Chocolate is the most favorite treat in the world, accounting for more than $100 billion in retail sales globally, with North America, Western Europe, and Asia Pacific being the biggest chocolate consumer markets. Cocoa is the essential ingredient in chocolate, which has been under scrutiny for its social and environmental footprint due to the practices that farmers use, such as deforestation, which contributes to climate change.
However, the cocoa sector has undergone transformational changes, and nowadays, global suppliers like ofi focus on offering ingredients and foods that are sustainably produced, catering to eco-conscious customers’ expectations. Furthermore, tech developments have been making a tremendous difference in many areas of the industry’s supply chain, from traceability and farm mapping to farming practices and market analytics.
In the article below, we will examine the role of digitalization in the cocoa sector and how it can be applied in business. Read on!
Examine how digitalization fits your business
There’s no doubt that digitalization can improve a business’s bottom line in the cocoa industry, especially when considering that all actors in the supply chain require more information on quality, origin, and sustainability. Fortunately, digitalization makes this information easier to collect and share, and the good news is that many tools are available to choose from, in all the different areas of the cocoa supply chain. However, before selecting the digital tools to use, it’s essential to look at your current digitalization level. What are the tools that your business is already utilizing? What level of digital skills does your team currently have? Who will mainly use the digital tools in your company? These are all important questions to help you evaluate your company’s preparedness to embrace new digital tools, so take the time to answer them honestly.
It’s also essential to determine what areas you can improve by leveraging digital tools. For instance, some exporters may need to map the cocoa farms and production areas where they source from, while others may require further supply chain developments, like traceability. When choosing digital tools for your organization, it’s essential to consider what they will require from you – suppose they imply a more significant step up in digitalization; in this case, it’s wise to start small. For instance, if you rely on paper-based traceability, instead of going to full blockchain traceability, consider an off-the-shelf solution in the beginning, such as a simple Excel-based administration.
Invest in AI or new tech only if you leverage advanced technology
Artificial intelligence in the food and beverage industry is expected to reach over 35 billion USD in 2024-2028, with the technology improving efficiency, lowering operational costs, and enhancing product quality. While this technology may not be accessible to small and medium-sized businesses, it’s clear that it won’t go anywhere anytime soon. It makes sense to integrate AI in your supply chain only if you’ve already been using advanced tech for a while, but it’s worth noting that cocoa is generally produced by smallholder farmers whose level of digitalization is pretty low. Advanced technology is used in large-scale cocoa farming as well as export.
But most specifically, what is the role of AI in the cocoa sector? The technology mainly helps with processes such as design (3D printers can make chocolate in specific shapes) and the processing and development of flavors. Moreover, some businesses even rely on tech like AR in operations such as packaging or bringing together bakers, pâtissiers, and chocolatiers. Furthermore, AI is very valuable for improvements in the supply chain’s beginning, improving smallholder farmers’ economic conditions by offering access to information on weather, prices, and production techniques.
Embrace digital payments
Good buying practices are essential for a cocoa supplier, involving fair contracts, long-term relationships, transparency, and rewarding farmers for their work. You can attract more eco-conscious buyers by offering transparency with your buying practices. Digital payments to farmers provide greater peace of mind because the payments will reach the farmers, and they are more secure and seamless, helping create income records for farmers and improving their access to finance.
When it comes to responsible and scalable payment digitalization, there are four essential building blocks cocoa buyers should pay attention to:
- Knowing their smallholder farmers;
- Creating the value proposition for digitalization, both internally and externally;
- Allowing the spending of funds and digital services access for farmers ( in other words, developing an ecosystem where farmers can purchase services and goods digitally without relying on cash and where they can replace digital payments with cash;
- Teaching farmers and staff about digital payments’ value by creating materials and explaining the advantages.
Invest in traceability technology
The cocoa sector has long been investing in traceability tools because they can help you understand the source of your cocoa and make its production more sustainable. However, traceability has recently become a part of mandatory compliance, as the EU Regulation on Deforestation-free products requires enterprises to complete detailed checks and ensure the cocoa they purchase isn’t produced on land deforested after 31 December 2020. Businesses must comply with this regulation and use traceability tools to prove that their cocoa comes from locations that weren’t deforested recently.
To leverage this tool, it’s essential to learn about the accessible traceability systems, which sometimes trace the same cocoa volumes but are often not interconnected. Supply chain actors rely on multiple systems for the traceability of the cocoa, which can be confusing and inconvenient for users. However, some systems link with others, making cocoa traceability much smoother, which is why we recommend taking the time to weigh the available options and select the right tool.
The bottom line
Today’s consumers are more mindful of how the food they eat is produced, and they are wary of businesses that make bold sustainability claims, always looking for evidence to support such claims. Thus, it’s of the utmost importance to take sustainability seriously and demonstrate that the ingredients are sustainably sourced, helping them build better trust with stakeholders, consumers, and employees alike and provide environmental protection for future generations. Digitalization is a great place to start when it comes to making the cocoa sector more sustainable, and although it may seem daunting at first, the practices can be easily implemented by businesses looking to transform their operations and play their part in building a thriving cocoa sector.
