Vca Study Specialty Coffee and Cocoa Peru

Value Chain Analysis
CBI Integrated Country Programme
Final Report
Specialty coffee and cocoa
Contact:
Udo Censkowsky
+49-89-82075902
u.censkowsky@organic-services.com
www.organic-services.com
Organic Services - committed to creating value

Content
1. Introduction ....................................................................................................... 3
2. Market demand in the European Union ............................................................ 4
2.1. Global situation and European imports ....................................................... 4

2.2. Domestic market trends in Peru ................................................................ 10
2.3. EU import requirements ............................................................................ 11
3. Coffee & cacao value chain analysis .............................................................. 14
3.1. Governance of the coffee and cocoa sector ............................................. 14

3.2. Status-Quo production and trends ............................................................ 15
3.3. Value Chain Analysis ................................................................................ 19
4. Number of Peruvian companies ...................................................................... 25
5. Risk assessment and opportunities ................................................................ 26
6. Role of stakeholders in a CBI country programme.......................................... 33
7. Corporate Social Responsibility (CSR) in the value chain .............................. 35
8. Result chain .................................................................................................... 37
9. Recommendations and conclusions ............................................................... 39
10. Annexes .......................................................................................................... 46
10.1. Annex 1: Leading green coffee exporters in 2011 ................................. 46

10.2. Annex 2: Speciality coffee chain actors ................................................. 47
10.3. Annex 3: Coffee processing ................................................................... 49
10.4. Annex 4: Leading cocoa exporters in 2011 ............................................ 51
10.5. Annex 5: Cocoa value chain actors ....................................................... 52
10.6. Annex 6: Cocoa processing ................................................................... 53
10.7. Annex 7: Is cocoa certification beneficial for farmers? ........................... 55
10.8. Annex 7: Validation workshop ............................................................... 57

1. Introduction
In the first research phase a pre-assessment of the Peruvian coffee and cocoa sector has
been done and due to existing market opportunities the decision taken to conduct a Value
Chain Analysis (VCA). The main results of the pre-assessment are summarized in an
inception report.
CBI1 asked explicitly not to include mainstream coffee and cocoa in the assessment but to
focus on speciality coffee and cocoa, single origins and with one of the market relevant
certifications (organic, UTZ certified, Fair Trade, Rainforest Alliance). The Peruvian cocoa
and speciality coffee sector experienced not only a positive development in the past
decade but also contributes significantly to the overall income generated by agro-business
exports. Nevertheless, CBI decided to consider further on including both sectors into the
integrated country programme 2013-2017 setting a clear focus on quality production and
stepwise increase of value added products. On the basis of the present VCA a final
decision will be taken.
The VCA has been conducted by Petra Heid with support from Thomas Sporrer and Udo
Censkowsky. The VCA has been reviewed after the realization of the validation workshop
in Lima (17th of April 2013). New information gained as well as results of the workshop
discussion have been integrated.
What is a “specialty coffee”?
The term “specialty coffee” originated in the United States. It was initially used to describe the range of
coffee products sold in dedicated coffee shops, in order to differentiate these coffees from mainstream
coffee generally available through supermarkets and other retail outlets. Now it refers to a wider range
which includes higher quality coffees, both single origin and blends, certified or verified coffees, such as
organic, Fair Trade, UTZ Certified, Rainforest Alliance, 4C, bird friendly, etc., and unconventional
coffees such as flavoured coffees and coffees with an unusual background or story behind them. Today
“specialty coffee” has become a generic label covering a range of different coffees, which either
command a premium price over other coffees or are perceived by consumers as being different from
the widely available mainstream brands coffee. The term has become so broad that there is no or not a
universally accepted definition of what constitutes “specialty coffee”, and it frequently means different
things to different people. Therefore, it is not possible to accurately quantify how much is produced, or
how much is consumed. The general consensus appears to be that specialty coffee in all its different
forms may account for more than 10% of the world consumption.
1
CBI (Centre for the Promotion of Imports from developing countries) is an Agency of the Netherlands Ministry
of Foreign Affairs.
3

2. Market demand in the European Union
2.1. Global situation and European imports
Worldwide demand of coffee and cocoa beans has grown steadily at around 2.5%
annually in recent years. Growth is fastest in emerging economies, such as those in
Eastern Europe and Asia. There has been very little growth in coffee and cocoa
consumption in Europe over the last five years. In these established markets shifting
preferences towards quality, origin and an increasing interest in the economic, social and
environmental aspects of coffee and cocoa production can be observed and determines
buying behavior.
Estimations based on these trends show, that approx. 25 million of additional bags of
coffee and approx. 1 million additional tonnes of cocoa will be needed to keep pace with
the demand by 2020. An expansion of coffee and cocoa farmland is only possible at the
expense of the remaining tropical rainforest, which is not an option. This leads to the
conclusion that either productivity on existing farmland must increase significantly or the
coffee and cocoa sector will suffer considerable supply constraints, market disruptions, and
price fluctuations.
In 2010 world coffee consumption was 134.000.000 bags. 40% of the coffee was
consumed in Europe. 12 million bags, which is equivalent to 9% of the world coffee
consumption was sold as sustainable coffee, complying with at least one of the different
certification schemes, such as UTZ certified, Rainforest Alliance (RA), organic, Fair Trade,
the Common Code for the Coffee Community (4C) or Starbucks Coffee Practices. In the
United States, gourmet or premium coffee has increased its market share from 1% to 20%
in the last 25 years2.
Estimates of world cocoa bean consumption (grindings) according to International Cocoa

Organization (ICCO)3 statistics were in 2010 around 3.9 million tons. Of these cocoa beans
1.615 million tons, equivalent to 41%, was grinded in Europe. The majority of these beans -
about 0.5 million tons -, were grinded in the Netherlands. Germany occupies the second
place with 0.4 million tons of the grinding volume. Nearly 10% of the total cocoa production
is certified4. Most important certification schemes in the last years were organic and Fair
Trade, but Rainforest Alliance and above all UTZ certified cocoa volumes are catching up
rapidly. According to Rainforest Alliance the certified cocoa production has quadrupled up
to 405,608 tons in 2012 (this would be equivalent to 10% of the world cocoa production in
2012 and would make Rainforest Alliance to the leading sustainability label in cocoa
markets).
According to TCC Coffee and TCC Cocoa Barometer 20125, demand for sustainable coffee
and cocoa in the future will increase and growth rate will be much faster than in
conventional coffee and cocoa. Consumed volumes of the most important European coffee
consumer countries for sustainable coffee are listed in the TCC Coffee Barometer 2012.
Table 1 shows that sustainability certification schemes are varying from country to country
2
Specialty Coffee Association of America www.scaa.org
3
International Cocoa Organization www.icco.org
4
Report Cocoa 2012 Swiss Economic Cooperation (SECO)
5
TCC = Tropical Commodity Coalition www.teacoffeecocoa.org/tcc
4

in Europe. The figures do not reflect that many producer organizations count on various
certifications in order to have access to more than one market segment.
Table 1: Relevance of coffee sustainability schemes6
The demand for specialty coffees is growing whereas the total market volumes are
stagnating in most of the traditional European markets. The relevance for filter coffee is still
high but declines year by year in particular in Germany, Europe’s largest coffee market7.
Coffee market drivers are
 Coffee pads/capsule market which is still growing

 Instant coffee is growing
 Sales of roasted full beans is growing (e.g. freshly prepared espresso beans is seen
a strong trend in future)8
 Single origin coffees
 Share of sustainable coffee is growing (FLO, Rainforest Alliance, Organic)9
The demand for cocoa is growing and especially the demand for certified cocoa is
expected to continue to grow in Europe over the next years. Consumption trends in
consolidated European markets remain stable and on high level with no or only a slight
increase on the total volume. The following shift on consumer trends can be observed:
 Trend towards “high end chocolate products”

 Trend towards bitter/darker premium chocolate with a higher percentage of cocoa
content for consumers who appreciate high quality, health aspects and an exquisite
taste often, which is related to a certain live style.
 Trend towards “sustainable” (certified) chocolate products. Cocoa bean production
complies with social, environmental and economic aspects and the whole process
is successfully certified by a third party.
 Trend towards authentic ingredients and single origin cocoa products.
Consumption in emerging European markets is developing differently. These markets grow

rapidly on volume and the following consumer trends can be observed:
6
Only the organic market is based on a legal regulation. All other labels are private label initiatives.
7
German consumer drink 149 litre per capita and year (30% above the European average); In total Germany
consumes 402,000 tons of roasted coffee and 12,800 tons of instant coffee;
8
Goes hand in hand with strong sales in espresso/coffee machine;
9
In Germany 3% market share in 2011; in 2012 4% market share with a clear trend to grow further.
5

 Rapid increase of cheap chocolate products (low cocoa mass/cocoa butter content)
 Trend to small package units to satisfy consumers with less buying power
 Much lower importance of sustainability certification for coffee and cocoa production
in emerging European markets
Due to increased consumer awareness of issues surrounding sustainable cocoa production

several European countries, like the Netherlands, Germany and Belgium have started to
implement national roundtables aiming to support awareness building within the consumers
and to increase national consumption of sustainably produced cocoa and chocolate
products10.
Parallel to country initiatives, various industry initiatives on sustainability in coffee and

cocoa have been launched in the past few years. Big industry players have committed to
buy a certain volume of coffee or cocoa beans produced under certain conditions.
Therefore, the demand of “certified” coffee and cocoa beans, which often is seen as
synonymous with “sustainable”, is increasing rapidly. The following Table 2 list industry
purchasing commitments in “sustainably” produced coffee and cocoa volumes for the near
future
Table 2: Buyers commitments to buy from sustainable sources (Source TCC Coffee, Cocoa
Barometer 2012)
10
www.giz.de/de/downloads/giz2012-en-forum-sustainable-cocoa-factsheet.pdf
6

Both commodity markets are highly concentrated. Only a handful of companies dominate
the import of coffee and cocoa beans (and/or cocoa derivates) and the concentration
process is still going on. Very recently the world’s leading buyer of cocoa beans Barry
Callebaut11 has bought the largest cocoa supplier in Asia Petra Foods.
The leading import and trading groups are important channels to develop the
European/EFTA markets. However, in particular in the confectionary industry many SME’s
companies are actively looking for alternatives to the leading confectionary brands offered
in the normal retail trade. Therefore, they are a key target group for Peruvian exporters of
specialty cocoa. Those smaller companies have a specific interest in high-quality products,
sustainability and “stories around the product”. The latter is used for marketing and
promotion.12
Opportunities for Peruvian coffee exporters
Coffee is by far the most important product in terms of export values within the traditional
agricultural export sector. Export values have increased from 887 million US-$ in 2010 to
over 1.5 billion in 201113. Peru was in 2011 the world´s sixth largest coffee exporter with a
total export volume of 4.7 Mio bags (60 kg), which represent US$ 1.581 Mio. This has been
a growth of 78% in comparison to the year 2010 due to world market price increase. Export
of specialty coffee was only 1 Mio bags. Nevertheless, Peru is the world´s leading exporter
of organic coffee. In 2011 0.5 Mio bags of organic certified green coffee and 0.1 Mio bags
of Rainforest Alliance certified green coffee were exported.
About 75 percent of Peruvian coffee - which is exclusively Arabica coffee - is grown

throughout the eastern slopes of the Andes in more than 405.000 ha between 1.000 and
1.800 meters above sea level and provides therefore the best pre-conditions for a high
quality premium coffee with a good aroma and flavor. In 2010, special Peruvian coffee was
chosen among the best at the SCAA conference14. Due to its long lasting history in growing
coffee under diverse shade together with other crops and the tradition to be organized in
smallholder producer groups, makes Peru an excellent origin for specialty coffee in the
sense of meeting high quality standards, but also complying easily with different
certification or verification schemes, such as organic, Fair Trade, UTZ certified, Rainforest
Alliance, Bird friendly coffee or 4C.
European export destinations of organic coffee are as follows:
Germany 28 %
Belgium 15 %
Sweden 9%
UK 7%
Denmark 1%
Norway 1%
11
Barry Callebaut has partner organisations in important supplying countries like BioPartenaire in Ivory Coast
(UTZ certified and Rainforest Alliance certified). In Peru Barry Callebaut has no own purchase company but
cooperates with the Swiss Pronatec in order to supply cocoa for „Alto El Sol chocolate confectionary line“.
12
For more details on EU trends in coffee and cocoa markets please refer also to the presentation of the
th
validation workshop, 17 April in Lima.
13
The increase of global coffee market prices is the main reason for this increase and not an increase in
volumes. Prices declined from 2011 to 2012 by about 70 US-$ per bag. In 2010 about 5 million coffee bags (QQ
or 46kg) have been exported. In 2011 6.8 million coffee bags have been harvested due to the high price
situation.
14
USDA Gain Report 2010: Peruvian Coffee Sector
7

