From January 2018, the ratio at which cocoa credits can be exchanged will better reflect the realities of cocoa processing. Sven Drillenburg, Europe Lead Markets, explains: “Up to now a volume of cocoa liquor could be converted into the same volume of either cocoa butter OR cocoa powder. From 2018, a volume of cocoa liquor must be split into an equal volume of both butter AND powder.”
Changes to the conversion ratio
Prices are set by the market
UTZ is not involved in market mechanisms and does not set the prices. Sven explains: “Companies set the prices for UTZ certified cocoa products. From January 2018, the average first buyer in the supply chain will have to buy more certified cocoa beans to be able to make and sell the same amount of certified butter. This could then lead to an increase in the costs per MT certified butter.”
“Due to commitments to sustainable sourcing in the chocolate confectionery industry there is, in general, more demand for certified butter than powder. Cocoa butter is what is used to make chocolate, whereas cocoa powder is an ingredient for drinks, cookies etc,” says Sven. “We don’t expect the prices to rise excessively for 2018 and after. Some UTZ members have already fixed 2018 contracts and they confirm this.”
We don’t expect the prices to rise excessively for 2018 and after. Some UTZ members have already fixed 2018 contracts and they confirm this.
UTZ wants to be as transparent as possible about the costs of certification – but these costs already vary between suppliers. “This is because the cost of investing in certification is different on every farm and in every supply chain,” says Sven. “Likewise, any additional costs based on the changed conversion ratio will also vary between suppliers. We recommend that you contact your suppliers to find out what the new conversion ratio will mean for the certified cocoa you buy. UTZ is also encouraging suppliers to explain the cost of meeting the UTZ requirements for sustainably produced cocoa (products).”
UTZ remains a cost efficient program
The new conversion ratio will not impact bean or cocoa liquor prices. Other program costs are stable or going down, because we focus on keeping overheads as low as possible. For example, companies with a well performing UTZ Chain of Custody can opt for bi-annual audits instead of annual ones, as of January 2015, which reduces overall audit costs in the supply chain.
“Our goal is to scale up the market for sustainable cocoa, to extend the benefits to more farmers. The mass balance system is an important part of our strategy, offering an incentive to companies to source more sustainable cocoa,” says Sven. “As UTZ is now the world’s largest sustainability program for cocoa, we can change the conversion ratio to ensure the UTZ system better reflects the reality of the cocoa production chain. This makes the UTZ cocoa program more transparent and credible. We also want to align with other international sustainability initiatives.”
Find out more
If you want to know more about what the new conversion rates mean for you, don’t hesitate to contact your account manager or get in touch with our Member Support Team.
Do you want to know more details about the changes to the mass balance rules? Go to our mass balance member pack and find all the resources we have available, including guidance documents, videos, templates for credit accounts and more.
Also check the member pack for the basics of mass balance, ready-to-use communication materials and guidance on how to make credible claims.