A Quantitative Look at the Economics of Cocoa Certification
Place: Africa • Date: 2010 • Partner: Mars
The following quantitative analysis consists of modeling the impact of cocoa certification programs under a variety of assumptions about underlying technology, behavior and external conditions.
The focus is on the cost of certification to Mars and the industry, including impacts on cocoa prices and farm revenue. Data and assumptions provided by Mars were used, as well as authoritative sources in the industry and research literature.
The key constraint to this study is the high degree of uncertainty regarding future market conditions and a variety of behavioral and technology characteristics. The future is uncertain by definition, but in this case there is the added randomness of the large degree of uncertainty regarding the impacts of certification on productivity, the impacts of other activities on productivity, how these may vary across nations, etc. This is addressed using a scenario framework, which permits a better understanding of the nature of the variables as they affect the outcomes being considered, and of the order of magnitude of certification and how different actions may affect it. The analysis consists of two grand scenarios, and within each are sub-scenarios to illustrate how factors will affect key performance variables.