Increasing demand in Europe for specialty coffee provides Peru a great economic
opportunity by shifting from the conventional commodity market to the niche market and
pull out from this niche market by further expanding the production and supply of specialty
coffee. This would improve coffee farmers’ incomes and living conditions.
Unlike in Europe the export of finished coffee products to countries like China is a realistic
option for Peruvian exporters. In high-end supermarkets for example in Beijing and
Shanghai single origin coffees are offered already but imported from roasters in Europe.
Opportunities for Peruvian cocoa exporters
From the 29.4 Mio inhabitants it is estimated that more than 33´000 Peruvian families
cultivate cocoa and more than 150´000 are indirectly involved in cocoa production.
Nowadays, close to 90% of cocoa production is exported; in 2011 64% of the total
production was exported as beans, 18% was exported as butter and 9% as powder. Cocoa
production and export increased dramatically in the last ten years from 8.5 million USD in
2001 to 118 million USD in 2011. Export volumes between 2007 and 2012 tripled from
13´000 tons to more than 50´000 tons and cocoa production in Peru grew around 16% only
in 2012. This growth was due to successful cooperation between smallholder producer
groups, national and international development agencies and the private cocoa business.
In 2011 43% of the exported cocoa was produced by farmer organizations and companies
which received support from USAID PERU PDA (Programa Desarollo Alternativa). More
than 80% of the total of the Peruvian cocoa export volume was sent to the following
European countries (2011):
Country Participation FOB USD

Belgium 22 % 13´779´190
Italy 16 % 9´890´580
Netherlands 16 % 9´837´220
Switzerland 8% 4´894´910
Germany 3% 2´033´080
Spain 1% 646´400
Shifting consumer trends in Europe towards more sustainable and certified chocolate
products and dark chocolates with denomination of origin built a perfect match with the
increasing production interests in Peru and opens for Peruvian cocoa producer groups and
exporters a great opportunity to step into the gap. The cocoa tradition and culture with its
origin in the rain forest at the source of the Amazon and Orinoco Rivers as well as cocoa
tree genotypes with a special flavor and aroma profile provides unique selling propositions.
Unlike in Europe the export of finished cocoa (or chocolate) products to countries like
China is a realistic option for Peruvian exporters. In high-end supermarkets for example in
Beijing and Shanghai a large variety of European chocolates are offered already.
For cocoa and coffee European importers see the following competitive advantages for
Peruvian coffee exporters:
 Experiences in certification: Peru has since decades experiences with the

production of certified coffee and more recently with certified cocoa for niche
markets and has gained a strong reputation as the world´s leading organic coffee

and as the second largest organic cocoa exporter. Peru is the second largest
exporter of Fair Trade certified coffee. In addition, other certification and verification
schemes like UTZ certified, Rainforest Alliance, 4C and UEBT as well as related
actors (accredited certification bodies) are present in Peru.
 Consistent quality and exquisite aroma profiles: Quality of specialty coffee and
cocoa beans is good and the taste and aroma profiles are special. For example
cocoa beans from Ecuador, which have a similar quality and taste profile, are much
more expensive, while beans from the Dominican Republic are competitive in price
but are not reaching the same exquisite flavor.
 Solid smallholder farmer organizations: 80% of the coffee farmers and more
than 95% of the cocoa farmers are cultivating their products on small scale farms of
3 hectares or less. About 25% of the farmers are organized in cooperatives
structures, which are the base of Fair Trade certification and others. The higher
prices in combination with support from development agencies have contributed a
lot to the supply chain development.
 Strong and professional exporters with social and ecological responsibility: In

the search of certified coffee and cocoa, Peruvian exporters started to build up
strong relationships with small scale farmers who were not organized in
cooperatives in order to group them into associations and undergo the certification
process. After organic certification, UTZ certified, Rainforest Alliance and 4C
certification are realized. Within this process these exporters are providing services
such as training, planting material, loans, tools, administration and accounting
support, etc.; to their farmers which can be compared with a good functioning
cooperative and most of the times are officially registered as associations.
 High degree of professionalism on exporter level: The competitive advantage of

Peruvian exporters lies in their ability to react quickly to new market developments,
whether it is a cooperative or a private exporter. They are already professional
enough to provide the market with a good product in consistent quality and
produced in a sustainable way.
 Increasing interest in specialty coffee and cocoa in European markets: high

product quality in combination with a credible sustainability certification meets the
interest of European processors to develop single origin, high-quality and
sustainable products in order to differentiate in a stagnating European market. The
given situation implies also that companies European/EFTA countries have a higher
interest in developing sustainable supply chain projects as part of their marketing
story15.
 Good perspectives for co-operation: Peruvian stakeholder organizations as well

as international donor organizations and Non-Governmental Organizations are
engaged in the development of smallholder supply chains. This offers a good
potential to develop export market oriented co-operation projects between CBI/ECP
participants, international donor and Peruvian stakeholder organizations.
15
Please, see example of wild cocoa from the German processor Hachez http://www.hachez.de/von-den-
besten-cacaobohnen-zu-den-feinsten-chocoladen/news/artikel/artikel/capitalwildes-verlangen.html
9

2.2. Domestic market trends in Peru
The domestic market for coffee and cocoa will not compete for raw material with export
markets in short to midterm. For example coffee consumption in Peru is low with 500
grams per capita in 2011. The hot drink market is still dominated by the traditional and most
consumed hot drink called “Emoliente”16. However, in the larger cities coffee consumption
is growing rapidly, but on a low level (per capita consumption of coffee in Lima is > 1 kg
already).
In the context of the CBI sector interventions it is also interesting to see that more finished
cocoa and coffee products are emerging in the domestic market. With a growing domestic
market not only the competence in processing of finished products will increase but also
the number of companies involved.
Different events and activities have been organized throughout the year by relevant sector
players, such as the National Coffee Association (Junta Nacional del Café, JNC) and
international donor organizations such as USAID, in order to increase domestic coffee
demand In October 2011, for the first time, the fair EXPOCAFE was organized in Lima
concluding in a final national competition of high quality specialty coffees.
The national consumption of cocoa is also still very low in Peru with an average of 0.2 kg
per person. Several activities are on-going to promote the local consumption: such as the
annual event “Salon del cacao y chocolate”, held for the third time in 2012 in Lima and
organized in cooperation with the well-known event in Paris. In addition, in 2012, cocoa
producers with finished products, for the 1st time, were included in the annual public food
fair Mistura.
Furthermore, cocoa production is strongly supported by national and international donor

organizations to produce high quality raw material and finished products, especially as
cocoa serves as a good example to overcome the illegal coca plantations and is excellent
to fight rural poverty; the so-called “Milagro de San Martín”. Such an example is the
recently formed company “Consorcio Cacao Amazonico SAC” that groups together 4
associations from the region San Martín and has developed 4 high quality chocolates with
financial support and technical assistance through Agriterra; the chocolate is to be
launched this year 2013 in the national market aiming at export in the future.
16
Emoliente is a typical Peruvian hot drink made out of a number of plant ingredients: toasted barley, flax
seeds, dried horse tail herb, dried grass, and plantain leaf. Other herbs are added like for example anisseed,
boldo, lemon verbena, lemongrass, and cat’s claw.
10

2.3. EU import requirements
In the following some main standards and legal import requirements have been mentioned
but without following the intention to give a full picture on all relevant import requirements.
Detailed information on specific requirements for the European Union but also for some
EFTA countries are presented on the CBI website17. In addition some business risks
(Ochratoxin A and Cadmium level in chocolate products) have been highlighted which CBI
and partner organizations in Peru should take into consideration. First of all when working
with export companies but also as potential field of action for the BSOs related to the coffee
and/or cocoa sector.
EU does not levy any import duties on green coffee imports nor on cocoa beans.
Value added tax (VAT) is levied on both roasted and soluble coffee sales by most
European countries with the percentage ranging from 3% in Luxemburg to 25% in Denmark
and Hungary (paid by importer).
Other cocoa products enter the EU under the following tariff codes:
- beans (and nibs, raw or roasted): 1801 0000
(free of duty)
- mass, not defatted 1803 1000 and mass, defatted 1803 2000
(6.1% reduced import duty)
- cocoa butter 1804 000
- cocoa powder 1805 0000
Organic coffee and cocoa (Regulation (EC) No 834/2007)

For the import of organic coffee and cocoa beans and derivates into European and EFTA
countries certain conditions have to be met. No coffee or cocoa product may be brought to
the marketplace and labelled organic unless it is proved to confirm to the regulations. That
means that coffee and cocoa products can be marketed as organic only when they are
certified as such by an accredited certification body, based on regular inspection of all
stages of production, processing, transporting and processing of the coffee or cocoa. In the
European Union, the market for certified organic food is regulated by Council Regulation
(EC) No. 834/2007 and subsequent amendments thereto18.
Peruvian exporters and BSOs count on long year experiences in organic product
certification. No principle bottleneck is seen by the authors in regard to organic certification.
Pesticides (Regulation (EC) No 396/2005)

On 2 September 2008 European Union Regulation (EC) No. 396/2005 came into force for a
large number of commodities, including green coffee and cocoa beans. (Visit www.eur-
lex.europa.eu for further information).
A maximum residue level (MRLs) for pesticides is provided on

http://ec.europa.eu/sanco_pesticides/public/index.cfm?event=commodity.resultat
Discussion on cadmium maximum level for chocolates products within the EU
(Regulation (EC) No 1881/2006)
17
http://www.cbi.eu/marketintel_platform/Coffee-Tea-and-Cocoa-/177417
18
Visit www.eur-lex.europa.eu
11

Chocolate is among the foodstuffs in which the highest cadmium concentrations were
detected. Maximum cadmium residue levels exist for a number of foods, but still there are
none set for chocolate. The EU plans to amend Regulation (EC) No 1881/2006 in order to
set a maximum cadmium residue level in chocolate, out of concerns that the heavy metal
causes kidney failure and increases the risk of cancer.
Cadmium in chocolate is linked to the total dry cocoa solids in cocoa beans. Cocoa beans
naturally take cadmium up from the soil, therefore cadmium levels are different in cocoa
beans grown in different geographic areas due to different cadmium levels in the soil. Soil
pH level influences cadmium mobility in soil solutions, which has a direct impact on the
uptake by the plants. The higher the pH level in the soil solution is, the more cadmium is
fixed and less will be taken up by the plant. Cadmium up-take by the cocoa plant varies
also according to the cocoa genotypes.
Peru is one of the countries where cadmium is naturally present in high quantities in the
soil of cocoa plantations, and therefore, it can be detected in Peruvian cocoa beans and in
chocolate products made from these beans. From interviews with different chocolate
manufacturers it became clear that cadmium levels even from the same producer group
vary a lot, so that a correlation between different geographical areas is difficult to
determine.
At the moment different cadmium MRLs are in discussion amongst different stakeholder
groups, taking into account the different impacts of various cocoa products, for example:
dark chocolate, with a high cocoa content, tends to be consumed in small quantities by
adults, whereas children prefer milk chocolate with a low cocoa content, but is consumed in
high quantities. While the German Institute for Risk Assessment (Bundesinstitut für
Risikobewertung) suggests for milk chocolate a maximum residue level of 0.1 mg/kg
cadmium and for dark chocolate 0.3 mg/kg, the Association of Chocolate, Biscuit and
Confectionery Industries of the European Union (CAOBISCO) suggested in their recent
statement to use levels of 0.6 and 0.8 mg/kg respectively.
Cadmium content in chocolate made from single origin Peruvian cocoa beans may range
above the suggested mentioned levels, and therefore, threatens their marketability towards
the EU at the moment the MRLs amendment of the existing EU regulation will come into
force.
How seriously this problem is taken into consideration by the European chocolate industry
depends on what role Peruvian cocoa plays in their chocolate production process. The
cadmium content in chocolate products, using Peruvian cocoa beans in a blend with other
low cadmium contaminated beans, will range far below the above mentioned MRLs, and
thus, the manufacturers of these products do not see any problems nor need of any
counteractions when the amendment will come into effect. Whereas, European chocolate
producers who are promoting premium, dark or even single origin Peruvian chocolates will
have to ensure that the cadmium level is below the set MRL in order to fulfill the legal
requirements. These actions will cause considerable additional costs because it will require
regular tests to ensure the fulfillment of the cadmium MRLs and the implementation of
necessary counteractions in case MRLs are exceeded; which may lead to costs such as
the destruction of whole container loads or demanding tests before shipment, thus, even
increasing the production costs of Peruvian exporters.
This circumstance may have the consequence that premium chocolate manufacturer are
looking for alternative beans with less risk and cost implications. This situation puts in
12

