Rise of Chocolonies by Kay-Mok Ku


15 November 2019


Accompanied Tharman Shanmugaratnam, Chairman of the Monetary Authority of Singapore, on a business mission to Cote d’Ivoire and Ghana. Ghana is also where the Jack Ma Foundation will hold its inaugural African Netpreneur Summit on 16 Nov.

Meeting with Agriculture Development Bank of Ghana hosted by their Deputy Managing Director, Alhassan Yakubu-Tali

The two countries are “Chocolonies”, accounting for 60% of global cocoa production. The global chocolate market is worth $100 billion yet the producers make only $6 billion and most cocoa farmers are making a subsistence living. Why? Well, it has a lot to do with market structure and how certain groups have a stranglehold on the most valuable part of the value chain…

Taking a page from the online world: most global online consumers, with the exception of China, are controlled by the FANGs of Facebook, Apple, Netflix and Google. In particular, Facebook and Google, whose business model depends on monetisation from third party payers through advertising, are acting like de facto tax authorities to venture capital. Each time our portfolio companies want to get access to online users, we are paying a customer acquisition tax by way of advertising. Sophisticated algorithms are deployed by these platforms to deter tax dodges, for instance search engine optimisation typically used by startup companies.

Similarly, on the commodities side, supply is controlled by a handful of global corporations. For example, the grains trading industry is controlled by the ABCDs of ADM, Bunge, Cargill and Dreyfus. In cocoa, a similar group of 4 traders account for half of all purchases. As a result, the government of Cote d’Ivoire and Ghana have formed a cartel similar to OPEC this year to set a minimum ground price to cocoa. Alas, the effort may not be that effective as most cocoa beans are exported in raw or semi-finished state, leaving the high value added processing and roasting to be performed overseas.

Perhaps it’s time for venture capital to step in and disrupt the value chain, investing in local agritech startups to help transform the local commodity-based economy into agri-industry powerhouses… From Chocolonies to Chocopolies!