I recently spoke with my uncle, Ronald D. Waugh Jr., who served as Vice President of Business Development for W.R. Grace Cocoa and later Archer Daniels Midland from the years 1993 to 1999. W.R. Grace Cocoa had factories in Amsterdam and Wisconsin, and he worked in both locations over the course of his career. In our conversation, he spoke about the intricacies of supplying cocoa products to large clients like Nabisco and Unilever, as well as his experience visiting their business partners in the Côte d’Ivoire (pictured below). When he left in 1999, he estimates that the company was processing roughly twenty-five percent of the world’s cacao. Although his company took corporate social responsibility seriously and was regarded as a progressive employer by many of its workers at the time, he acknowledges that these terms have taken new meaning in modern times. This new level of social awareness is especially evident in Portland, Oregon, the city he now calls home.
Courtesy of Ronald D. Waugh — he is on the right (circa 1999)
W.R. Grace Cocoa’s European headquarters in Amsterdam specialized in the processing of cacao beans and chocolate products including liqueur, cocoa butter, cocoa cakes, and cocoa powder. For sourcing, Grace turned towards cacao growing regions in countries throughout West Africa such as Ghana, Cameroon, and Côte d’Ivoire, as well as East Asian countries like Indonesia. At its height, Grace Cocoa sold more than $700 million in industrial cocoa and chocolate products around the world annually (New York Times 1996). Grace was able to do so because of the diversity of their clients’ products. Their needs differed based on the intended use of the cocoa, and my uncle facilitated many of these corporate relationships.
One of the first distinctions he made in our conversation was that between actual chocolate, and what is considered “chocolate flavor.” Chocolate liqueur, which is made from the pressing and grinding of cacao beans, is divided into two main substances: cocoa and cocoa butter. In order for a product to legally labeled as containing chocolate in the United States, cocoa butter must still be present. Otherwise, the product must be denoted as “chocolate flavored.” Fat-content impacts the flavor of the products, and more legal standards of identity determine these ratios. Low-fat content chocolate must contain between ten and twelve percent cocoa butter, while high-fat content chocolate must contain between sixteen and eighteen percent cocoa butter (Waugh 2017). Because cocoa butter is the more expensive ingredient of chocolate, Grace Cocoa was able to generate savings for their clients when they could optimize the fat content. Sometimes, this also required the blending of cocoa from different batches, the processes of which also had to be developed in their labs. According to Waugh, they would aim for 10 percent fat-content in their low-fat chocolate products, and sixteen percent in the high-fat chocolate products, as to fulfill fat-content standards, and minimize input costs for their clients (2017).
Common substitutes for cocoa butter are forms of vegetable fats and oils. These substitutes can be made for reasons of cost, as cited above, but also desired physical properties of the final product, such as melting point or mouthfeel. True cocoa butter melts at the temperature of the human body, eighty-six degrees fahrenheit, while compound chocolate has a higher melting point (Muir 2015). The higher melting point of these coatings make them ideal for use on ice cream products, compared to a candy which the consumer will eat right away. Appropriately, Grace Cocoa was contracted to supply the chocolate coatings for Unilever’s Magnum ice cream bars, which were made from Grace’s variety of chocolate flavorings. Other attributes of cocoa also came to be important to Grace Cocoa’s clients.
Unilever’s Magnum ice cream bars (left) and Nabisco’s Oreos (right)
Other factors clients cared about included grittiness, viscosity, and color. Adjustments in these could save or cost their customers money over time. One example he cited, was if the chocolate was intended to go on top of oatmeal cookies, the smoothness of their chocolate did not matter as much. The oatmeal would mask any grittiness in the chocolate, and they could save money in the production process, which Grace Cocoa would pass onto their customers. Viscosity of the chocolate Grace sold was also important, as it would come into direct contact with the customer’s machinery. A chocolate liqueur that had too much viscosity could potentially clog up a client’s machines, leaving them unable to produce their final products. Finally, the color consistency of the cocoa powder was of utmost importance. Grace Cocoa was one of the only companies that had the resources to consistently produce black cocoa powder — as result, they developed an exclusive relationship with Nabisco to provide the cocoa for their iconic Oreo cookies. The popularity of these international brands puts pressure on companies like Grace Cocoa in order to satisfy the world’s demand.