danger the positive development of the Peruvian cocoa sector seeking for added value
marketing opportunities for the specialty cocoa market. As a counteraction to the cadmium
MRLs amendment and the on-going discussion in the EU, the countries Cameroon,
Colombia, Ecuador, Ghana, Mexico, Nicaragua and Peru have started a campaign, arguing
that the amendment will threaten their exports and the livelihoods of small scale cocoa
farmers.
The EU is listening to these concerns, particularly regarding the impact on small scale
farmers, and is planning a transition period for producers to adjust to the new amendment.
A possible amendment of the existing EU regulation, at the earliest, could be adopted by
the end of 2013.
Ochratoxin A (OTA)
In recent years mould in coffee has increasingly become associated with concerns over
the presence in food and beverages of OTA. The toxicological status of OTA has not yet
been settled but most major importing countries are nevertheless paying increasing
attention to its occurrence in coffee and other agricultural products, and are requiring
preventative measures.
In the European Union the following maximum limits apply to finished coffee products,
effective 1 March 2007: roasted coffee – 5 ppb (parts per billion); soluble coffee – 10 ppb.
No limit has been set for green coffee but green coffee remains under review; and there is
a provision for annual reporting of the occurrence of OTA and prevention measures.
In the meantime, a number of individual European countries (Czech Republic, Finland,

Greece, Hungary, Italy, Portugal, Spain and Switzerland) have their own legislation or
customs regulations in place that also set (varying) maximum limits on green coffee. Italy
has limits on finished coffee products while in some countries (e.g. the Netherlands)
internal instructions for food safety inspectors are in place. Germany, Europe’s largest
importer, applies the EU limits.
Codex Alimentarius
FAO/Codex Alimentarius19 provides following standards for governmental and private
standard developing organisations as well as for the definition of precise trade
specifications covering coffee and cocoa:
i. CAC/RCP 69-2009: Code of practices for the prevention and reduction of Ochratoxin
A contamination in coffee
ii. CAC/RCP 67-2009: Code of practice for the reduction of acrylamide in foods
iii. CODEX STAN 141-1983 Standard for cocoa mass (cocoa/chocolate liquor) and
Cocoa Cake
iv. CODEX STAN 105-1981 Standard for cocoa powders (cocoas) and dry mixtures of
cocoa and sugars
v. CODEX STAN 86-1981 Standard for cocoa butter
vi. CODEX STAN 87-1981 Standard for chocolate
19
http://www.codexalimentarius.org/standards/list-of-standards/en/
13

3. Coffee & cacao value chain analysis
3.1. Governance of the coffee and cocoa sector

The Peruvian government (Ministry of Agriculture) has supported the coffee sector in the
last years significantly. In particular the governmental organisation DEVIDA (Comisión
Nacional para el Desarrollo y Vida sin Drogas)20 has coordinated many coffee related
projects co-financed by international donor organizations.
Nearly 100% of the Peruvian coffee production is in hand of smallholders who are
organized in smallholder producer groups. Peruvian coffee smallholders are represented
by the National Coffee Board (Junta Nacional de Café)21. Private sector companies
(producers, processors and exporters) are organized in the Camara Peruana de Café y
Cacao22.
Currently, the National Coffee Board conducts an assessment to create a greater economic
and environmental sustainability of coffee production in Peru. This project has started and
is financed by the Inter-American Development Bank23.
Like for coffee cocoa production falls also under the responsibility of the Ministry for
Agriculture and likewise DEVIDA is coordinating cocoa related projects in the context of
anti-drug programmes. Smallholder producers and/or cocoa smallholder producer groups
are organized in APPCACAO24.
Within the country the following laws are relevant for coffee and cocoa marketing:
 Decreto Legislative No. 1062, Ley de Inocuidad de los Alimentos

 Decreto Supremo No. 034-2008-AG, Reglamento de Inocuidad Agroalimentaria
 Decreto Legislative No. 1062, Ley de Inocuidad de los Alimentos
 Decreto Supremo No. 034-2008-AG, Reglamento de Inocuidad Agroalimentaria
At INDECOPI (Instituto Nacional e Defensa de la Competencia y de la Proteccion de la

Propiedad Intellectual) the following guidelines and standards are registered as guidance in
order to comply with the increasing quality demand of the international market:
 Normas Técnicas Peruanas, ICS 67.140.20 Café y sustitutios del café

 Normas Técnicas Peruana ICS 67.140.30 Cacao
 Café Verde, NTP 209.027
 Cafés Especiales, NTP 209.311
 Café. Buena prácticas para prevenir la formacion de mohos, NTP 209.312
20
www.devida.gob.pe
21
www.juntadelcafe.org.pe
22
www.camcafeperu.com
23
http://www.iadb.org/en/projects/project-description-title,1303.html?id=PE-M1082
24
www.appcacao.org
14

3.2. Status-Quo production and trends
Coffee came to Peru in the 1700s. Peru´s coffee exports accounted three percent of all
merchandise in 2011 which was 1´581 million USD and 0.88 percent of the GDP (Gross
Domestric Product). Coffee production has reached over 7 million bags of green coffee in
2011 due the high market price in 2011 but declined to 5.5 million bags in 2012. The latter
decline can be described by a number of factors: lower world market prices, heavy rainfall
during the harvest season and a lack of workers during the harvest time as well as
unproductive and old coffee plantations. Harvest 2013 has been forecasted with more than
7 million bags. But the severe outbreak of coffee rust (Hemileia vastatrix) on about 130.000
ha from over 400.000 ha of coffee plantations in particular in San Martin, Junin, Cajamarca
and Amazonas will lead to a lower coffee harvest of about 6 million bags.
There are more than 165.000 coffee grower families in Peru, most of them are indigenous
to these landscapes and speak Spanish as a second language. 80 percent of these
families live on two or three hectares, hours away from the comforts of electricity and
running water. With no personal warehouse space and only unreliable, expensive collective
storage in town, farmers generally have no option but to accept the purchase price offered
to them from the next buyer. The more remote the farms, the more times the coffees are
mixed and traded before they arrive at the coast. Once there, the coffee is dry-milled and
prepared for export. This unorganized trading system and isolation has caused farmers to
become disconnected from markets.
Graph 1: Coffee growing regions in Peru
An estimated 15 – 25 percent of Peru's smallholder farmers now belong to cooperative

organizations. These cooperatives have linked with international Fair Trade and organic
networks to stimulate their growth. Working in partnership with different private industry
partners, development agencies and the Fair Trade and organic movement, Peruvian
15

smallholder producer groups quickly became the second largest suppliers of Fair Trade
certified coffee after Mexico and the largest organic producers. The higher prices offered
through these certified and specialty markets have strengthened cooperatives and offered
at least some price premiums to farmers. The more direct market access has also helped
four Fair Trade certified cooperatives establish themselves among Peru's largest coffee
and cocoa exporters.
Although, only 1 million bags have been sold as specialty coffee in 2011, which is 21% of
the total volume, the production of specialty coffee is much higher. In 2010 organic coffee
production was already more than 1.5 million bags, while export volumes were only 1 Mio
bags. The fact, that 75% of Peruvian coffee is grown in 1.000 or more meters above sea
level in a shaded environment and 80% from smallholder farmers, shows the potential to
produce significant volumes of different kinds of specialty coffee (high grown, Fair Trade,
UTZ, RA, 4C, bird friendly certified). The different coffees can be characterized by their
different growing regions as follows:
Region Areas Altitude Cup characteristic Of total

production
area
Northern Piura 900 - Full body, medium acidity, 2%
(49%) 1´200m strong aroma, sweet flavour
Cajamarca 1´000 - Mild body, medium acidity, 18%
1´800m good aroma, sweet flavour
Amazonas 900 – Medium body, good acidity, 13%
1´800m strong aroma and flavour
San Martin 800 - Very good body, medium 16%
1´500m acidity, good aroma, flavour
mild and sweet
Central Pasco 1´000 - Medium body, high acidity, 2%
(28%) 1´800m mild aroma, good flavour
Huanuco 900 - Medium body, good acidity, 1%
1´500m mild aroma, good flavour
Junin- 900 - Very good body, medium 25%
Chanchamayo 1´500m acidity, good aroma, delicious
flavour
Junin-Satipo 1´000 - Good body, low acidity,
1´400m medium aroma, good flavour
Southern Cuzco 900 - Light body, medium acidity, 17%
(22%) 1´600m aroma and flavour very good
Puno 1´000 - Very good body, high acidity, 3%
1´650m aroma and flavour good
Ayacucho 800 – Light body, medium acidity, 2%
1´600m aroma good, characteristic
flavour
The northern region is the biggest, but also the newest coffee growing region with the
highest number of uneducated coffee producers and traders. The central region has the
longest tradition in using sustainable coffee producing techniques, such as shade, organic
fertilizer and weed control. Most famous coffee farms are in Villa Rica and La Merced.
Peak harvest is a few months apart, which gives this region a selling advantage in the
coffee market. In the southern region, near Cuzco a coffee with the most consistently
balanced coffee is grown, with fruity acidity.
16

Cocoa production and export increased dramatically in the last ten years from 8.5 million
USD in 2001 to 118 million USD in 2011. Export volumes increased significantly from
13´000 tons to more than 56´000 tons between 2007 and 2011. Export volumes for
specialty chocolate production are with 13% lower than in specialty coffee, but with a
potential to grow.
In 2011 56´600 tons of cocoa have been produced by 33´000 cocoa farmers, most of them
small holder farmers. The increase of Peruvian cacao production in the last years is due to
several reasons. Cocoa production was promoted very intensively on national and
international level as alternative crop to coca. Furthermore, cocoa is seen by the rural
population as an attractive cash crop with promising income perspectives for young people
and adults interested in agriculture in the tropical zones of Peru.
Falling production in the world’s four largest cacao growing nations, as well as growing
expectations of consumer countries for Andean cacao have opened Peruvian cacao a
window of opportunity that Peru is efficiently tapping. Peruvian government officials
supported by international cooperation agencies like SECO from Switzerland, GIZ from
Germany or USAID as well as producer organizations represented by APPCACAO have
launched a vast program to standardize Peruvian cacao by identifying quality beans from
various cacao growing areas, achieve organic or other sustainable certification, such as
UTZ Certified, Rainforest Alliance and Fair Trade, and to homogenize and improve
production processes, in particular in the post-harvest stage when the fruit’s aroma and
taste develops. The country is now the world´s second largest producer of organic cocoa.
Therefore, Peru has in the last years quickly built a global reputation for producing
traditionally cultivated, shade grown, high quality coffee and cocoa beans. Many
development aid programs are currently ending their support and therefore withdrawing
financial and human resources from cooperatives and other key players and institutions of
the coffee and cocoa industry.
If sustainable structures are in place a slow run down of the aid programs will cause no
negative impact. In cases, where sustainable structures are lacking, a weakening or even
breakdown of these structures could happen. This instance will put in danger some
achievements gained in the last decades. The negative impact would then hit worst the
most vulnerable actors of the supply chain, which would be smallholder coffee and cocoa
farmers.
CBI and co-operating BSOs recommended to select the most dynamic and well organized
producer organizations in order to avoid severe setbacks. Thus CBI can contribute to
consolidate producer organizations (export) business formerly supported by value chain
developing donor organizations.
Cocoa production has a long lasting history in Peru. For Peru the main local and native
species are Porcelana and Chuncho. These two species belong to the generic group
Forastero Alto Amazonas, Raza nativa Piura and Cusco. Criollo trees can only be found in
very scattered patterns. The cross between Criollo and Forastero is called Trinitario.
60% of the cocoa producing area is planted with the traditional varieties which include the
national cocoa Porcelana in the North and Chuncho in the south east of Amazonia. The
exquisite Peruvian aromatic cocoa is of high quality resulting from greater fat content. 37%
17

