, ADM and Barry
Callebaut (all found in the Zaanstreek, above). There are now only nine sig-
nificant grinders in Europe, as opposed to about 40 a decade ago. The smaller
companies have either ceased to grind or they process liquor purchased from
the large grinders (Gilbert 1997). However, estimates of the aggregate grinding
capacity of the three largest companies (about 1,150,000 tonnes) compared with
total grindings (about 2,400,000 tonnes in the late 1990s) reflect a considerable
‘residual’ of beans still processed by medium and small grinders, as well as in
‘dedicated’ grinding in vertically integrated chocolate manufacturing companies.
As indicated earlier, economies of scale and scope are major factors underlying
concentration and centralization, in combination with rapidly increasing costs of
both process development and measures necessary to comply with sanitary and
environmental requirements in national regulations. The large grinding com-
panies in Europe are now able to deliver cocoa liquor and cocoa butter in liquid
form to chocolate manufacturers on a JIT basis, reducing the costs of an extra
processing stage (melting of cocoa butter in solid form) (Gilbert 1997). More-
over, due to the development of fats and oils chemistry and process technology,
grinders are able to supply a broad range of cocoa powder products demanded
by the food processing industry and the chocolate industry in particular.
In effect, grinder/traders seem to have specialized in cross-cutting base process-
ing of cocoa products and therefore play a role resembling that of merchant
contract manufacturers, in what some observers have named a ‘turn-key net-
work’ system, in relationship to brand-name (chocolate product) designing and
marketing companies (Sturgeon 2000). The merchant contractors concentrate on
process improvements and automated and programmable production systems,
allowing themselves the opportunity to switch production between customers at
low costs and at short notice. The organizational split between product innova-
tion and production is enabled by highly formalized links between firms in the
turn-key network. The links are based on an increasing codification and stand-
ardization of the technology applied by contractors, so that orders and contracts
are implemented with a low degree of uncertainty. In addition, both customers
and suppliers seek to undertake volume spreading so that dependence is limited
and firms do not become ‘locked’ into a bilateral trading relationship.
244 Niels Fold

However, lead firms in each segment need the stability and high volume of
supply/demand of the other segment. The delicate balance in the global cocoa–
chocolate chain is only maintained by the enormous cost of crossing the boundar-
ies between existing segments on the basis of mergers and acquisitions; large-scale
‘green field’ investments are out of the question. Nevertheless, there is a struc-
tural imbalance in the chain important for its present dynamics. Because of the
advanced stage of industrial concentration, volume spreading has become
relatively difficult for chocolate manufacturers. The large grinders increasingly
internalize bean purchase through their subsidiaries in the major West African
producer countries, and they control a very substantial share of the market in
intermediate cocoa goods via their investments in grinding in both cocoa
producing and consuming countries. Moreover, the grinders have been able to
expand their customer base by developing various cocoa powder products usable
in all kinds of food products with chocolate ingredients (cakes, biscuits, ready-
made desserts, etc.). This was reflected during the recent economic crisis in
Russia, where consumption of confectionery chocolate declined but demand for
cocoa powder, which can be mixed with cheaper vegetable fats, increased, indic-
ating the appearance on this market of new chocolate-containing food products.
In this situation even the powerful chocolate companies are looking for ways
to avoid dependence, and continuously look for ways to sustain competition and
reduce the oligopolistic power of the contract manufacturers (grinders). One
way is to link up with new, efficient and independent medium-sized grinding
companies by offering them favourable contracts with stable volumes and prices,
although the contractor’s ability to meet environmental and sanitary standards is
crucial for the establishment of these arrangements. This is exemplified by the
relationship between Mars and the new independent grinding company in the
Zaanstreek/Amsterdam area.
Another way to hold the power of the grinding companies in check is to buy
beans from the surviving international traders. Very few trading companies of
international significance are left, though. Concentration in grinding segment
and increasingly widespread outsourcing of grinding, even by small- and
medium-sized chocolate manufacturers, have eroded the market for non-bulk
transactions in beans. In addition, most smaller trading companies have with-
drawn from trade in cocoa beans due to the high risks involved in buying and
holding high volumes in a situation of declining prices. Other larger, more
famous, trading companies with the necessary capacity have closed due to failed
speculative operations in other commodities (e.g. Andre & Cie).
Hence the global cocoa–chocolate chain is essentially buyer-driven in the sense
that agricultural producers are more or less price-takers on the global market.
The dynamics of power within the chain are determined in the buyer segments,
although it is less easy to ascertain the exact locus of ‘driving’. I suggest that the
concept of containment is useful for interpreting the structural coherence and
coordination in bi-polar GCCs like the cocoa–chocolate chain. Lead firms among
the brand-name companies try to find means whereby contract manufacturers
can be blocked from gaining powerful positions within the chain that destabilize
Grinders and Branders in the Global Cocoa–chocolate Industry 245

their positions. This includes the creation of ‘controlled’ competition by spread-

