Olam, Blommer, Hershey: a sustainable supply-chain partnership

Olam International is a leading agri-business operating from seed to shelf in over 70 countries—supplying food and industrial raw materials to over 16,200 customers worldwide. The Blommer Chocolate Company is the largest cocoa processor and ingredient chocolate supplier in North America. Hershey’s is one of the most recognizable chocolate brands in the world, a company that has been supplying North America with chocolate for well over 100 years.

Together, the three companies form a sustainable supply-chain partnership. Olam has been operational in cocoa in Côte d’Ivoire since 1998, working directly with co-ops to improve cocoa quality. The company’s sustainability programme began in 2003/04, in Indonesia, through a joint project with The Blommer Chocolate Co. In 2011, the two companies set up a joint venture, GrowCocoa, which formalized their shared vision for sustainability in cocoa. In 2013, the partnership was extended to include The Hershey Company and the sustainability program Learn To Grow was established. Within the program, Olam supplies cocoa beans to Blommer for processing and Hershey is provided with a semi-finished product.

The partnership received funding from CPQP in 2014, which contributed to the Learn To Grow program’s focus on improving yields through the application of Good Agricultural Practices (GAP) and the regeneration of aging plots, and enabled it to begin work on introducing fertilizer to cocoa farmers on credit. It has also created a 200 % increase in the uptake of seedlings for regeneration, and trialled a mobile money scheme with the help of Advans CI.

The mobile-money-system pilot has indicated that the cost of mobile money can be a challenge. Farmers cannot necessarily afford the associated fees. There are also issues around cashing in payments in rural areas: few rural outlets exist, and their agents are often only able to handle low volumes of cash. Advans CI is keen to work through these issues and Olam is providing support and encouraging farmers to participate.

Discover the stories behind five years of partnership with CPQP

From training to coaching: the journey towards improved adoption rates

The Olam, Blommer, Hershey partnership began by training trainers at the start of each season. Co-ops were pre-financed to run Farmer Field Schools (FFS) over a four-month period, overseen by the companies’ staff. As the program has progressed, its training has deepened and improved, moving from FFS to a wider model that also incorporates one-to-one coaching in the form of individual farm visits.

Demonstration plots have been set up for use during FFS training. A month-long intensive course on agronomic practices has been established to boost trainers’ ability to support farmers. And the coaching visits have enabled the partnership to follow up on GAP training with targeted recommendations for input application

To support the coaching component of the training, Olam launched its Olam Farmer Information System (OFIS) in 2015. OFIS is a technical solution for collecting, analyzing, and utilizing farm-gate-level data. Its farm-mapping and surveying elements enable it to generate individual farm-management plans, which can guide farmers on input usage. The coaches provide context for the plans, helping farmers to understand how they can cut costs, increase yields, and boost revenue.

See also: Training

Planned regeneration: increasing the uptake of better environmental practices

Hybrid seeds have long been available for regenerating cocoa farms. Farmers, however, have struggled to make optimal use of them. Olam has used a mixture of better data and partnership to significantly improve the planning of farm regeneration.

More accurate information on the total number of old trees to be replaced has been generated by Olam’s farm development plans, which have catalogued the age of current tree stock. And Olam has moved from initially accessing hybrid seeds directly from research institutions to collaboration with Le Conseil du Café-Cacao. In 2016, Olam trebled the volume of seeds sourced from 20,000 to 60,000 based on data from its farm-level plans.

Data-driven regeneration is not the only way in which Olam has managed to increase the uptake of good environmental practices. Farmers have been advised to replace a maximum of 3 % of trees per annum to avoid significant revenue loss, but in reality old productive trees are rarely cut down. Farmers either ‘infill’ with seedlings next to old trees or use adjacent plots. Olam is also encouraging farmers to plant leguminous shade trees alongside seedlings, to facilitate biodiversity and resist climate change over the longer term.

Olam, Advans, and the Cocoa Fertilizer Initiative: pioneers of credit for fertilizer

Though initially cautious about promoting fertilizer, Olam became one of the first companies to work with the Cocoa Fertilizer Initiative. In partnership with Advans CI, Olam developed a scheme to provide inputs on credit. Olam makes the initial down payment to Advans CI (of around 30 %) and the balance is deducted from the premiums paid for delivery of beans over the season.

With the cost of fertilizer representing a significant undertaking for a farmer, it is important to mitigate risk: one way to do this is to ensure that the farmer makes an informed investment decision. In the Olam/Advans CI model, Farmer Field School (FFS) training provides farmers with the business information they need to make such decisions. Those who decide to proceed are trained on the application of the correct formula and quantity up to a maximum of 25 % of the farm area (thereby keeping the investment within affordable boundaries).

Co-ops have responded well—despite already managing loans from Olam for the purchase of cocoa (and other activities such as transport and certification). The good response is no accident. To ensure that new debts were within their investment capacity, Olam asked each co-op to develop financial plans for the fertilizer credit scheme. Co-ops carefully assessed the number of farmers willing to make the commitment and calculated how much debt they were willing to take on. Farmers were also asked to create solidarity groups, each of which made a clear agreement with its associated co-op. Building this solid base of demand has proven to be a very successful approach and has resulted in 100 % repayment from the co-ops to Advans.

Another risk-mitigation procedure is represented by the acquisition of knowledge: the more a company understands the factors surrounding an input’s chances of success, the better prepared it is to offer the input in a less risky way. Olam was keen to better understand soil structure and to know whether the fertilizer formulae being promoted were correct or needed modification. An extensive soil analysis carried out by the Cocoa Fertilizer Initiative over a two-year period concluded that the formulae are mainly suitable, although there is a refinement on the application of nitrogen.

The Initiative also developed training manuals and brought stakeholders together to encourage wider use of fertilizer and facilitate more competitive pricing.

See also: Finance

OFIS: measuring impact

OFIS has enabled Olam to collect accurate data on a range of metrics to measure and assess the rates of adoption per farmer. The system looks at uptake of GAP, quantity of inputs applied, the number of trees regenerated, and improvements on yield per hectare. Farmers who have applied all the practices recommended by Olam have managed to increase yields significantly over the last four years.

Demonstration plots have been key in increasing adoption, thanks to their ability to showcase pre-harvest practices such as pruning (which farmers are often reluctant to do).

Quality has also improved through the introduction of solar dryers. Bringing in solar dryers encouraged farmers to make greater efforts around the post-harvest practices of drying, fermentation, sorting, and cleaning. 2011’s price stabilization also contributed, as stricter quality standards were imposed at the port.

Increasing adoption rates and improving quality has raised the ability of co-ops to market their own cocoa. Olam is now planning to support co-ops through the establishment of Rural Service Centers, which will work to further professionalize service delivery. The company is also aiming to address sustainability over the longer term through climate-change-mitigation activities, such as promoting biodiversity on cocoa farms and protecting cocoa trees from disease.

See also: Good Data