Ecuadorian Cocoa Farming VII

Working Capital Associates provides direct financing to value chains of agriculture products from Sub-Saharan Africa (SSA) and Latin America (Latam). So far, the company has raised 1.405.000€ through GoParity to fund three different organizations: a coffee cooperative in Peru (Peruvian Resilient Farming I and II); a cocoa company in Peru (Resilient Cocoa Farming I, II, III, and IV); and a family-owned cocoa company in Ecuador (Ecuadorian Cocoa Farming I, II, III, IV, V and VI). 

This is the seventh campaign promoted by WCA with GoParity. Seven out of the previous eleven campaigns have reached payment plan maturity. All investors received their capital back, a total amount of 925.000€, and corresponding interest.

The goal of this campaign is to fund a family-owned company based in the coastal area of the Guayas Province in Ecuador. The company specializes in aggregation, processing, and sales of conventional cocoa beans and semi-finished products such as Liquor, Butter, and Powder to Europe and North America. The funds raised through this campaign will be used as Transactional Working Capital to provide the company with liquidity for several stages, from procurement and processing stage, all the way through its exports.

The Company was established in 1996 by a local entrepreneur and it has become one of the leading national exporting companies of Ecuador's fine aroma cocoa, as well as special semi and premium gourmet chocolates - with an industrial process "bean to bar", and names of the traceable origin of the geographical areas that are most representative of fine aroma cocoa in Ecuador.

With its two Plants in the Guayas and Los Rios provinces, the Company has a total of 20,000MT export capacity per year. Given growing competition in the market, due to the increasing presence of multinationals, and local competition growth, the Company decided to invest in operations automation, mechanization, and product portfolio diversification to become more efficient and competitive.

The Company developed an innovative operations automation project by using high-end technology machinery specially made for the cocoa sector.

According to the Company, such technological innovations achieved the following results:

• Duplicated production and exports volume.
• Reduced labor risks.
• Reduced time between the preparation of lots.
• Improve and ensure the homogeneity and quality of the beans.
• Reduce the percentage of human error throughout the stages of production.
• Allowed for production costs control.
• Achieved higher quality.

In addition, the Company implemented full automation of the entire factory that allows management of all processes from a computer, laptop, or tablet.

The Company’s mission is to export the best fine Ecuadorian cocoa beans and their derivatives to the world, promoting fair trade with small producers and traders, and integrating the whole agro productive cocoa chain with international markets assuring high-quality standards, responsibility for human resources, and care for the environment.

According to management, the Company has established a traceability system that guarantees information about the cocoa tracing on each of its processes from the production, postharvest handling, and cocoa distribution, to maintain a record of the cocoa until its final delivery to the consumer.

The Company sources its produce from 2.500 cocoa farmers and is focused on improving their productivity and quality controls through two Private Sponsored programs, which benefit 5.000 families, as follows.

1. A Program based on Quality, Traceability, and Sustainability that offers farming communities the following services:

• Technical assistance and training to improve productivity.
• Advice and support for improving the quality and post-harvest.
• Training to develop management, financial, and trading capacities in communities.
• Fairtrade practices to improve life quality in the communities.

The goal is to establish a traceability system to guarantee the trace information of cocoa beans in each one of the processes, from production, postharvest handling, and distribution. The Company works with a group of small-scale producer associations in this program.

2. A sustainable project developed to improve the productivity of small producers of cocoa and to enhance their quality of life by using tools such as technical training and delivery of agricultural inputs. The main objective of the program is to obtain a fine flavored cocoa grain with less fat and more flavor with the sponsorship of the Government of Sucumbíos (Cocoa Region) and in coordination with the main small farmer associations. As of today, 680 cocoa producers enrolled in this program.

Overall, Ecuador is the second producer of cocoa in Latin American after Brazil, and for many years, it has been recognized as the largest fine or flavored cacao producer in the world.

There are two general categories of cocoa beans in the world: “fine or flavor” and “bulk or ordinary”. Fine cocoa production represents less than 5% per year of the world’s cocoa bean production and Ecuador is the largest producer of “fine or flavor” beans, producing over half of the world’s production – the raw material that is required in the European and American industries for fine chocolate production. Evidence from Ecuador suggests that the cocoa premium over the New York Stock Exchange price of fine or flavor cocoa beans is 20% to 30%.

At the end of the 2020/21 crop year, the total volume of cocoa beans graded on the ICE Futures U.S. peaked at 109,599 tonnes of cocoa beans, up from 25,679 tonnes graded during the same period of the preceding cocoa year, with volumes of cocoa beans from Ecuador in ICE Futures U.S. gradings reaching 18,383 tonnes respectively.

In Ecuador, approximately 360,000 hectares of cocoa are cultivated by approximately 90,000 farmers. Most of these farmers are relatively poor and operate on less than 10 hectares of land (according to representatives from non-governmental organizations in Ecuador). Their incomes are largely dependent on agricultural production with almost half generated by the sale of cocoa beans. 85% of cocoa production occurs in the coastal plain region of Ecuador.