January 25, 2009
We talked to Stephen McDonnell, founder and chief executive of Applegate Farms organic food company and establisher of the Kallari Chocolate Company, about the social, environmental and economic advantages of both growing and producing your own product – and the role that this business model has to play in the future of sustainable farming.
How did you come to form the Kallari Chocolate Company?
My daughter Nora went on a school trip to Ecuador and visited a biological station in the Napo region. She met a volunteer there named Judy Logback, who had been instrumental in helping the local families create the Kallari Association so that the farmers could market their beans as a collective. She also introduced them to Dr. Robert Steinberg, a founder of Scharffen Berger chocolate in Berkeley, California, and with the help of his formula, the farmers made their first chocolate bars in a small cooperative-owned Andean confectionary workshop.
I met Kallari members in July of 2007, and with their permission established the Kallari Chocolate Company. We visited a larger factory for producing the chocolate and enlisted the help of Tomas Keme, a Swiss chocolate expert, to help improve the quality and techniques of Kallari chocolate making.
How have Kallari farmers been able to merge commerce with sustainable business practices?
Although the average Iowa farmer may take pride in the number of bushels per acre yield from his farm, the bragging rights of an Amazon cacao farmer are derived from the number of species of valuable plants interplanted in her cacao trees.
Historically, Amazon farmers have used agroforestry techniques, called Chakra in Kichwa, where cacao is planted amongst other crops, imitating the natural biodiversity that exists in the rainforest. The floodplain area of each farm is the most productive area for cacao trees, so most Kallari cacao growers prefer to have small plots of only one acre each distantly scattered along the banks of Amazon tributaries. In each cacao grove the small chocolate trees are planted amongst scores of hardwood trees, fruit trees, bananas, plantains, palms and medicinal plants. The remaining floodplain land includes other subsistence food crops in a similar agroforestry plantation. The rainforest on the steep highland or terra firme portion of the family farm plots remains in primary or secondary forest. These forests are key natural resources for each family, and a family might choose to sacrifice one at a time for home construction or for sale in the rare case of a family emergency.
The average Kallari cacao grove is only a small percentage of the overall farm size (less than 2%), but the high price for cacao with the value addition of chocolate making has boosted it to provide nearly half of the annual income for a rural family. Although the individual farmer may not get as wealthy as they would otherwise right away, this agroforestry method of traditional Kichwa farming enables sustainable harvests for many years to come, for many future generations of farmers. So, in a way, eating this chocolate is actually helping both the farmers and the environment.
Kallari farmers have been approached by companies seeking to drill, mine and log on their land in the past. How do they avoid giving in to these pressures?
These 850 farmers on average used to make about $500 a year per family. By improving the flavor quality of their cacao, finding direct markets, and now producing their own chocolate, they can get more than double for their cacao than they did in 2002. That’s an immediate payback versus fair trade. Fair Trade pays 10 percent over world commodity prices, but with the benefit of getting back 100% of the profit from the chocolate they make, Kallari farmers are making fifty cents more, a bonus of five times greater than the Fair Trade price increase.
Speaking on a strictly financial basis, this is a baseline equation that needs to be consistently working for them in order for them not to be tempted to allow oil or logging interests to come into their villages. If we can create that type of economic value, they improve their livelihood and are simultaneously improving the chances that the rainforest is sustained.
How does the co-op system benefit farmers?
Co-op associations have always been a way for an individual farmer to connect to a larger organization. As a collective group they can engage in trade in more efficiently and in a more productive manner than they could on their own. But the co-op system itself is not a new concept. What’s unique in our case is that the Kallari farmers are selling the commodity they grow in a finished product at retail. They partake of all profits and have an incredible opportunity to be directly linked to consumers at the end of the supply chain.
How has the local movement influenced Kallari’s success?
Chocolate has never been a local product as cacao is only grown in a small region above and below and equator. However, our project is helping to expand people’s consciousness of what it means to grow and buy local – even if our end product travels a distance to consumers. For us, ‘local’ is about appreciating the fact that our chocolate is made by the people that grow the beans, and gaining an understanding of the immediate environment that Kallari famers live in. The broader story of how each one of us is tied to the land and the product connects people in an intimate way to the most important ecosystem on the planet – the rainforest.
Few cacao farmers make and market their own chocolate. Do you expect other cacao farmers to adapt your approach?
During the past decade the Kallari community has gained international exposure, and this means that our farmers take pride in producing a quality product worthy of sale in North America and Europe. It also means that consumers have brand recognition of this product as one that preserves the environment while improving the economic circumstances of the farming community in this region.
Now that the farmers have control over both the supply and demand side of the equation – by both growing the beans and producing the chocolate – they can drive real economic change. And if this is something that can occur in a community like Kallari, then there is no reason why other sister communities from different cacao regions can’t do the same thing.
What has your role been in advancing the company?
My goal in joining this operation was to help create a business model that would eventually have the Kallari farmers fully engaged in running every aspect of their business – from growing cacao to chocolate manufacturing, sales marketing and distribution.
While I understand that giving 100% of profits back to the community a radical notion, we are hoping that this model will create awareness for other companies, and a model for them to follow, even if the percentage that goes back to their farming community is smaller. All companies have an obligation to give back something to the environment – and to the people who grow and source the materials they use to produce their end product.
What can retailers learn from Kallari’s success?
If our story is good for the consumer, then it’s also good for the retailer because they are giving consumers exactly what they are looking for. More than ever, consumers are demanding a relationship with their food. They want to know it’s good quality, but they also want to know where it comes from. They are increasingly interested in knowing that their purchase has a direct impact on the people who grow it and they want to know the impact of their purchase on the broader environment.
As retailers become more conscientious and get more connected to the local movement, they become an integral part of the process. Offering products like Kallari Chocolate signifies a retailer’s commitment to their overall sustainability plan. It’s a no brainer.
In upcoming issues, we will feature interviews with companies that are taking innovative steps toward the creation of sustainable products and services. If you are interested in telling us more about what your company is doing please contact Allison Bloom at email@example.com.