Edmund Poku, Managing Director, Niche Cocoa: Interview

Interview: Edmund Poku

How would you evaluate the current condition of the domestic cocoa market?

EDMUND POKU: When we entered the cocoa processing market as a private domestic company in 2007 it was a budding industry, as only the government and some multinationals were processing cocoa locally. Ghana was processing about 15% of the cocoa harvested in the country and the rest was being exported, meaning there was a major opportunity for us to come in and add value. However, as it had never been done before, the prevailing understanding was that it was impossible for an individual to come in and set up their own processing plant; a successful processing business would need very deep pockets and an established value chain for the finished or semi-finished product to reach end users. As we developed our business plan, we realised that we could sell our product to third parties who can then reach end users, rather than selling the cocoa bean to international markets or attempting to reach end users directly. Over time we have cultivated the capacity to reach end users without the middleman. Since 2017 we have expanded by gaining partial ownership of one of the largest melting plants in Germany, which allows us access to the European consumer market.

This model has served us well, but the barriers to entry for other local private processors remain high. Raising money in this multinational industry, either through private equity or banks, remains very costly and difficult for those who are not well connected or do not possess a high level of capital. Acquiring the permit to purchase cocoa beans from the government is also complicated and expensive. While a number of Ghanaian artisan chocolate producers have entered the consumer market in recent years, no other “beanto-bar” producer has been able to replicate the path we took – although there is still a lot of value to be added. This is a sign that the government needs to do more to allow other players to enter the market.

To what extent will the living income differential (LID) impact the cocoa industry in Ghana?

POKU: The LID will have a significant impact on several aspects of the cocoa industry. For the end user and the bottom line of the large multinationals, the additional $400 per tonne added to the price of cocoa will not make much of a difference. Chocolate producers can pass on the majority of the cost increase by slightly reducing the size of their bars or by marginally increasing the price of the finished product, but their profit margins are not expected to reduce significantly. For local artisans, however, it is more difficult to pass on the cost to consumers, thus it is likely to more seriously impact this emerging segment of the industry.

On the agricultural side, if the government can introduce the LID effectively, it will have a positive effect on the livelihood of cocoa farmers. Currently, cocoa farmers take home about 65% of the farm gate price, with 35% going to the government. After the LID the balance shifts to 70% or 75% of the cocoa bean value going to farmers. This makes cocoa farming more attractive, and we expect to see a revival.

What trends are likely to affect domestic chocolate consumption in the near future?

POKU: There is a strong correlation between GDP growth and a rise in chocolate consumption. In short, almost anyone who can afford chocolate will consume it. The difficulty brought by the local environment is that the weather is very hot, and any chocolate that is of high quality will melt quickly. What is needed is innovation and a change in mindset in order to allow affordable, high-quality products to succeed on the local market. In the near term, we anticipate strong growth in the consumption of instant chocolate drinks. With the African Continental Free Trade Agreement in place, we hope to see an increase in regional chocolate trade and a reduction in the cost of inputs for finished products that cannot be sourced in Ghana.