Demand for chocolate is relatively inelastic. In my uncle’s experience at Grace, their predictions for the growth of demand in a particular country would roughly mirror population growth (Waugh 2017). If the population was expected to grow by one percent, they could also expect a one percent growth in the demand for chocolate products. The only exception to this rule being Asian countries, where chocolate only caught on through the cultural practices of gift-giving. As result, marketing strategies are different in Asia. Authors of the book, The Economics of Chocolate explain, “foreign chocolate makers devote much in advertising and packaging efforts to promote chocolate as a gift that symbolizes love and friendship” (Squicciarini and Swinnen 2016). Waugh says that he and his colleagues used to joke, that if they could get every person in China to eat one chocolate bar per year, they would all be able to retire. With demand being predictable and constant, any challenges that those in the cocoa industry would face almost always came on the supply side.
Managing the supply of cacao was paramount to Grace Cocoa’s success. Cacao is a notoriously difficult crop to grow, and its successful growth is subject to various environmental factors. The author of Bitter Chocolate: The Dark Side of the World’s Most Seductive Sweet, explains the variables likely to impact worldwide cacao supply:
“The quality of beans, the capricious rains, the unpredictable harvests, the cost of pesticides, the threat of witch’s broom (a disease of the Theobroma tree), the see-saw prices and the exorbitant government taxes. These farmers know everything about the difficulties of growing cocoa in this region” (Off 2008).
Cacao rose to prominence as a cash crop in West and Central Africa due to the regions’ favorable growing climates. In these areas, politics have become greatly intertwined with the cultivation of cacao, and consequently many hurdles and question marks exist for the villages who make their livelihood farming cacao. Companies that must meet the world’s demand for cacao, like Grace Cocoa, are forced to mitigate the risk of fluctuations in supply by sourcing their beans from African business groups with ties across their countries, instead of the farmers themselves. My uncle worked directly with these people, and even visited Côte d’Ivoire periodically throughout his time working in the industry.
In his visits to the Côte d’Ivoire, Waugh and his colleagues frequently interacted with figures like Pierre Billon, father of the current Ivorian Minister of Commerce, Jean-Louis Billon. Pierre Billon, who has since passed away, is described as, “a tycoon and close confidant of Côte d’Ivoire’s founding father, Félix Houphouët-Boigny” (Abidjan 2013). Navigating these relationships was challenging, because unlike in Western countries, these were the types of men which influenced everything within the country, even on a governmental level. On one of his trips, my uncle was awarded an officer medal from Côte d’Ivoire’s Ordre de Mérite Agricole, or the Order of Agricultural Merit. Admittedly, he said this was fun to receive, but he also acknowledges this gesture may have been an attempt to warm up to him. He was able to visit several farms and see the harshness of the wilderness, but he never expected the modern revelations that more sinister practices were taking place.
Waugh describes the cacao production he saw within the Côte d’Ivoire as much more “artisan” than plantations he’d seen in other parts of the world like Indonesia (2017). Plantations didn’t exist in Côte d’Ivoire, or at least he wasn’t shown them. It was explained to Waugh that primarily Lebanese men called pisteurs, would travel the treacherous terrain to the farms around the country in order to collect the cacao beans. Carol Off explains her experience navigating Côte d’Ivoire’s bush country, “Tangled vines and shrubbery encroach on both sides of our vehicle while we push through what resembles a dark, leafy tunnel. Constant precipitation — a perpetual cycle from warm mist to torrential thundershowers to steam — seems to stimulate the new jungle growth before my eyes” (Off 2001). The density of the unforgiving wilderness seemed to distract from the idea that forced labor could exist in the area.
Another circumstance which may have covered up the forced labor practices to visitors like my uncle, was the small size of the cacao farms within the country. Duguma, Gockowski and Bakala explain, “In the humid west and central Africa, cacao (Theobroma cacao Linn.) is one of the most important cash crops and it is grown largely (> 80%) by the small-scale farmers” (2001). The average farm size is only 2.5 hectares, or just over 6 acres (see table below). Waugh explained that the farms he saw were also home to animals like pigs and chickens. Although it never crossed his mind that inhumane conditions could’ve existed, he does admit that he feels somewhat complicit in the things that were happening (2017). Looking at the larger picture of the cocoa processing operations, both Grace Cocoa and Archer tried to spread out production means, in turn helping several regions throughout the world.