ing orders to suppliers of minor importance, while simultaneously maintaining
stability of supply by utilizing the quantitative and qualitative capacity of high-
volume contract manufacturers. This contributes to a relatively stable balance in
the chain where lead contract manufacturers (grinders) are contained by the com-
mercial (and tactical) practices of lead brand-name chocolate manufacturers.
Containment practices also occur within distinct segments of bi-polar GCC
with important effects for chain dynamics. In the case of chocolate manufac-
turers, companies dependent on single product lines may defend their position
by undertaking strategic investments (in grinding facilities) with no short-term
profit rationale. On the other hand, the nature of firm ownership becomes a key
parameter for understanding chain dynamics.
The effectiveness of the present types of containment strategies may be eroded
for different reasons. Firstly, innovations in processing equipment and logistics
may change the power balance between actors in the global chain, as when bulk
transportation and flat storage substantially reduced the costs of large-scale bean
processing, accelerating concentration in the grinding segment. Secondly, changes
in demand patterns may have the same effect, as demonstrated by the increasing
mass consumption of low quality chocolate in different kinds of food items,
including various filled chocolate products. Thirdly, intra- and inter-segment
mergers among the global players can shift the balance quite dramatically, although
the scale of investment in take-overs at present prices would be so astronomic
that most observers consider this extremely unlikely.

The cocoa–chocolate industry in the Zaanstreek/Amsterdam area and cocoa farm-
ing in Ghana played important roles in the development of the global commod-
ity chain. In the Netherlands, cocoa processing and chocolate production have
been radically concentrated. Due to its history and geography, the Zaanstreek/
Amsterdam area is now a centre of major global importance in the chain because
of the location there of large factories owned by the principal transnational
companies in grinding.
Ghana is the last producer country in which important state regulatory insti-
tutions, including a quality-control system, remain more or less intact. How-
ever, regulation has gradually changed even here over the last decade, and private
buying companies can now operate, albeit not directly nested into the world
market, while cocoa exports are still controlled by the state. The ability to oper-
ate a fixed price system is closely related to the maintenance of a quality-control
system that satisfies the requirements of industrial customers sufficiently to merit
them buying Ghana beans on forward terms.
Despite their obvious specificities, the constituent structures and actors of these
two territorially embedded segments of a global commodity chain open a win-
dow to understanding the dynamics of the latter. A conspicuous feature is the
bifurcation of buyer-drivenness between a small elite of branded manufacturers
246 Niels Fold

and global contract manufacturers. Transnational companies operating within,

and stretching across, these segments play the driving role irrespective of their
core functions. Ability to exploit economies of scale in production and organiza-
tion, capacity for brand marketing, and relative short-term profitability, are
important factors in company strength within the chain. In this type of bi-polar
chain, where major markets are slow-growing and far-reaching mergers and
acquisitions are extremely costly, the concept of containment is a key to under-
standing the dynamics of the chain. Containment in this context means that
company strategies constantly defend and try to improve positions in the global
market by creating competition among suppliers upstream and expanding the
portfolio of customers and sales outlets downstream.
What are the consequences of containment strategies for cocoa farmers in
West Africa? There is a clear trend towards a restoration of something structur-
ally similar to a pre-colonial trading system in the producing countries. Global
trading cum primary processing companies increasingly dominate cocoa bean
exports from the major producer countries except Ghana and Nigeria (the latter
because of extremely difficult conditions for commercial operations). In this
sense, the world market is shrinking; increasing volumes of beans are directly
internalized in intra-company transactions before they leave their country of
origin. Establishment of grinding facilities in countries of origin further strengthens
the dominance of the same transnational companies because it gives them higher
shares of global capacity and increased political clout.
As a consequence of the liberalization and privatization of domestic trade,
bean quality has deteriorated and forward sales disappeared in all countries
except Ghana. New intra-company grading systems adjusted for day-to-day price
fluctuations have replaced state-monitored quality-control systems and fixed pro-
ducer prices. In a situation of rising or stable prices, producer revenue may
increase to the benefit of many West African cocoa farmers. When prices decline
on a more or less continuous basis, smallholder income will most likely decline,
although devaluation or an increasing share of the world market price may mitig-
ate the effects. Prolonged stagnation or decline in cocoa producer prices may
result in a serious drop in labour allocated to cocoa cultivation and hence global
supply of cocoa. Concerns about this possibility are raised in the processing and
manufacturing segments of the chain, and the former focus on price is now
accompanied by anxiety concerning global supply stability. New industry-wide
initiatives such as the ‘sustainable cocoa programme’ are being discussed and
introduced, including efforts to expand production in new producer countries,
particularly in Southeast Asia.
This anxiety, combined with West Africa’s still unchallenged position as the
major producer region, seems to be the strongest mechanism available for the
countries in the region to regain something of their former bargaining power.
This might be consolidated by a request for donor financed re-establishment of
state-regulated quality-control systems, although new quality-control institu-
tions would need to be far more flexible and efficient than their colonial and
post-colonial predecessors. Outsourcing of quality control to international standard
Grinders and Branders in the Global Cocoa–chocolate Industry 247

controllers might be an option, but the need would remain for state monitoring,
if not operational involvement, in order to secure consistency of bean quality.
The marketing of beans according to previously accepted standards is necessary
if small- and medium-sized international traders and chocolate manufacturers are
to remain as direct purchasers, and hence if the breadth of the demand base is to
be preserved or extended. Moreover, an origin’s reputation for stability of sup-
ply and consistent quality can lead to a resumption of forward sales. This in turn
is a prerequisite for a reformed price system, that on one hand could offer small-
holders some kind of protection from the vagaries of the world market, and, on
the other hand, has the ability to channel gains from price increases to farmers.

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