is planted with the variety CCN-5125 and the remaining 3% is planted with Trinitario clones
such as ICS-1 or Forastero clones such as IMC-67. Development aid programs focused in
the San Martin region with the cultivation of CCN-51 and production rose in the last ten
years 11 times.
Graph 2: Cocoa production regions in Peru
Region Production Area in ha Production Yield % of

areas (2010) in tons (2010) kg/ha total area
Northern Piura 265 189 713 0.4 %
(49%) Cajamarca 1.590 994 625 2.2 %
Amazonas 6.318 2.749 435 6.2 %
San Martin 24.623 18.764 762 42.3 %
Lambayeque 32 27 844 0.1 %
Loreto 178 128 717 0.3 %
La Libertad 45 52 1.160 0.1 %
Tumbes 218 311 1.428 0.7 %
Central Pasco 262 253 966 0.6 %
(28%) Huanuco 3.837 1.840 480 4.1 %
Ucayali 1.134 1.032 910 2.3 %
Junin 8.555 4.440 519 10.0 %
Southern Cuzco 36.408 7.192 198 16.2 %
(22%) Puno 89 67 753 0.2 %
Madre de Dios 55 37 674 0,1 %
Ayacucho 8.851 6.263 708 14.1 %
TOTAL 16 regions 92´460 44´338
25
In the United States effort on the war against drugs, the U.S. Agency for International Development (USAID)
introduced a high-yielding but acidic CCN-51 Trinitario cocoa hybrid to Peruvian farmers in 2002 as an
alternative to planting coca. The pure native cocoa has lower yields and is more susceptible to disease than
CCN-51.
18

3.3. Value Chain Analysis
The Peruvian coffee and cocoa sector are facing similar bottlenecks. The major bottlenecks
of the Value Chains in question are presented in graph 1.
Low productivity and profitability in existing coffee and cocoa farms

In some regions old coffee/cocoa plants (about 20 years old) or unproductive trees in
younger farms are not replaced at time with good planting material and causing crop
shortfall. Unsustainable production methods and inadequate use of pesticides and fertilizer,
monoculture and lack of farm management are causing erosion and soil depletion which
also result in yield depressions. Especially, new established cocoa farms are set up with
high productive trees in monoculture and put into risk farm sustainability.
To improve productivity and profitability in existing coffee and cocoa farms requires a
dedicated and intensive training in different training blocks where farmers and farmers’
trainers have the opportunity to learn and will be coached and professionally accompanied
when they implement the lessons learned in their farms. To provide farmers with good
planting material, nurseries have to be set up and seeds of good quality have to be
provided. For all these different activities huge investment and the willingness to cooperate
amongst different NGOs and sector organization is required.
If this bottleneck will not be removed farms remain unprofitable and farmers will not be
motivated to invest in their farms and young people will be not attracted. If productivity
remains low, volume increase can only be realized the expansion of cultivation area; in the
worst case at the expense of primary forests. The success to remove this bottleneck
depends on the ability of the different sector players to work closely together and the
provision of funds in order to finance the above mentioned activities.
Low product quality

Harvest of the beans not in the optimal moment of their ripeness and inadequate post-
harvest processing such as insufficient fermentation and drying methods are reducing
coffee/cocoa bean quality drastically.
Farmer and farmer group training in best harvest, post-harvest (fermentation & drying) and
storage practices in order to achieve maximum quality results for specialty coffee and
cocoa is required. Investments in infrastructure for de-pulping (for coffee) and for an
optimal fermentation and drying process of coffee and cocoa beans is indispensable for a
good product quality. Finance strategies depend on how the market rewards the better
quality achieved. In the optimal case, farmers would get access to credits for investments
in infrastructure.
As coffee and cocoa buyers develop higher quality standards for specialty coffee- such as
SCAA points, and for coffee and cocoa good agricultural practices, good processing
practices, HACCP, – coffee and cocoa producers will need regular training to be able to
comply in the future with the international demand.
If this bottleneck would not be removed the market will not require higher volumes of
Peruvian specialty coffee and good quality cocoa and/or prices will be less attractive. The
success to remove this bottleneck depends on the success of training and awareness
building for coffee and cocoa quality, on the availability of funds for investments, and on the
market to reward better quality.
19

Missing capacity building
The problems of low farm productivity and profitability, weak farmer organizations,
uneducated or not professional farmers persist in regions where national research activities
and extension services for farmer, technicians and cooperative staff are missing.
Increase in volumes and product quality goes hand in hand with a professional promotion
and positioning of Peruvian specialty coffee and cocoa towards the international market.
Only if interested customers are well informed and convinced that the product they are
buying is of highest quality and produced in an economically sound and socially
responsible way, they are willing to support, invest or sign long term contracts directly with
cooperatives and smallholder organizations.
If the bottleneck will not be removed the demand for Peruvian specialty coffee and cocoa is
not growing at its maximum speed and other countries, such as Colombia, Guatemala and
Bolivia for coffee and such as Dominican Republic and Ecuador for cocoa are gaining on
market share. The success to remove this bottleneck depends on the professionalism of
the responsible promoting organization and the money provided for campaigns.
Lack of professionalism in cooperatives and farmer organizations

Weak farmer organization or even the absence of any and missing leadership are causing
inefficiency and economic failure and make small farmers and their farmer groups
vulnerable and less competitive. Still a huge number of farmers are not organized and
therefore have no access to capacity building and markets.
Training of cooperative management staff and the promotion of setting up new farmer
organizations is crucial. Only professional cooperatives and farmer organizations are able
to attract individual farmers and provide them with a service which optimizes coffee and
cocoa production, processing, certification and marketing and enhance rural development
and increase long term farmers’ income. It is necessary to conduct training in organization
management, bookkeeping and administration topics in cooperatives with the responsible
staff. New structures and initiatives where individual farmers are grouped and organized
have to be supported. These smallholder farmer groups are also in need to establish more
contacts with international buyers to secure new clients for the increase in their harvest and
to reduce their dependency from only few buyers.
If the bottleneck would not be removed, weak farmer organizations are subject of
inefficiency and vulnerability. This would weaken the whole Peruvian coffee and cocoa
sector. The success to remove this bottleneck depends on the support of development
agencies and the private sector.
Missing traceability hamper certification and denomination of origin

Too many intermediaries are causing a complex and in-transparent product flow and
additional costs. Documentation is difficult.
Complex product flow systems are not traceable and certification of the process is not
possible or very difficult. The better farmers are organized the easier supply chain
processes can be traced back and documented and serve for any kind of certification or
denomination of single origin coffees or cocoa. This helps to increase volumes of specialty
20

coffee and certified cocoa26. If the bottleneck will not be removed, certification and
denomination of origin of specialty coffee and certified cocoa in order to increase volumes
will be complicated and costly. The success to remove this bottleneck depends on the one
hand on the private sector to support certification and denomination of origin initiatives and
on the other had on the market that should reward with higher prices or premiums for single
origin or certified cocoa and coffees.
Complex commercialization channels of coffee and cocoa

Too many intermediaries are reducing negotiation power of farmers and are responsible for
low farm gate prices.
Individual farmers in remote areas depend a lot on intermediaries. To cluster and organize
farmers geographically and provide them with services, like training, post-harvest
infrastructure, storage facilities and logistics would strengthen these farmers and would
make them less vulnerable.
If the bottleneck would not be removed a lot of smallholder farmers will remain in a less
powerful position which hamper their development and hence the development of the
whole Peruvian coffee and cocoa sector. The success to remove this bottleneck depends
on how farmers can be clustered and can develop better business and management skills.
This activity will require especially financial and operational support of the private industry,
development agencies and other sector players.
Lack of investment
Missing of attractive credit lines for farmer groups and access to micro credits for farmers
hamper investments in training, new plantations, roads and infrastructure. The principle
bottleneck is that small farmers very often have no land titles. Without land titling banks are
not granting loans and small farmers rely on informal lenders and/or coffee buyers.
Apart of capacity building, investments in infrastructure, roads, farming inputs and tools are
necessary in order to boost the Peruvian specialty coffee and cocoa sector. Some of the
existing smallholder farmer groups already receive support by national and/or international
donor organization and/or are supported by the international buyer or finance institutions
such as Sustainability International, Oikocredit, Rabobank, to finance their internal
production and harvest collection.
If this bottleneck would not be removed, development and improvement processes will be
hampered. This delay causes less professionalism and competitiveness in the international
market. The success to remove this bottleneck depends on the ability of value chain
influencers to strongly promote and financial support the sector and make sure that finance
and micro credit institutes are finding a perfect and trustful business environment for their
investments.
Poor national and international promotion for specialty coffee and sustainable cocoa
Although various national events in the coffee and cocoa sector have been realized in the
last years, more should be done, especially on international level. Visit of international fairs
should be supported.
Increase in volumes and product quality goes hand in hand with a professional promotion
and positioning of Peruvian specialty coffee and cocoa towards the international market.
Only if interested customers are well informed and convinced that the product they are
26
Sustainability schemes for cocoa such as Rainforest Alliance and Organic require full traceability. Other
schemes such as UTZ Certified allow for mixing of certified and non-certified products which reduces the need
to set up traceability systems.
21

buying is of highest quality and produced in an economically sound and socially
responsible way, they are willing to support, invest or sign long term contracts directly with
cooperatives and exporters.
If the bottleneck would not be removed the demand for Peruvian specialty coffee and
cocoa will not grow at its maximum speed and other countries, such as Colombia,
Guatemala and Bolivia for coffee and such as Dominican Republic and Ecuador for cocoa
are gaining market share. The success to remove this bottleneck depends on the
professionalism of the responsible promoting organization and the money provided for
campaigns.
Missing preparative actions regarding future maximum levels for cadmium in

chocolate products
No or not sufficient preliminary action is taken in order to reduce the negative marketing
impact of Peruvian cocoa beans at the moment when maximum levels for cadmium will be
set by the EU commission.
In the moment the amendment of the EU regulation for maximum levels on cadmium in
chocolate products comes in force the country should have a strategy in place how to
tackle with this issue. Due to the fact that cadmium level in cocoa beans depends on
different factors, such as the pH level of the soil solution, the cocoa plant genotypes and
the cocoa growing region, a detailed soil map should be elaborated in order to determine
and assess the risk of high cadmium contents in the beans.
In general, farmers should learn how to increase pH levels in their cocoa plantations in a
sustainable way, in order to hamper cadmium uptake by the plants, e.g. by increasing
biodiversity in the production system which leads to increased levels of biomass and
humus. Some farmers have already started to apply calcium carbonate fertilizer to raise the
pH. Because of the additional costs and other negative impacts on the soil, the
sustainability of this method is questionable and should be subject of further investigations.
It should be realized to better understand how cadmium levels could be sustainably
reduced in Peruvian cocoa beans.
If this bottleneck would not be removed, the country runs into the risk that high quality and
hence premium cocoa products from Peru which would be used for the single origin or dark
chocolate production will lose their market and will be neglected by the European
customers. The success to remove this bottleneck depends not only on the success of the
realization of the above mentioned activities but also on further investigation results on how
cadmium can be reduced in Peruvian cocoa beans.
Competitors for Peruvian coffee and cocoa exporters

