Public-private partnerships: making the Indonesian cocoa sector competitive

Sustainable agriculture, Trade facilitation
24.11.2021
Over the course of ten years, the Sustainable Cocoa Production Programme (SCPP) has grown into an initiative reaching 165,000 farmers and engaging the entire cocoa industry in Indonesia. During a time of significant upheaval in the cocoa sector in Indonesia, the impact of the SCPP spans a spectrum of areas, such as productivity increase, poverty reduction and reductions in greenhouse gas emissions. By bringing together a diverse range of actors, Swisscontact facilitated cooperation within the sector under a common objective. 

The SCPP showcased how a well-convened partnership of public and private institutions can be used to drive sector-wide improvements, transforming a pre-commercial sector into a competitive one. The project also demonstrated how a public-private partnership approach and strategy need to evolve in keeping with the changing context and involving all actors within the cocoa industry.

The SCPP was a large-scale, donor-led project that has secured the active support of private sector- and government actors at the national, regional and district levels. It was funded by the Swiss State Secretariat for Economic Affairs (SECO), the Sustainable Trade Initiative (IDH), the Embassy of the Kingdom of the Netherlands, the International Fund for Agricultural Development (IFAD) and the Millennium Challenge Account Indonesia (MCA-I). The programme also worked with and received significant support from various private sector partners. These included industry leaders such as chocolate manufacturers and commodity trading companies, amongst which Barry Callebaut, Mars, Mondelez International, Nestlé, Cargill Cocoa & Chocolate, Armajaro/ECOM Agroindustrial Corporation, Guittard Chocolate Company, Krakakoa, BT Cocoa and JB Cocoa.

The structure of the SCPP is best described as a hub and spoke network, with Swisscontact at the hub playing the central role as coordinator, moderator and project implementer. Swisscontact consulted with a multitude of stakeholders, ranging from government agencies at different administrative levels, research institutions, programme donors, NGOs, cocoa traders and banks, to industry platforms and global chocolate manufacturers.    

By demonstrating the technical expertise and the impact of the SCPP’s project activities on the sector, Swisscontact was consistently able to attract and retain both donor and private sector interest in sustaining their commitment to the programme.

Adjusted programme approach

As cocoa prices have dropped in the past five years and the cultivation of other commodities was boosted by large investments, many farmers left the cocoa sector, which led to fundamental incentive issues for farmers. This problem could not be resolved through training; only by collaborating with cocoa buyers. Under competitive pressure, the private industry leaders realised that blanket coverage of upgrading farmers’ skills in classic cocoa cultivation was no longer an appropriate approach. Investments should focus on innovative production methods and prospective farmers. Swisscontact thus provided inputs to cocoa players to create a strategic approach to innovation diffusion. Instead of providing direct solutions, the SCPP switched to a facilitative role, aiming to make changes at producer levels efficiently.

An incubator for innovations in commodities 

To fill the absence of advanced education in the Indonesian cocoa sector, the SCPP directed the public-private coalition to deliver high-quality, large-scale training. Through certification premiums, farmers and other market actors along the supply chain were incentivised to adopt improved practices in accordance with sustainability standards of the industry. Training not only made farmers realise that modern cocoa cultivation can be quite profitable, also in comparison with other commodities, but it also strengthened their self-confidence as well as their motivation for cocoa farming.

"Thanks to the SCPP training, I realised my cocoa yield was so low because the shade trees were incorrectly positioned. After correcting this and applying the Good Agricultural Practices, my annual cocoa yield tripled, from 266kg to 800kg per hectare."
– Hasriadi Hasan, cocoa farmer in Pidie Jaya, Aceh  

As these supporting services matured and became commercially viable, the project provided cocoa companies and service providers with further innovations so they could perform their functions more effectively and efficiently.

Offers bespoke, participatory coaching that emphasises the active role of women in co-managing cocoa as a family business.

Diversifying income from timber, fruit and seasonal crops and/or livestock, to reduce susceptibility to cocoa price fluctuations.  

Identifying farmers who are keen to adopt new concepts and are influential enough in their network to spread innovations without external intervention.  

In the video, Megan Willis, Sustainability Lead Asia Pacific, explains the importance of this Social Network Analysis to the cocoa buying company Cargill Cacao and Chocolate:

The SCPP ensured that these innovations produced net-benefits for both cocoa companies and farmers, delivered sustainably, for both parties’ commercially viable model.

Indonesia
Sustainable agriculture, Trade facilitation
Sustainable Cocoa Production Programme
SCPP was established as a multi-donor, public-private partnership comprising of the Swiss State Secretariat for Economic Affairs (SECO), public donors and private sector in the cocoa industry.