Exploring Pricing Models in Cocoa Value Chains
What is the main objective of the project?
Prices are one of the determinants of living incomes of cocoa farmers. Cocoa prices also variously affect incentives and conditions for deforestation and child labour. Over the past years, developments in cocoa pricing schemes could be observed at multiple levels, for instance pricing models, supply chain models and regulatory frameworks. This project aims to fill the gap around a systematic understanding of the nature, similarities and differences of such pricing schemes. To that end, the project will result in a report which will be publicly accessible.
How will the project contribute to sustainable cocoa production?
The project aims to promote sustainability in the cocoa value chain by providing insights into the design, implementation challenges, and upscaling opportunities of pricing schemes targeted at living income. The report will shed light on the role of pricing models at micro- and meso-levels in fostering living income.
To this end, it will discuss to what extent and how the underlying systemic challenges, that currently hinder or prevent value chain actors from amplifying price models that contribute to living income targets, can be addressed through existing examples of pricing models at the micro- and macro-level. It will also situate this discussion in the smart-mix approach to fostering living income.
The project will: (1) critically reassess the mainstream narrative's key terms and underlying assumptions, incorporating insights from literature on price management and living income. This includes raising questions on the price-income-sustainability nexus and discussing the welfare gains for cocoa farmers from increased prices and the sustainability of living income differentials.
Further, the report will (2) provide a typology of pricing models aiming to contribute to living income, which systematises pricing models within existing supply chains as well as pricing models related to innovative supply chain models, (3) analyse developments in public pricing policies in the cocoa sector, their downsides, and ways to redress shortcomings and (4) present the current pricing schemes and explore ways to overcome their limitations by connecting them with innovative legal and institutional frameworks and approaches.
"The rich primary data on pricing schemes collected in a sector-wide survey knitted into a multi-level analysis that interfaces governance issues at the micro, meso and macro level – which allows to take the analysis beyond “niche” initiatives and focus on structural challenges."
How will the project contribute to sustainable cocoa production?
The project aims to promote sustainability in the cocoa value chain by providing insights into the design, implementation challenges, and upscaling opportunities of pricing schemes targeted at living income. The report will shed light on the role of pricing models at micro- and meso-levels in fostering living income.
To this end, it will discuss to what extent and how the underlying systemic challenges, that currently hinder or prevent value chain actors from amplifying price models that contribute to living income targets, can be addressed through existing examples of pricing models at the micro- and macro-level. It will also situate this discussion in the smart-mix approach to fostering living income.
The project will: (1) critically reassess the mainstream narrative's key terms and underlying assumptions, incorporating insights from literature on price management and living income. This includes raising questions on the price-income-sustainability nexus and discussing the welfare gains for cocoa farmers from increased prices and the sustainability of living income differentials.
Further, the report will (2) provide a typology of pricing models aiming to contribute to living income, which systematises pricing models within existing supply chains as well as pricing models related to innovative supply chain models, (3) analyse developments in public pricing policies in the cocoa sector, their downsides, and ways to redress shortcomings and (4) present the current pricing schemes and explore ways to overcome their limitations by connecting them with innovative legal and institutional frameworks and approaches.
What steps are taken during the project?
The report will evaluate pricing mechanisms at the micro (individual companies), meso (industry and supply chain), and macro (governmental) levels. Their effectiveness will be assessed based on expert input, going beyond existing literature through desk research, conceptual analysis, and real-world data. Findings will be refined with feedback from a panel of experts, ensuring comprehensive and practical insights.
How do you plan to communicate the outcomes to relevant stakeholders?
The analysis of this project (on micro and meso levels) is partly based on data collection from a survey conducted as part of the COMPASS research project at the CDE that involves several Swiss cocoa companies. The project builds on grassroots work, multi-stakeholder consultation processes and needs assessments carried out in the context of various CDE initiatives.
The project outcomes will be disseminated through SWISSCO and CDE websites, social media, webinars and larger online and in-person events. Targeting cocoa stakeholders globally, we aim to engage Industry/Business Associations, Regulatory Boards, Civil Society/NGOs, and Research Institutions. The focus is on peer learning and collaboration, sharing insights on pricing models, and informing policy decisions for a broad audience involved in the cocoa trade.
Where do you see the greatest potential for other stakeholders in the cocoa sector and beyond to learn from the outcomes of this project?
Beyond cocoa, the findings of this project will inform policy discussions on more stable and remunerative prices for Ethiopian coffee. This will be achieved through collaborations with an interdisciplinary research project funded in the second call of the SOR4D program for the period 2024-28. Additionally, the results of this project will contribute to discussions on more sustainable trade governance by a group of international experts from the global North and global South, as part of the "Agreement on Agriculture Reimagined" project. This project strives to create a model agreement on agricultural trade for sustainable development.
Organisations involved