Export volumes of Peruvian specialty coffee are steadily growing. Peruvian specialty
coffee is often used in premium blends and less used as single origin coffee. Quality of
Peruvian specialty coffee is considered from the market as ‘very good’ to ‘good’ with a
consistent quality. Nevertheless, the country has not yet gained the same reputation for
premium single origin coffees like other countries, e.g. Kenya, Guatemala, Colombia or
Costa Rica, but is on its way.
The majority of the Peruvian cocoa beans are used in conventional chocolate mass
production where they are replacing West African beans when they are cheaper and
therefore economically more attractive for the chocolate industry. These beans will be
processed to liquor or butter and powder and will then be mixed together with beans from
other provenances for the production of industrial chocolate. Rather low quality beans are
processed in Peru into butter and liquor and are then exported because the cheapest
22

beans will make the deal. Peruvian cocoa beans which are foreseen for industry chocolate
production are in constant competition with West African beans with the risk to lose the
gained market again.
However, Peru has developed a strong position in the organic market. In the coffee market
Peru is the largest supplier of organic green coffee. In 2010 a turnover of more than 100
million US-$ has been achieved. In the cocoa market Peru is the second biggest supplier of
organic cocoa beans. In 2010 a turnover of more than 27 million US-$ has been achieved.
In addition Peru is a larger supplier of UTZ certified cocoa beans (about 16’ – 19’000 tons
from the total cocoa beans production of 56’000 tons in 2011).
Peru was able to position itself in the world market as a provider of specialty cocoa, fine
aroma with organic and/or fair trade certification and, furthermore, applying single origin. All
interviewed chocolate producing companies confirmed, that their Peruvian exporter are
able to provide them with beans of a good and consistent quality and taste. Peru is in
competition with other Latin American fine flavor provenances, such as Ecuador and the
Dominican Republic.
Low level of exports of semi-finished and finished coffee and cocoa products
Only a few companies and producer organizations are involved in the export of finished
cocoa and coffee products. A strong European import, processing and retailing structure as
well as a handful of dominating commodity traders control larger parts of the coffee and
cocoa product markets in Europe. This structure cannot be changed and will dominate the
mainstream market further on. Nevertheless, the trend towards single origins, sustainability
coffee and cocoa products as well as the need of smaller European companies for
differentiation in the market provide opportunities for Peruvian exporters (and processing
companies)27.
27
Currently, the Peruvian cocoa processing industry has a slight over capacity.
23

24

4. Number of Peruvian companies
More than 100 Peruvian companies are exporting coffee. The five leading exporters of
green coffee represent a share of more than 57% of total export values (2011). 20
companies export coffee worth more than 1.4 billion US-$ or nearly 90% of the total export
value28. Among the 20 companies 5 are belonging to smallholder cooperatives, standing for
less than 10% of total export values. The largest exporter in this sub-group is Central de
Cooperativas Cocla Ltda.. The current trend goes into the direction of further concentration
processes in the sector. Among the exporting companies are also international buying
groups running their own purchase and exporting companies (e.g. Coinca belonging to the
German Neumann Coffee Group). In regard to roasted coffee the number of companies is
by far smaller, and the concentration even higher. The leading exporters are Cafe Inca del
Peru SAC and Cafe Britt Peru SAC. The total number of exporters of roasted coffee is
about 10 to 15 companies. About 30 producer groups and/or exporters are engaged in
speciality coffees29.
More than fifty companies are exporting cocoa. The five leading exporters of cocoa (and its
derivates) represent a share of 59% (2011). Unlike in the coffee sector two of the leading
companies are owned by smallholder organizations. Twenty companies export cocoa and
its derivates worth more than 107 million US-$ or nearly 59% of the total export value30.
Among the twenty companies six are belonging to smallholder cooperatives, standing for
nearly 25% of the total export value (26.3 million US-$).
About ten to fifteen Peruvian companies export cocoa derivates such as cocoa butter, and
cocoa powder. In 2010 the export value of all cocoa derivates has reached around 40.5
million US-$. Nearly 80% of this business is in hand of two companies (Machu Picchu
Trading and Exportadora Romex). Two cooperatives are engaged in the export business of
processed cocoa products (Cooperativa Agraria Industrial Naranjillo und Asociacion
Central Piurana de Cafetaleros).
During the validation workshop it has been underlined that a sufficient number of
companies and producer organizations are available. Also, a number of coffee and cocoa
exporters (including producer organizations) have already entered the Ruta Exportadora
scheme. Most likely CBI will be able to select pre-qualified applicants for the ECP
programme as the number of potential candidates will be much higher than the maximal
number CBI can approve finally.
28
See list of the 20 leading coffee export companies in annex 1
29
See list of speciality coffee producers/exporters in annex 2
30
See list of the 20 leading cocoa export companies in annex 4
25

5. Risk assessment and opportunities
Identified risks and bottlenecks have been described at length already (in chapter 3.3.).
Table 3 gives a summary of the principle risks which are similar in both value chains. The
Peruvian stakeholders are aware of the identified bottlenecks. Nevertheless, the
government in co-operation with stakeholder organisations and private sector companies
have not been able to solve the problems principally. Fertilization and re-planting
programmes have been set up to ensure declining harvests in some regions. However, a
national strategy and/or an action plan are still missing. Therefore, the authors see a high
risk that the situation will not change significantly within the next years. And, solutions
cannot or only in parts provided by CBI. However, CBI’s direct intervention shall focus on
export marketing. Export of more certified coffee and cocoa quantities, export organized by
producer organizations directly and last but not least export of semi-finished and finished
products does not automatically require an increase in production.
Table 3: Value chain constraints analysis
Observed constraints in Critical Solvable Could a solution be Likelihood

value chain constraint? in short provided? If yes, by CBI or that it will
(Y/N) term other organisation be
(Y/N) effectively
solved
(high/low)
Certification
1 Missing Y Y CBI, BSOs High
traceability/certification
Production
2 Low productivity and Y Partly CBI, BSOs, MINAG, INIA, ICT Medium
profitability and universities, Extension
bodies, Consultants, NGOs
3 Lack of investment Y Partly CBI, Agroideas, Rabobank, High
Oikokredit and others,
Microfinance Institutes, Ministry of
Agriculture
4 Missing capacity building Y Y CBI, BSOs, MINAG, universities, Medium
Extension bodies, JNC,
Consultants, NGOs
5 Lack of professionalism in Y Partly CBI, DEVIDA, Extension bodies, Medium
grower groups JNC, Consultants, NGOs
Processing
6 Low level of export of semi- Y No CBI,selected ECP participants, High
finished and finished products BSOs, ACHOPE, DEVIDA,
Agroideas
Quality assurance
7 Low product quality Y Partly CBI, BSOs, MINAG, universities, High
ICT, Extension bodies,
Consultants, NGOs
8 Missing preparative actions Y Partly CBI with EU buyers, BSOs, Medium
regarding future maximum MINAG, Research Institutes,
levels for cadmium in Consultants
chocolate products
Export issues
9 Poor promotion of specialty Y Y CBI, Promperu, MEF, JNC, High
coffee and cocoa MINAG/INIA, ICT, Camera
Peruana Café&Cacao
10 Complex commercialization Y Partly CBI, BSOs Medium
channels
In the following table 4 solutions are presented. Most of the sector solutions need to be
developed by Peruvian stakeholder organizations. The role of CBI is mainly seen as a
26

facilitator initiating needed actions in cooperation with BSO, governmental organizations
and international donor programmes. Only within the ECP module working with concrete
coffee and/or cocoa producer organizations CBI can contribute to the realization of
solutions directly.
Results from the validation workshop Lima, 17.04.2013

(see also complete workshop wall notes in table 4)
In comparison to the recommendations given before the workshop, some new aspects
where identified and especially a deepening of the understanding of the Peruvian sector
bottlenecks and potential solutions was achieved.
27

Table 4: Solution Design
Workshop wall notes
Constraint Why does this facilitate How can the constraint be solved/ Can it be
Sector
exports? addressed? addressed by
a CBI
module? Problem Solution
Certification
1 Missing Traceability as a precondition for Promote verification and certification Yes:
traceability/certification certification processes with exporters / cooperatives, Certification,
provide BSO training in BSOD
certification/verification
Cacao
National norm in preparation should fulfil Partly: National norm of Trainings regarding sustainable
a standard with market relevance Selection of production in nurseries, pruning, nutrition required
fitting standard preparation
Production
C&C
2 Low productivity and Generate more attractiveness of Training and coaching of farmers and, Indirectly: Low productivity Offer of technical assistance /
profitability the crop for smallholder farmers provision of good planting material, and Certification per ha solutions has priority in comparison to
farming tools augmentation of the planted acreage.
Cacao
Others like Quality seeds Adapted to regional zone, altitude
MINAG, INIA, required quality and productivity
ICT and
universities
3 Lack of investment Direct investments in farms Training on available micro credits for Partly: There are national programmes e.g.
(planting material, tools, etc.) sustainable farm investments, credits for CSR module Agroideas31
and infrastructure (dryers, certification and infrastructure after the and Business
warehouses, etc.) approval of a sound business plan, Development
round table with stakeholders to discuss
land titling issue
4 Missing capacity Capacity building of all relevant Training of exporters and BSO trainers Partly:
building chain actors in order of a in sustainable agriculture practices, best Export farmers, technicians,
sustainable development of the social and economic practices, capacity cooperative staff
sector agroforestry, diversification, etc. building and
Connecting small farmers to markets BSOD
should be implemented in the Ruta
Exportadora (small farmer training
module)
31
NOTE: SNIP = “Sistema de la Inversion Publica” (Public Investment System of Peru was mentioned in the WS but at the moment cannot be used to finance aspects of
production but is used to finance the construction of missing infrastructure
28

Sector
a CBI
Production (continued)
Coffee
Understand sustainable solutions:
organic farms where affected to a
considerably lower degree. There are
funds available for inputs (should be
focused on organic inputs).
Coffee
Solutions have to be integrated,
including seeds and nurseries.
Cacao
5 Lack of professionalism Strengthen reliability of grower Cooperative management and Partly: Positive examples can motivate others
in cooperatives/grower groups as business partners; administration training, training of coop Business to follow. 32
groups Provides a solution for individual staff; promote formation of new farmer Development
farmers creating access to groups and/or enlarge existing groups;
capacity building and to the
market
Processing
6 Low level of export of Utilization of currently good A) EU market study finished products Yes
semi-finished and finished perspectives of processed (possibly together with DEVIDA) and A) MI
products chocolate products in B) Training in IFS / BRC / GFSI
combination with certification of certification B) Certification
food safety standards
Yes: BSOD
Network
partner for
potential
participants
32
Inform interested producer groups about the benefits and show examples that work. Biggest exporters: Naranjillo, Acopagro, etc. Example: Asociacion KALLPA
Asociación de productores agropecuarios de cacao, promoting technical assistance and market development in the Cuenca del Huallaga and the Valle del Monzón with
products like chocolate, fruit juices and fruits in syrup.
29

Sector
a CBI
Processing (continued)
Network
partner for
potential
participants
Provides
synergies
PmP, ADEX,
CCL
PmP, ADEX,
CCL
Yes: ECP for  Laboratories to savour

33
processors (catación)
 Capacity building
 Adapt rapidly to the market
 Traceability
Yes: European Fermented & roasted cacao nibs34
Market Entry
Yes:  Transparency in
Certification associations
 Disconnect from individual
persons
 Strengthening35
33
For savouring (catación) no laboratory is needed, the instrument is the guillotine and focused are variety aspects such as flavour, colour, odour are trained in specific
courses to be carried out in the field.
34
Nibs are exported as semi-processed product with final consumer and gastronomy packaging – Increasing demand is noted since the last two years.
35
Through certifications that embrace the value chain, such as fair trade/ organic, the trust can be achieved.
30

Sector
a CBI
Quality assurance
7 Low product quality Consistent high quality is a Training and coaching of farmer Partly:
precondition for clients organizations in harvest and post- Certification
harvest management pracitces,
provision of infrastructure (dryers)
Others like
MINAG,
universities,
ICT
PmP, ADEX, Due to humidity while storing; can be
CCL and prevented e.g. by proper packaging
others material (membranes which don’t let
pass humidity and oxygen).36
Partly:
Business
Development
Partly: BSOD
8 Missing preparative If amendment of EU regulation Setting up an action plan (elaboration of Partly by

actions regarding future will come in force: prevent high a soil Cd map, trials with organic matter lobbying with
maximum levels for Cd level in cocoa beans in order to increase pH, kick off intensive EU buyers
cadmium in chocolate to prevent loss of market shares research and extension activities to
products reduce Cd in cocoa beans)
36
The problem of humidity can be solved by storing in appropriate conditions such as is done currently by national buyers: storage of C&C in higher dry areas in Peru
(Andes) before final shipment to coast and export.
31

