Cacao fruits are piled up in a pushcart for further processing on Nov 25 at the Cau Chocolates plantation in Tabanan regency, Bali. - Photo: The Jakarta Post/ANN
JAKARTA: Indonesia’s goal to upscale the downstream cacao industry faces a multitude of obstacles spanning the entire supply chain, from low crop yields to inconsistent quality that must be overcome for the country to become a meaningful chocolate exporter.
I Kadek Surya Prasetya Wiguna, CEO of Bali-based chocolate producer Cau Chocolates, said the industry faces various problems upstream, such as plant diseases and high capital expenditure on seeds and fertiliser.
“On the intermediary level, many [factories] in our [processing] industry still take unfermented cacao beans,” Kadek told reporters at a media briefing in Bali on Nov 25, a practice he said violates an Agriculture Ministry regulation mandating that factories process only fermented beans.
Before being turned into intermediate products, cacao seeds normally go through six to 10 days of fermentation to prevent mold and undesirable pathogens, after which they are referred to as cacao beans.
The beans are then dried for another five to 10 days to further develop and stabilise their flavor, before being roasted and then turned into intermediate products, such as cocoa powder or cocoa butter.
Indonesian Cacao Council (Dekaindo) chairman Soetanto Abdoellah said at the same briefing on Nov 24 that farmers sell unfermented beans because fermentation takes a long time and the financial incentive for the additional processing step is “unattractive”.
The main problem, however, is that there is a market for unfermented beans, thanks to chocolate producers mixing fermented and unfermented beans in a 60:40 ratio to reduce cost without ruining the taste, said Soetanto.
Kadek expressed concern over that mindset: “As long as farmers produce nonfermented beans, Indonesia will continue to be regarded as a producer of low-quality beans.”
He added that Indonesia is the only cacao-producing country that makes do with unfermented beans.
Indonesia was the world’s third-largest cacao beans producer from 2005 to 2015, behind only Ivory Coast and Ghana, but then slipped to fourth place in 2016 and to sixth in 2017, and it has been seventh since 2019, while remaining Asia’s largest producer.
The country is home to 1.3 million hectares of cacao plantations, virtually all of which belong to small-scale farms, with less than 1 per cent managed by either state-owned or corporate plantations.
Most of the 200,000 tonnes of cacao beans were used for onshore processing in 2024, while only around 13,000 tonnes were exported, according to data from Statistics Indonesia (BPS).
The government has imposed an export duty on beans since 2010 to incentivize domestic processing.
Indonesia was a net exporter of cacao products in 2024 thanks to large outgoing shipments of intermediate products, namely cocoa paste, butter and powder.
The country exported some 25,000 tonnes of chocolate last year and imported 24,000 tonnes, but that translated to net imports worth US$51 million because of price differences.
Despite being a large cacao producer, the country struggled to meet domestic demand for cacao beans last year, necessitating 157,000 tonnes of imports for around $1 billion.
Adi Sucipto, an official from the Plantation Fund Management Agency (BPDP), one of the government institutions involved in cacao development, told the reporters in Bali that Indonesia used to have 31 chocolate factories but that 10 of them had closed because the import costs exceed their profits.
Global prices for cacao skyrocketed throughout 2024 and the first half of this year following harvest failures in West Africa, the main source of beans.
Unmet domestic demand for beans is largely caused by productivity issues given that many of Indonesia’s cacao plantations can only produce 600 kilogrammes per hectare every year, far from the ideal figure of 2 tonnes, Kadek revealed.
Finance Ministry official Nurlaidi said at the Bali briefing on Nov. 24 that two-thirds of Indonesia’s cacao trees were too old to be productive, while Bali Government official Dewa Ayu Nyoman Budiasih added that not only are the trees aging, but the farmers are too.
Fifty-year-old Bali farmer Ni Made Budi Ayu Anggraeni, who owns 4 ha of cacao, told The Jakarta Post that bean prices are a major problem for farmers, since the buying factories often offer only a slim margin that floats with the global price.
I Ketut Pas Gunawa, a 48-year-old Bali farmer who owns 2 ha, said he often finds himself “in a tight spot” where he cannot find a processing offtaker, leaving him with no choice but to sell to middlemen with even slimmer margins.
Both farmers have been supplying exclusively to Cau Chocolates since 2021, with a floating rate subject to global prices.
The company guarantees a price floor of Rp 100,000 ($5.99) per kg regardless of global prices, under the condition that the beans are fermented.
Cau Chocolates, which has exported to Singapore, Malaysia and Qatar in the past, now ships around 10 percent of its output to Poland and Australia.
CEO Kadek said the main challenge with exporting is to meet standards enforced by each target country.
These may include organic production across the entire supply chain, from fertiliser and pesticides to ingredients used, such as organic sugar, he said, which can make the chocolate taste less sweet.
The “different consumer culture” translates into market segmentation, because the Indonesian market prefers sweet, light chocolate, while the country mainly produces dark chocolate, which partly explains the large [number of] chocolate imports, BPDP’s Adi said.
On the downstream end, the industry faces what Kadek calls a “branding problem” in its bid to shape market perceptions to put Indonesian chocolate on equal footing with “French, Belgian or Swiss” chocolates.
"Not one of the cacao trees behind me grows in Europe, but why are their chocolates better than ours? Why do we have the trees but the good chocolate comes from outside?
"We should have the strength, the pride that this chocolate, the chocolate or cacao we produce, is the best in the world," Kadek said.
Dekaindo’s Soetanto concurred, lamenting that “the quality of our final products is deemed inferior by foreign consumers”, while it is all just a matter of perception and adjustment to the market segment.
A negative perception is the main challenge to exporting chocolate, and the branding responsibility falls on the government’s shoulders, Soetanto argued. - The Jakarta Post/ANN