Source: Federation of Cocoa Commerce (FCC)
Waugh says that production operations were based out of Amsterdam, because the Netherlands had readily available means of processing the cacao beans. The technology that they relied to do so was ancient, and it was the windmill. Grace Cocoa used the means of production that was convenient, and because much of the world’s cacao was entering Europe through Amsterdam, it simply made sense to station their operations here. Waugh says he was often asked why Grace or Archer Daniels did not build processing plants in Africa — and his response? They did. In 1997, following the acquisition of Grace Cocoa, ADM became a shareholder and later the outright owner of Union Ivoirienne de Traitement de Cacao (Unicao). Unicao, a local cocoa trader and processor owned a plant in the city of Abidjan (Squicciarini and Swinnen 2016). Photos of the factory can be seen below. Having these operations within the country certainly cut some of their overhead costs of shipping unprocessed beans, but it also limited their supply to Ivorian cacao. The company was forced to blend their cocoa cakes in this factory, and Waugh says this worked for some applications, but not all.
Photos courtesy of Ronald D. Waugh (circa 1999)
Conditions in communities throughout Côte d’Ivoire are still rough today, but Grace and later Archer, did what they could to help out at the time. Carol Off writes, “The community’s livelihood comes from growing “the food of the gods,” but this is a long way from paradise. None of the children here go to school, and there are no services — no electricity, no phones, no clinics or hospitals” (2008). Waugh explained that both Grace and Archer were regarded as progressive employers in the Côte d’Ivoire. In the city where their processing plant was located, they built several schools and a medical clinic. They also provided housing for the African managers of their factory. Community members believed that they were a fair employer and as result, both parties felt better off because of the balance of loyalty.
In the era of the internet, corporate responsibility has gained a lot of prominence. Perhaps, it is because heightened transparency has increased the accountability of corporations. One brand that brings that close to home (literally and figuratively) for my uncle is called Tony’s Chocolonely. With locations in Portland, Oregon, and Amsterdam, the brand directly sources their cocoa from farmers in Ghana and Côte d’Ivoire. The reason? They want to ensure that the cacao is not grown, harvested, or processed by slave labor in any way, shape, or form (see link below). At one point not too long ago in history, corporate responsibility simply entailed treating employees, communities, consumers and the environment with respect. Building housing, schools and clinics would’ve been considered going above and beyond one’s obligations. In today’s globalized world, that may not be enough. I don’t think that means any firm in particular was in the right or in the wrong, but future generations have a responsibility to learn and grow from history. I’m grateful that through this project, I was able to learn more about the complexities chocolate production through my uncle’s expertise and experiences.
Abidjan, A. R. “A Rising Star.” Blog Post. The Economist. The Economist, 3 May 2013. Web. 5 May 2017.
“Archer in $430 Million Deal to Buy W.R. Grace Cocoa Unit.” New York Times, Dec. 24, 1996. pp. 1, ProQuest Historical Newspapers: The New York Times.
Duguma, B. Gockowski, J. & Bakala, J. “Smallholder Cacao (Theobroma Cacao Linn.) Cultivation in Agroforestry Systems of West and Central Africa: Challenges and Opportunities.” Agroforestry Systems 51 (2001): 177-88. Springer Link. Web. 5 May 2017.
Muir, April. “Candy Making: Facts about Chocolate Compound Coating.” Sephra. Sephra, 03 Oct. 2015. Web. 05 May 2017.
Squicciarini, Mara P., and Swinnen, Johan. “Chocolate Brands and Preferences of Chinese Consumers.” The Economics of Chocolate. Oxford: Oxford Univ, 2016. N. pag. Oxford Scholarship [Oxford UP]. Web. 5 May 2017.
Off, Carol. 2008. Bitter Chocolate: The Dark Side of the World’s Most Seductive Sweet. pp. 1-8, 119-161
Waugh, Ronald D., Jr. Telephone interview. 3 May 2017.