Sector
a CBI
Export issues
9 Poor promotion for Increase awareness and Participation in international trade Partly:
specialty coffee and therewith demand of the already shows, continuing with “ExpoCafé”, BSOD
cocoa existing offer of high quality “CoffeeTalk”, Salón del “Cacao y
specialty coffee and cocoa Chocolate” and others
Others like Only 6 main Classification is done by their aroma.
ICT varieties in Peru They are not genetically pure
are classified by anymore.37
INIA
Partly: To be Lack of
considered in differentiation:
BSOD and quality of beans
Business vs. quality of
Development chocolate
Partly: inform Strategic public &
MEF about private plan –
what CBI including int.
covers cooperation
Yes: Peruvian technical
BSOD and regional
desks
Provides
synergies
10 Complex Shorten the value chain by direct Strengthening of cooperatives /grower Partly:
commercialization contacts to enable quality control groups who take over the role of Business
channels and documentation intermediaries Development
Partly: To export is easier than to organize

BD producers’ associations38
37
No database of varieties suitable for specific production regions (soil, climate change adaptation etc) exits. There are more genetically pure cocoa species in Peru,
many exist, at least 80 to 100 have been identified. The private Institute ICT-Instituto de Cultivos Tropicales is the leader in investigation regarding coffee and cocoa.
Research carried out already: Diversidad genética de cacao Criollo "porcelana" en base a marcadores AFLP; Diversidad genética de genotipos nativos de cacao en
base a marcadores SSR y AFLP; Análisis de la diversidad genética de 45 Genotipos de cacao de las cuencas de los ríos Santiago y Morona usando marcadores
RAPD; see: http://www.ict-peru.org/ and select LABORATORIO DE BIOTECNOLOGIA .
38
Cooperation with producer associations should be formed up to the target market, successful examples are the existing associations like Acopagro and Naranjillo that
work directly and with Peruvian exporters in cooperation with buyers in European markets
32

6. Role of stakeholders in a CBI country programme
The coffee/cocoa sector is readily comprehensible. The lion’s share of production is in

hand of producer organizations (cooperatives etc.). The latter are recommended to play a
particular role in the CBI country programme (in general). Thus the representatives of the
producer organizations are important stakeholders and need to be included.
From the governmental side the Ministry of Agriculture (and in parts the Ministry of
Production) are governing the sector. Co-operation with international donor organization in
order to discuss realization of presented solutions and to create win-win situations should
involve DEVIDA. The latter organization is strongly involved with many programmes in the
coca production region. Last but not least the private sector bodies Camara Peruana de
Cafe y Cacao and the ADEX are involved. Some private sector companies have engaged a
lot in regard to development of producer organisations and/or active co-operation within
international donor programmes in the coffee and cocoa sector39.
Graph 4: Stakeholders in the Peruvian coffee and cocoa sector
39
Examples are the Swiss Pronatec and Sumaqao. The latter has also set up an NGO offering consulting
services for producer organizations.
33

Besides Promperu as the main co-operation partner of CBI in Peru the following BSOs
shall be taken into consideration:
 ADEX in regard to export of finished and semi-finished products. ADEX should

involve the Peruvian BSOs Achope40 (semi-finished and finished chocolate
products) and Camara de Café y Cacao.
 SIEX and Junta Nacional de Café in regard to identify appropriate ECP participants
from the coffee and cocoa sector. SIEX could get involved via CCL as they work
together in projects of other sectors already (coffee and cocoa and dehydrated
Physalis covered with chocolate). In the involvement of SIEX all export-related
issues should be directed to the partner CCL (or the partner of CBI’s choice) and
SIEX could identify organisations ready for the market as participants and provide
solutions for problems related to the production.
 DEVIDA in regard to solve sector problems (should be done by Promperu where
needed)
It is recommended to set up a sector specific steering committee for the coffee and cocoa
in order to integrate the activities of all involved stakeholder organizations.
40
Asociación de Chocolateros del Perú – Achope: This association for finished confectionary-chocolate
products exists since 1 year and some members already export. The association supports certain aspects of
company management.
34

7. Corporate Social Responsibility (CSR) in the value chain
In Peru more than 165.000 coffee and 33.000 cocoa smallholder families are growing their
cash crop on a two or three hectares and are directly dependent on coffee or cocoa for
their livelihood. As a result, declining and volatile coffee and cocoa prices can have a direct
impact on access to education, housing, food, medical services and other basic
necessities.
Table 5: CSR aspects in the Peruvian coffee and cocoa sector
CSR aspects Impact Sustainable practices

Environmental
1.1 Climate change Changing temperatures and water
regimes have negative impact on coffee  Promotion of sustainable production
and cocoa yields, pest and diseases, and methods, e.g. diversification, agro
soil fertility forestry,
1.2 Inadequate use of Pollution of the environment, health risk  Introduction of organic and other
fertilizer and pesticides for uneducated farmers when managing sustainable certification systems
farm inputs  Introduction of food crops in
1.3 Soil degradation Inadequate farming techniques and use association with coffee/cocoa plants
of fertilizer causes the loss of organic  Rejuvenation of farms: replacement
matter and humus, provoke soil erosion of old non-productive coffee/cocoa
and reduces soil fertility and hence plants with young high productive
productivity of the farm ones
1.4 Monoculture Monoculture in coffee and cocoa  Intensive farmer and trainer training
production causes a loss in biodiversity and coaching to ensure
and on long term problems with pests implementation of the above
and diseases, soil erosion and depletion mentioned measurements
and raises production costs. Lack of food
crops in the plantation can cause food
shortages of the farmer family.
1.5 Waste water Wet processing techniques which are Recycling of water in the de-pulping
(relevant only for common in Peru everywhere do need and bean washing processes.
coffee) high volumes of fresh water and
generate waste water of a high Biological
Oxygen Demand
Social and Human Rights
2.1 Worst forms of Declining yields and productivity on All measurements from No. 1 plus:
Child Labor (WFCL) coffee and cocoa farms causes income
decrease. Families start to use their  Implementation of sensitization
children as cheap labour in their farms programs against WFCL
doing work which is hazardous or  Promotion of school programs
harmful for their health and safety and do  Construction of additional schools
not send them anymore to school.  Promotion and implementation of
2.2 Discrimination of The role of women in household social standards, such as Fair Trade,
woman decision-making is often disproportionate UTZ Certified, Rainforest Alliance,
to the work they devote to actual coffee 4C Verification to reinforce children,
or cocoa production. workers and women
2.3 Labor rights Poverty causes inhuman hiring practices,
working and housing conditions for
workers in the Peruvian coffee and cocoa
sectors.
Child labour is seen as the most critical CSR aspect in coffee and cocoa supply chains.
The difficult economic situation (particular in periods of low world market prices) the
younger farmers leave the rural areas which will increase the shortage of workers in rural
areas (above all during harvest time). However, in comparison to Africa the risk is seen as
significantly lower and no argument against an intervention of CBI in the sector. On the
35

contrary, when focussing on sustainability certification as well as increasing value adding
and income generation CBI supports solutions for the child labour problem. Also,
sustainability certification takes into consideration fair operating practices. Either ECP
participants count already on a market relevant certification or are seriously working on a
certification.
36

8. Result chain
A theoretical estimation of the economic export value generated by the CBI sector
programme comes up to 13.8 million € (18 million US-$) for coffee and cocoa (representing
about 1% of the total coffee and cocoa exports in 2011)41. The lion’s share of the export
value will be generated with non-processed coffee beans and/or cocoa beans. With a
maximum of 10 ECP participants each participants will generate export values of about 1.8
million US-$ over four years.
Within a four year programme exports may start from the second year on. The mentioned
export value needs to be divided by the number of years. Export value generation can be
expected by
 enabling producer organisations to start and/or enlarge direct export of cocoa

and/or coffee from certified sustainable supply chains to EU/EFTA countries
 enlarging the farmers base of selected producer organizations and converting
farmers to sustainable practices
 enabling processors/exporters to start and/or enlarge export of roasted coffee
(finished product single origin and/or from certified sustainable) to EU/EFTA
countries
 enabling processors/exporters to start and/or enlarge exports of cocoa derivates
and chocolates (finished product) to EU/EFTA countries
2-4 processors of finished chocolate and coffee products are certified according to
IFS/BRC food standard and/or one of the applicable sustainability standards. Processors
do either export finished products directly or process on behalf of producer organizations
(sub-contracting).
2-4 producer groups for each product category have been qualified to start direct
exportation and/or enlarge existing export business and/or convert production towards any
of the sustainability schemes.
2-4 exporters have been qualified to support producer organizations in enlarging the
production basis and/or converting towards one of the existing sustainability labels and/or
increasing export volumes.
41 Coffee is foreseen with 12 million US-$ and cocoa with 6 million US-$.
37

Graph 5: Result Chain
38

9. Recommendations and conclusions
This chapter summarizes recommendations on three different levels. Macro Level =

Activities to improve framework conditions for the sector in Peru and sector development.
BSO Level = Capacity building activities, development of tailor-made services and support
of sector development initiatives. Micro Level = Support of companies in Peru (ECP) and
acquisition of European partner companies (buyers, investors).
The following recommendations start with a {number} which indicates the reference to the
solution design in table 4.
Recommendations at Macro Level
Fields of action for CBI, BSOs and further organisations:
 {8, (1)} Currently there are starting new national alliances and the construction of
national strategies for coffee & cacao (which incorporate quality and value issues
and aim to develop solutions for issues such as cadmium levels in chocolate).
Peru (in coordination with other countries like Ecuador and Colombia) is making
lobbying efforts aiming that the new EU norm lowering the permitted cadmium level
comes into effect later than planned. MINAG, Promperu and others see the need to
conduct a profound study to find out the real correlation between involved factors of
the problem in Peru in order to develop a pro-active national strategy.
CBI should support approaching the European Commission, e.g. by bringing

together European importers and Latin American exporters as a lowering of the
permitted cadmium level affects both - European importers and Peruvian SMEs.
 {9} CBI in cooperation with BSOs is recommended to initiate a strategic conference

with major stakeholders of the sector, Ministry of Economy and Finance (MEF),
Ministry of Agriculture (MINAG), DEVIDA, Business Support Organizations and
international donor organizations (USAID, GIZ). The conference should aim at
discussing strategies to develop export business hand in hand with value addition in
coffee/cocoa supply chains, identify win-win situation between the CBI sector
programme and export oriented activities of the national strategies (MEF) and
international donor organizations as well as connecting ECP participants with
programmes of donor organizations (e.g. to enlarge the production base for
speciality coffee /cocoa).
 {1, 2, 7} Large buyers of coffee and cocoa define targets and deadlines for sourcing
a specific percentage of coffee/cocoa from sustainable sources. Peru as an
important producer of coffee and cocoa could include in the national strategy (MEF)
defining proactively steps to convert the complete coffee and cocoa production
towards one of the less challenging sustainability schemes (e.g. in coffee 4C or in
cocoa UTZ certified). Following this target would not only help to improve the value
chain management but also support the export marketing of Peruvian coffee/cocoa
products. CBI together with Promperu could launch the idea and - as and when
required – support in the selection of a fitting standard.
39

 {9} Integration of the coffee/cocoa sector into the national marketing plan for
products from Peru highlighting: Social competence (“products from smallholders”),
environmental competence (“certified sustainability quality”) and value addition
(“processing of value added, finished products for export markets”).
Peru will be the host of the SCAA42 in 2014. CBI together with Promperu could give
recommendations on Peru’s participation. The Consejo Nacional de Café (in
particular the Junta Nacional de Café) is leading the effort. Consejo Nacional de
Café consists of Junta Nacional de Café, Camara Peruana de Café y Cacao,
Promperu, y MINAG.43
Recommendations at BSO Level
Fields of action for CBI and BSOs:

