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Investor Relations

Progress on cocoa sustainability

By Simon Brayn-Smith, Head of Cocoa Sustainability, Olam Cocoa

The Olam Cocoa sustainability business continued to grow in 2016, whilst also undergoing some significant changes after the acquisition of ADM’s cocoa business. The acquisition opened up new markets for sustainable products.

On the supply side, we have diversified our supply of sustainable cocoa beans to match our global footprint.  For example, we now source 20% of our total sustainable volumes from Côte d’Ivoire versus 99% previously by ADM from this single origin.

On the demand side, our changing and growing customer base requires us to continually review our underlying sustainability strategy and outlook. As our sustainability business has become more diversified across more origins, we will rely less on dedicated programmes and instead work on achieving alignment on the key sustainability concepts in all of our origin programmes.

We have finalised new, long term agreements with key customers for the supply of traceable cocoa butter from West Africa and sustainable cocoa powder. We are also engaged in discussions with a diverse range of global customers regarding new long-term programmes and the extension of existing sustainability programmes into new origins.

Our in-origin work continues to be strengthened with key initiatives, including the extension of our climate model in Indonesia and Nigeria and a new IFC/Scope Insight capacity building programme in Côte d’Ivoire. We have reached a milestone of 100% of our farmer groups in Côte d’Ivoire now having in place a Child Labour Monitoring and Remediation System. We also continue to be a leading contributor to CocoaAction (in which Olam Cocoa is a founding member), which by 2020 intends to support 300,000 cocoa farmers. In the meantime, we are working towards fully aligning the practices and activities of our sustainability programmes in Ghana and Côte d’Ivoire to achieve the same quality, yield and livelihood success levels and to positively adjust the activities in each country according to key cross-learnings generated.

Overall our sustainability programmes continue to be highly regarded by our customers with one recent audit report in South America commenting that “it’s rare to observe such a radical transformation, and [we] would like to highlight and applaud this work.

Our cocoa sustainability is well placed to capitalise on opportunities. On the commercial side, we have established a large market share with major global chocolate brands that will position us for strong growth as these customers stretch towards their 2020 sustainable volume commitments. Conversely, our market share with smaller players is currently fairly minimal, which allows for growth as we improve our marketing and communication strategy.

In addition, as the sums spent on sustainability and sustainable products increase, customers are demanding ever more transparency, specifically around premium and physical traceability, and on data openness. For premium traceability, our willingness to offer dedicated programmes where customers are directly involved with the farmer base and programme activities is clearly an advantage and is not something routinely offered by our competitors. Physical traceability is becoming increasingly requested by certain customers and as segregation costs are reduced, Olam is well positioned to meet this demand. Physical traceability is also likely to become increasingly important as issues such as deforestation move up the agenda.

Finally, our Olam Farmer Information System (OFIS) is an industry leading tool for supply chain transparency and continues to support our in-origin work as well as customer engagement.