Circular economy is game-changer for cocoa players

Circular economy is game-changer for cocoa players

The circular economy is increasingly championed as an effective approach to reducing the environmental impact of production and consumption, commanding significant attention from consumers, businesses, and policymakers worldwide.

While this concept has begun to infiltrate government and business discussions in Vietnam, awareness remains limited and has not yet ignited a systemic transition from conventional linear economy models to more sustainable alternatives.

Luong Pham, country director, Helvetas Vietnam

Vietnam’s cocoa sector has surfaced as a pioneer in circular economy solutions. Its unique position offers distinct advantages: the sector is substantial enough to convincingly showcase these concepts and harvest meaningful results, yet compact and cohesive enough to work as an effective case study.

Like other agricultural subsectors, challenges persist throughout the value chain: at the production level (soil degradation and erosion, water pollution, and substandard product quality), in processing (fossil fuel dependency, excessive water usage, and waste generation), and in the later lifecycle stages (environmentally harmful packaging choices).

Cocoa production has the potential to do no harm to the environment when properly managed, but best practices are not widespread. Regenerative and circular economy approaches are key to solving the above challenges.

Vietnam’s cocoa sector teeters at a crucial crossroads. With an annual yield of almost 4,000 metric tonnes of dry beans in 2024, the country dwells as a modest player on the global stage, contributing a mere 0.1 per cent of the world’s cocoa supply. However, its beans have earned the International Cocoa Organization’s “fine flavour” recognition, a status held by only 10 per cent of world cocoa. Vietnam’s cocoa sector has also magnetised increasing interest from domestic and global companies.

Key players such as Puratos, Trong Duc, Marou, Nam Truong Son, BariaChocolate, and CIC are spearheading advancements in cocoa processing and premium chocolate production. These companies discern the extraordinary potential of Vietnam’s high-quality beans and are actively channelling investments into the local supply chain.

Concurrently, global trends are favouring Vietnam. Climate change has hit African cocoa production hard, causing a global shortage of about 500,000 tonnes and tripling cocoa prices in just two years.

Vietnam sees this as a major chance to become a top eco-friendly supplier, meeting the growing demand for high-quality beans. Rising prices boost farmer incomes, driving cultivation expansion across Vietnam’s Central Highlands, the southeast, and provinces including Gia Lai, Lam Dong, Binh Phuoc, and Quang Nam.

Vast opportunities remain to change Vietnam’s cocoa sector positively. Unlike demanding crops such as durian, pepper, or macadamia, cocoa thrives under proper care, potentially yielding 3.5-4 tonnes dried per hectare, quadruple current averages. This yield level is reachable because farmers now benefit from comprehensive technical support from chocolate processors who provide cultivation guidance and farm monitoring, as well as pest and disease management.

Meanwhile, green investments from private sector and international funds increasingly target cocoa’s promising landscape, recognising its growth potential. These investments, coupled with sustainability programmes enhancing cultivation and fermentation techniques, could significantly elevate Vietnam’s cocoa profile.

Moreover, as EU regulations on deforestation take effect in 2026, Vietnam’s compliance would unlock premium markets hungry for sustainable and traceable cocoa.

Despite these favourable conditions, significant challenges loom: climate change threatens Mekong Delta cultivation with increasing salinisation and heavy metal contamination. Furthermore, while Vietnam produces exceptional beans, its processing capabilities lag globally.

This gap necessitates strategic development of value-added products, such as chocolate, cocoa powder, and butter production, for both domestic consumption and export markets to maximise the industry’s potential.

Helvetas Vietnam, through an EU-funded initiative, has championed the integration of circular economy solutions in cocoa production to create value from cocoa waste and minimise ecological footprints. By late 2024, we have demonstrated 14 circular solutions, trained over 1,100 individuals on circular farming, and improved income for about 30 per cent of participants.

The venture has additionally catalysed investments totalling an estimated $115,000 by bolstering cocoa processing companies, collectors, and producers in embracing circular agricultural practices. In parallel, the German Development Agency has also launched an initiative supporting regenerative cocoa production and farmer livelihoods in Vietnam.

Beyond commercial endeavours, these organisations also partner with policymakers to sculpt a robust legal framework for circular economy practices in Vietnam’s agriculture and fortify the local system to amplify and sustain circular economy principles among farmers and industry stakeholders.

As Vietnam builds its reputation as a sustainable cocoa producer by adopting circular economy principles, it can transform its cocoa sector into a zero-waste, high-value sector. For investors looking to emerging markets with strong growth potential, Vietnam’s cocoa sector offers an exciting opportunity at this critical moment in time for development and expansion.

VIR