 {4, 5, 1} In co-operation with PmP, ADEX and CCL the existing capacity building
tools of Ruta Exportadora should be assessed in regard to the main bottlenecks
identified in this VCA. In particular tailor made training and capacity tools for
producer organisations in the small farmer training module are seen as crucial
especially if there are producer organisations that participate in the ECP,
CBI could support these groups to achieve suitable certifications and
a) to improve export management skills of larger producer organizations,

b) to enable producer organizations in developing export business,
c) to develop export oriented consortia of various smaller producer organizations. 44
 {3, (2, 7)} In co-operation with Promperu, ADEX and CCL the existing capacity
building tools of Ruta Exportadora should be assessed in regard to tailor made
training and capacity tools for exporters interested to develop fair benefit sharing
models with producer organisations. Without an increase of the economic benefit
for producers needed re-investments in plantations cannot be realized. Solutions for
pre-financing production are crucial. CBI should train exporters directly in benefit
sharing with producers in the CSR component of the programme and inform about
a range of available financing tools during Business Development.
 {6} A) In order to develop a range of finished Peruvian cocoa and coffee products
for export to EU/EFTA markets a joint action of food processing sector, coffee and
cocoa producers as well as related BSOs is recommended. Besides launching the
idea CBI is recommended to develop tailor made capacity building activities for
sector organizations as well as for ECP participants. The output of these activities
should be an increase of IFS/BRC certified food processors in Peru. A precondition
to export finished products to EU/EFTA markets (but also to other markets for
example United States). Besides food safety issues trainings and know-how-
transfer in regard to organic certification of food processing plants is recommended.
Most of the organic food products exported from Peru are commodities45. Synergies
are seen as Promperu has resources to support certification and packaging. CBI
focus could thus be directed to support the ECP participants in selecting the
certification that is best for them (through export capacity building modules).
42
http://www.scaa.org/?page=events
43
Some actors (ACDI/VOCA/PMP) doubt that direct support of export issues at CNC would be efficient.
44
This tool can be applied for other sectors too as most of the supply chains rely on producer groups.
45
This capacity building activities can be combined with other sectors except for garments.
40

Support for Promperu could focus to develop standard methodologies and manuals
for certification within the BSOD module.
 {6} B) CBI should support BSOs through specific and tailor made market
intelligence in the European market with regard to the specific markets for finished
cocoa/coffee products, that Promperu can include in their SICEX system (and other
BSOs in their MI system). DEVIDA has funds to commission tailor made studies
and was advised to connect their efforts with the CBI program. Besides import tax
information and food regulations it is important to understand the dynamic trends in
product presentation of competitors in the European/EFTA markets (size of the
products, packaging material, claims on the product packages etc.). In addition,
market information on specific taste preferences is crucial46.
 {4, (2, 7)} Currently, Junta Nacional de Cafe (JNC) implements a project financed
by the Interamerican Development Bank aiming at developing strategies to make
the coffee value chain economically and environmentally more sustainable. CBI
through Promperu should contact JNC in order to understand which strategies are
seen as helpful to further develop the export business. CBI, Promperu and ECP
participants could benefit from results of this investigation which will be finished and
present results from 2014 on.
Recommendations at Micro Level
Fields of action for CBI and BSOs:

 {10, (1)} CBI together with Promperu (CCL, ADEX, (SIEX)) should identify and
acquire SMEs and/or coffee/cocoa producer groups for the ECP module with
reliable certified production in specialty coffee/cocoa production regions, potential to
include new small farmers and first experiences in export business and/or strongly
interested in development of export business. A tailor made capacity building tool
for export business development should be part of the ECP module.
 {1, 6} CBI should identify and acquire SMEs and/or coffee/cocoa producer groups
for the ECP module with reliable certified production in specialty coffee/cocoa
production regions and finished products (either produced in own or sub-contracted
processing plants)47.
 {6} CBI should identify and acquire Peruvian coffee roasters and processors of
semi-finished and finished cocoa products either interested to offer processing
services for producer organisations and other export companies or interested to
develop an own export business for semi-finished or finished coffee/cocoa products.
46
This market intelligence service can be combined with other sectors.
47
For example the authors have identified a consortium of 4 grower groups called „Consorcio Cacao
Amazónico“. With the help of Agriterra they have developed a line of four chocolate bars, produced by
„Bombonería di Perugia SAC“ in Lima. The development process has been accompanied by Jeroen Kruft, one
of the CBI experts in Peru). The raw material has various certifications (organic, UTZ certified and Fair Trade).
Consorcio Cacao Amazónico could be supported on the way to get a certification for the finished product as
well as IFS certification for the sub-contracted processing plant.
41

 {7} CBI should train coffee exporters participating in the ECP in preventive
strategies to reduce and/or avoid the risk of Ochratoxin contamination of green
coffee48.
a) Fields of action for BSOs and other organisations:
 {8} Cocoa and/or chocolate exporters participating in the ECP module should be
trained in preventive strategies to reduce the risk of exceeding MRL’s for cadmium
in cocoa products as soon as clear strategies are available.49
Fields of action for CBI:
 {10} CBI is recommended to identify and acquire EU/EFTA companies not only
interested in coffee/cocoa from sustainable supply chains in Peru but also in
partnership projects50.
Conclusions for the planning of the CBI programme:
The authors recommend to integrate the coffee and cocoa sector into the CBI country
programme. CBI interventions in this sector as described earlier will have a direct and
positive impact on marginalized small farmers in Peru. All sector organizations which have
attended the CBI validation workshop have shown clear interest in active participation in
the CBI programme. Also, Promperu sees good opportunities in this sector and has already
registered export companies in the Ruta Exportadora system. Acquisition of a sufficient
number of companies is not seen as a challenge in this sector. Also, no non-tolerable CSR
risks exit and could have a negative impact on a CBI export coaching programme.
When selecting ECP participants CBI should take the following sector specific selection
criteria into consideration:
 Give preference to companies which already developed finished products for the
domestic premium market as well as Peruvian coffee roasters and processors of
semi-finished and finished cocoa products either interested to offer processing
services for producer organisations and other export companies or interested to
develop an own export business for semi-finished or finished coffee/cocoa products.
 Give preference to SMEs and/or coffee/cocoa producer organizations for the ECP
module
- with reliable certified production of specialty coffee/cocoa
- with potential to include new small farmers and
- with first experiences in export business of export business
48
A sector crossing CBI module offered to ECP participants in product quality assurance along the supply chain
is recommended. Either Ochratoxins in coffee, heavy metals in cocoa, heavy metals in maca or virus problems
in bivalve mollusks, companies need to understand how to deal with the problems, how to develop quality
monitoring and traceability systems and how to alert customers in time.
49
There are positive experiences through highly diversified agroforestry systems including certain palm
varieties; scientific research is still needed to understand the underlying processes.
50
For example members of round tables for sustainable cocoa production in some European countries can be
easily identified.
42

- and finished products (either produced in own or sub-contracted processing
plants)
In general CBI should aim at three major objectives
 Preferably work with producer organisations interested in starting and/or enlarging

direct export business.
 Preferably work with producer organizations (and related processing companies)
developing the market for finished and semi-finished coffee and/or cocoa products.
 Preferably work with producer organizations and exporters pushing sustainability
certification.
Short term/immediately after programme approval:
1. In collaboration with Promperu (inviting DEVIDA), ADEX (inviting ACHOPE),

CCL, Sierra Exportadora (via CCL) and Cámara de Café y Cacao open a call
for ‘export coaching’ to SMEs and producer groups, inviting particularly:
 Exporters and producer groups as well as involved processors of

specialty coffees and semi-finished/finished cocoa products (either
produced in own or sub-contracted processing plants).51
 Producers of added value products and those that focus on the quality /
sustainability (organic / fair trade, etc) high-end market segments (they
should be awarded a higher score in the selection process)
 Cooperatives and producer groups (they should be given a higher score
in the selection process, on selection criteria like ‘social/development
impact’, or ‘from rural areas’)
2. Open a call-up for interested European companies interested in building direct

sourcing partnership projects with Peruvian suppliers, focusing particularly on
products like finished single origin organic chocolate and single origin organic
coffee.
3. Establish a steering sector committee, led by Promperu and consisting of at

least ADEX, LCC, Sierra Exportadora, ACHOPE and DEVIDA to promote, and
support the programme’s implementation.
51
The invitation to organic producer organisations of coffee and cocoa should mention as well natural
ingredients and grains, pulses, nuts as they have potential to diversify their product range rapidly on already
certified fields.
43

Medium term/After & depending on company selection:
1. In the export coaching & training for participating SMEs/producer groups, give
special attention to:
 Coaching in acquiring relevant standardized product- quality, -safety,
and -sustainability (organic as well for processing plants, fair trade, etc)
certifications (ISO 9001, HACCP, IFS/BRC etc) (certifications / packing
issues to be financially supported by Promperu)
 Training in negotiation skills for producer groups
 Training in management skills for producer groups
2. Develop and support 1 or 2 lighthouse projects in the coffee / cocoa sector, in
collaboration with EU importers and producer groups selected for the coaching
(for more ideas on lighthouse projects see country programme).
3. Develop Tailored Market Intelligence for processed food participants (finished
chocolate products)
4. Use the sector committee on specific bottlenecks that the participating
SMEs/producer groups will experience (expected bottlenecks: EU commission
lowering permitted cadmium level, national sustainability strategy, added value
products, pre-financing tools for primary production, product quality, investment
into cleaning/sorting/processing facilities).
5. Initialise strategic conferences with Promperu with other stakeholders (MINAG,
DEVIDA, MEF, int. donors) to contribute with market insights and fitting
standards to the national strategy/marketing plan (currently in development by
MEF).
44

CBI modules Result (to be inserted in result chain)
supporting this result
Export coaching: 5 producer group/cooperatives and 5 exporting/processing SMEs secure direct
Market entry module orders from EU importers for cocoa derivates and chocolates (finished product) and
specialty/roasted coffee (finished product single origin and/or from certified
sustainable) from certified sustainable supply chains
5 producer group/cooperatives and 5 exporting/processing SMEs establish close
business relations with EU importers in quality/sustainability/added value market
segments
Export coaching: 2-4 processors of finished chocolate and specialty coffee products are certified
certification module according to IFS/BRC food standard and/or one of the applicable sustainability
standards. Processors do either export finished products directly or process on behalf
of producer organizations (sub-contracting).
Export coaching: 2-4 participating producer groups / companies for each product category have
certification, export obtained the necessary skills (negotiation skills, quality management skills regarding
capacity building cadmium/ochratoxin, etc) and knowledge (including on fair benefit sharing with
modules, CSR module producer groups for farm investments, conversion to sustainability, IFS/BRC
certifications, and European market niches) to start direct exportation to the
Human resource European market and/or enlarge existing export business.
development (training)
modules
Tailored Intelligence
Export coaching: 2-4 producer groups/companies have implemented the Export Marketing Plan
export capacity supporting producer organizations in enlarging the production basis and/or converting
building module towards one of the existing sustainability labels and/or increasing export volumes.
Human Resource Participating producer groups/companies have developed their Export Marketing
Development (training) Plan enlarging the farmers base of selected producer organizations and converting
modules farmers to sustainable practices
Export coaching: 5 European importers establish partnerships and collaborate actively with CBI and
Export capacity the Peruvian sector to prevent rash measures by the EU commission to lower the
building module permitted cadmium level.
They collaborate as well with Peruvian producer groups/cooperatives in R&D,
product development, certification (including through 1 lighthouse project)
5 European importers interested in partnership projects sign up for the programme
BSOD: A coffee/cocoa sector committee meets regularly to monitor the programme’s
Export development & implementation, and take (joint) action on sector-wide bottlenecks experienced by
promotion module programme participants.
Strategic conferences CBI supports Promperu with standard methodologies and manuals for certification.
Promperu meets with JNC to evaluate if their national sector export strategy/plan is
pro-active (considering quality and value issues like cadmium level in cocoa and
sustainability) and gives JNC feed back together the steering sector committee,
under coordination of Promperu.
CBI supports the selection of labels during the implementation of the strategy/plan.
45

