Cocoa in Indonesia Steps towards sustainability Chris Claes

Welcome to Indonesia… 2

….and the third largest Cocoa producer of the world 712,500 tons/yr of dry Cocoa beans (15% of world production) Main production areas: Sulawesi (71%), Sumatra and to a lesser extend Java, Nusa Tenggara, Bali and Papua provinces 1,5 million hectares cultivated USD 1,2 billion export yearly 1,400,000 smallholder farmers (93%)

Cocoa players in Indonesia Big players in Private sector: Armajaro, Cargill, Mars Biosciences, Petra Foods, Nestle and several new companies expanding business in Indonesia (Kraft, Bary Callebaut, …) Important Institutions/Programmes : Indonesian Cocoa and Coffee research institute ICCRI, Association of Indonesian Cocoa sector ASKINDO, Cocoa Sustainable Platform CSP, Ministry of Agriculture (GERNAS programme revitalizing Cocoa production in Indonesia), Farmer Organizations involved: mostly locally based farmer organizations (JANTAN, SIKAP, AMANAH) not well respresented at national level. API National farmer organization includes some local FO members focusing on Cocoa

JANTAN and SIKAP JANTAN (East Flores): Multi purpose Cooperative (2007) 630 farmer members (growing) from 25 villages Objectives: collective marketing (Cocoa, Candlenuts, Cashew and Coconuts), member services, capital building SIKAP (Central Flores): Farmer Association (2010) 147 farmer members (growing) from 18 villages Objectives: collective marketing Cocoa, advocacy

What do these FO’s do in terms of sustainability? Organize collective marketing and sell bigger volumes to larger buyers obtaining a better price for farmers Setting up a village marketing system to control volume and quality of Cocoa Organize several trainings & demonstration plots for ecologically sound Cocoa production Socialization of Cocoa chain innovations towards members, government and other stakeholders Organize ICS and achieve certification of production (RA, UTZ)

How is the relation of FO’s with the private sector? In 2010 both FO’s sold wet Cocoa beans directly to Mars (100 tons wet beans). In 2011 direct sale to Mars stopped but continues to local traders (UD Gonzalu, Com. Mayora, UD Fajar,..) Both SIKAP and JANTAN are organizing fermenting and drying of Cocoa beans themselves to sell again to larger buyers. Mars is still present on Flores and supports farmers with training and advice Mars asks local providers to show price transparency towards farmers and use sustainability, traceability criteria provided by Mars.

Support VECO Indonesia for Cocoa Sulawesi and Flores Supporting 1900 Cocoa producer members of FO’s Focus on FO organizational strengthening and business development (mentorship) Technical support for Cocoa production (Farmer Field Schools, Exchange visits, ICS development, …). Linking different stakeholders of the value chain Cocoa (government, private sector, NGOs) Financial support for service providers

What are the succes factors for this case? Good leadership and management potential at FO level Access to training and mentorship from local FO and VECO-Indonesia Sustainability and farmer oriented policies of Mars in Indonesia Booming Cocoa world market and good prices

How do FO’s see the future ? Further develop Internal Control System (ICS) and obtain international certification (RA, UTZ) Increase volume and quality of Cocoa beans (fermented & dry) selling directy to larger buyers outside Flores island (Mars,…) Improve service provision for members (credit, training, price negotiation, lobby) Increase member base, registration and fee collection Become a strong and independent Farmer Organization that provides good economical/social benefits for its farmer members!

The Big Issue for the long term: WHO WILL PAY FOR SUSTAINABILITY? Internal Control Systems as the backbone towards certification Will mainstream be Rainforest Alliance or UTZ or FT or … within 10 years? If mainstream no premium? Low hanging fruit has been harvested, ambitions are quite high and deadlines narrow, farmers not strongly organized… FFS as basic method to get farmers certified: rather expensive, too slow Who will pay? 11

Other hot potatoes Instrumentalisation of farmers by traders/processors vs. empowerment of farmers (sustainability more than environment) Is too much dependence from company healthy? Investment of company  farmers move to other buyer? (pre-competitive domain) 12

Thank you for your attention ???