10. Annexes
10.1. Annex 1: Leading green coffee exporters in 2011
46

10.2. Annex 2: Speciality coffee chain actors
Chain Actors
Specialty coffee producers/exporters (alphabetical)
Accion Agraria Producer of organic coffee
AGRIND Exporter gourmet green coffee
Asociación de Productores Agropecuários Producer specialty coffee
del Valle AltoMayo - APAVAM
Asociación Central Productores de Café Producer specialty coffee
Pichanaki
Cooperativa Agraria Cafetalera Valle Río Producer and exporter specialty coffee
Apurímac
Cooperativa Agraria Cafetalera Valle de Producer specialty coffee
Incahuasi “ CACVI
Cooperativa Bagua Grande Producer organic/origin coffee
BYR PACIFIC TRADING Exporter of specialty coffee
CACE Valle Santa Cruz – Rio Tambo Producer specialty coffee
Café Montana Producer high grown premium quality coffee
CEPICAFE Producers and exporters of organic and premium
coffee
COCLA Producers and exporters of gourmet, high grown,
origin, organic coffee
Central Coicafe Producer of specialty coffee
COINCA Exporter of Neumann Kaffeegruppe
Cooperativa La Florida Producer and exporter of specialty coffee
Cooperativa Agraria Cafetalera La Divisoria Producer and exporter of specialty coffee
Copaevin Association Producer strictly high grown coffee, excellent flavour
and aroma
Cooperativa Agraria Sangareni Producer specialty coffee
Corporacion de productores de Peru SAC Producer and exporter of specialty coffee
El Palomar Ecomusa Producer strictly high grown coffee, excellent aroma
and flavour
Ecologic Origin´s Chanchamayo Export of specialty coffee
KUELAP Organic Coffee Export of high grown, gourmet, organic coffee
Cooperativa Naranjillo Producer and exporter of alternative coffee
Negociación Rivas S.A. NEGRISA Processor and exporter of specialty coffee of Villa
Rica, Chanchamayo, Divisoria and Inka Huasi
Cooperativa Oro Verde Producer organic coffee, UN programm support,
indian ethnic coffee
Pangoa Cooperative Producer high grown coffee, good aroma, balanced
flavour
Perhusa Big exporter gourmet, organic, premiums coffee,
Northern Peru, National Provider (brand: Altomayo)
excellent flavour, good aciditiy
PeruNorTrading Exporter excellent high grown, Jean origin, typical
variety coffees
Promotora de Agricultura Natural – Producer and exporter of organic and specialty
Pronatur coffee
PUNO Coffee SAC Producer and exporter of high grown, excellent
quality, specialty coffee
Cooperativa San Juan del Oro Producer origin Puno, organic coffee
SIAT Producer organic coffee
Typica Coffee Producer and exporter high grown, excellent quality,
specialty coffee, origin San Juan del Oro
47

UN Alternative Project Producer organic, alternative coffees from Cusco and
Ayacucho, good flavour and aroma
Unión de Cafetaleros Ecológicos – Producer organic coffee
Unicafec
Cooperativa Agraria Cafetalera Sostenible Producer specialty coffee
Valle Ubiriki
Vier Association Producer origin Villa Rica, good flavour, strictly high
grown coffee
Villa Rica Highland S.A. Producers high grown coffee
Certification bodies
IMO Peru SAC Inspection for organic, UTZ certified, Rainforest
Alliance, 4C (most experienced)
Biolatina Peru Inspection for organic and other certification schemes
Control Union Peru Inspection for organic and other certification schemes
Chain supporters
Junta Nacional de Café JNC Coalition of coffee producing cooperatives and
associations
Camara Peruana de Café y Cacao Association of private coffee businesses (producers,
exporters and coffee industry)
Promperu Peruvian Export and Tourism Promotion Organization
Chain influencers
Ministry of Agriculture
DEVIDA Peruvian anti-drug organization
48

10.3. Annex 3: Coffee processing
The following chart shows the processing of coffee cherries and green coffee beans
(Coffee Guide 2012):
49

Green washed coffee beans
There are two main primary processing methods: the unwashed or dry process, which
produces naturals, and the washed or wet process, which produces washed coffees. In
Peru mostly washed coffees are produced. In the dry process the ripe cherries are dried in
their entirety after which they are mechanically decorticated to produce the green bean. In
the washed or wet process the ripe cherries are pulped and fermented to remove the sticky
sugary coating called mucilage that adheres to the beans (this can also be done
mechanically), and the beans are then washed and dried.
There is a third process in which the ripe cherry is pulped and dried ‘as is’ with the
mucilage still adhering to the parchment skin. Originally called semi-washed in Africa, this
process is gaining considerable importance in Brazil where it occupies a place in-between
the dry and wet processes and is simply called ‘pulped natural’. In other countries, for
example in the Great Lakes region of Central Africa, semi washed coffee has been
laboriously produced for many decades using small hand pulpers. In all procedures the
parchment skin is later removed mechanically after drying.
50

10.4. Annex 4: Leading cocoa exporters in 2011
51

10.5. Annex 5: Cocoa value chain actors
Chain Actors
Cocoa producers/exporters (alphabetical)
See annex 4
Certification bodies
IMO Peru SAC Inspection for organic, UTZ certified, Rainforest
Alliance, 4C
Biolatina Peru Inspection for organic and other certification schemes
Control Union Peru Inspection for organic and other certification schemes
Chain Supporters
APPCACAO Peruvian Cocoa Farmers Association
Camara Peruana de Café y Cacao Association of private coffee businesses (producers,
exporters and coffee/cocoa industry)
Promperu Peruvian Export and Tourism Promotion Organization
Fundación Amazonia Viva NGO for capacity building in the Amazonas region
related to environmental and social apsects
Chain influencers
Ministry of Agriculture
DEVIDA Peruvian anti-drug organization
52

10.6. Annex 6: Cocoa processing
Summary of the process of transforming cocoa beans into chocolate
The fermented and dried cocoa beans are cleaned to remove all extraneous material. To
bring out the chocolate flavour and colour, the beans are roasted. The temperature, time
and degree of moisture involved in roasting depend on the type of beans used and the sort
of chocolate or product required from the process.
A winnowing machine is used to remove the shells from the beans to leave just the cocoa
nibs. The cocoa nibs undergo alkalisation, usually with potassium carbonate, to develop
the flavour and colour. The nibs are then milled to create cocoa liquor (cocoa particles
suspended in cocoa butter). The temperature and degree of milling varies according to the
type of nib used and the product required.
Manufacturers generally use more than one type of bean in their products and therefore
the different beans have to be blended together to the required formula. The cocoa liquor is
pressed to extract the cocoa butter, leaving a solid mass called cocoa press cake. The
amount of butter extracted from the liquor is controlled by the manufacturer to produce
press cake with different proportions of fat.
The processing now takes two different directions. The cocoa butter is used in the
manufacture of chocolate. The cocoa press cake is broken into small pieces to form kibbled
press cake, which is then pulverised to form cocoa powder. Cocoa liquor is used to
produce chocolate through the addition of cocoa butter. Other ingredients such as sugar,
milk, emulsifying agents and cocoa butter equivalents are also added and mixed. The
proportions of the different ingredients depend on the type of chocolate being made.
The mixture then undergoes a refining process by travelling through a series of rollers until
a smooth paste is formed. Refining improves the texture of the chocolate. The next
process, conching, further develops flavour and texture. Conching is a kneading or
smoothing process. The speed, duration and temperature of the kneading affect the
flavour.
An alternative to conching is an emulsifying process using a machine that works like an

egg beater. The mixture is then tempered or passed through a heating, cooling and
reheating process. This prevents discolouration and fat bloom in the product by preventing
certain crystalline formations of cocoa butter developing. The mixture is then put into
moulds or used for enrobing fillings and cooled in a cooling chamber. The chocolate is then
packaged for distribution to retail outlets.
53

54

10.7. Annex 7: Is cocoa certification beneficial for farmers?
55

56

10.8. Annex 7: Validation workshop
Aspects mentioned during the validation workshop:
Certification
 For coffee and cocoa anticipation about market requirements with regard to certification is
required.
 A national cocoa norm of production is in preparation which will cause trainings regarding
sustainable nurseries, pruning and plant nutrition.
Production
 For coffee and cocoa dissemination of locally adapted best practices is crucial prior to
expansion of planted acreage. A significant change is the increasing labour cost in
producing areas – this soon will lead to a comparative advantage for small producers who
manage labour with a minimum of hired workers.
Processing: Cocoa52
 ACHOPE should be contacted as a network partner for recruiting of participants as some
members already export chocolate covertures (e.g. from Cajamarca and San Ignacio) others
are mature to export. The association supports members in certain aspects of company
management.
 Investment in cacao processing: Agroideas is a suitable national program financing farmer
associations, (not individual companies). Several companies/associations have already
benefited through the financing program http://www.innovateperu.pe/ such as eg: Naranjillo.
Quality assurance
 Savouring capacities (cocoa) need to be harmonized in the country according to final
markets.
 Cocoa fermentation needs to be carried out according to the variety.
Export issues: Coffee and Cocoa:

 Essentially prevailing national strategic public and private sector plans (including
international cooperation) are missing. MEF (Ministerio de economía y finanzas) is currently
involved to develop a plan considering short, mid and long term targets. A link-up to tasks
covered by CBI modules should be communicated by CBI and Promperu soon.
Recommendations for the national strategy plan are:
 Development of a market-driven visible web site with systematized information about the
available Peruvian offer (including cluster of processed products)
 Technical and regional sector desks
 For cocoa: Differentiation between quality of cocoa beans and quality of chocolate has
to be considered more in the sector.
 The development of the local market brings synergies with export with regard to experience
and costs. It is going on well and pushed by various int. & nat. organizations through events,
promotion, sale stores, etc. Part of this development was the creation of the association
ACHOPE (chocolate confectionary producers association) launched during the Salon de
Cacao y Chocolate Lima in 2012.
 To establish alliances between international brands and producer associations could bring
solutions for the domestic, Latin-American and European market with regard to added value,
53
the connection to the sales market and directly to buyers .
52
no processing aspects for coffee were mentioned  green beans will continue to be the most important
presentation
53
Establishing alliances will support the development in Peru and help existing producer associations to
connect successfully – An international example is the project that was carried out in Indonesia with Mars Inc.
and several actors involved in the VC
57


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Value Chain Analysis

CBI Integrated Country Programme

Specialty coffee and cocoa

Organic Services - committed to creating value

2. Market demand in the European Union ............................................................ 4

2.1. Global situation and European imports ....................................................... 4

3. Coffee & cacao value chain analysis .............................................................. 14

3.1. Governance of the coffee and cocoa sector ............................................. 14

4. Number of Peruvian companies ...................................................................... 25

5. Risk assessment and opportunities ................................................................ 26

6. Role of stakeholders in a CBI country programme.......................................... 33

7. Corporate Social Responsibility (CSR) in the value chain .............................. 35

8. Result chain .................................................................................................... 37

9. Recommendations and conclusions ............................................................... 39

10. Annexes .......................................................................................................... 46

10.1. Annex 1: Leading green coffee exporters in 2011 ................................. 46

Organic Services - committed to creating value

What is a “specialty coffee”?

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2.1. Global situation and European imports

Estimates of world cocoa bean consumption (grindings) according to International Cocoa

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Table 1: Relevance of coffee sustainability schemes6

 Coffee pads/capsule market which is still growing

 Trend towards “high end chocolate products”

Consumption in emerging European markets is developing differently. These markets grow

Organic Services - committed to creating value

Due to increased consumer awareness of issues surrounding sustainable cocoa production

Parallel to country initiatives, various industry initiatives on sustainability in coffee and

Organic Services - committed to creating value

Opportunities for Peruvian coffee exporters

About 75 percent of Peruvian coffee - which is exclusively Arabica coffee - is grown

European export destinations of organic coffee are as follows:

Organic Services - committed to creating value

Opportunities for Peruvian cocoa exporters

Country Participation FOB USD

 Experiences in certification: Peru has since decades experiences with the

Organic Services - committed to creating value

 Strong and professional exporters with social and ecological responsibility: In

 High degree of professionalism on exporter level: The competitive advantage of

 Increasing interest in specialty coffee and cocoa in European markets: high

 Good perspectives for co-operation: Peruvian stakeholder organizations as well

Organic Services - committed to creating value

Furthermore, cocoa production is strongly supported by national and international donor

Organic Services - committed to creating value

Organic coffee and cocoa (Regulation (EC) No 834/2007)

Pesticides (Regulation (EC) No 396/2005)

A maximum residue level (MRLs) for pesticides is provided on

Organic Services - committed to creating value

Organic Services - committed to creating value

In the meantime, a number of individual European countries (Czech Republic, Finland,

Organic Services - committed to creating value

3.1. Governance of the coffee and cocoa sector

 Decreto Legislative No. 1062, Ley de Inocuidad de los Alimentos

At INDECOPI (Instituto Nacional e Defensa de la Competencia y de la Proteccion de la

 Normas Técnicas Peruanas, ICS 67.140.20 Café y sustitutios del café

Organic Services - committed to creating value

Graph 1: Coffee growing regions in Peru