World Cocoa Foundation

Cacao Cultivation

Commercial cacao cultivation requires a multitude of unique growing characteristics, coupled with a well developed logistics system overseen by experienced professionals, the combination of which, in the opinion of the Directors, provides a natural barrier to entry. Some of these include:

Soil quality

Cacao grows best in areas with natural organic material with some degree of secondary ground cover; pasture land or compacted soils are not suitable.

Rainfall

Cacao requires a minimum of 1,500 mm of rainfall per annum, evenly spread throughout the year.

Land Preparation

Large scale cultivation requires an extensive track/road network within the plantation and drainage system coupled with meticulous GPS planning with AutoCad. Such cultivation requires dozens of heavy machines and the ability to deliver sufficient fuel supplies to these machines on a daily basis. The Group currently has over 25 heavy machines operating in the field.

Tree Density

In order to achieve the maximum yield per hectare, it is essential to have the initial density of 1,111 trees per hectare. Therefore, the Group expects to have over 4.2 million trees on its 3,250 hectare estate when planting is completed by the end of 2016. Achieving this density requires that each planting hole be properly spaced (three meters by three meters) and staked with the use of topographical and GPS equipment. Each hole is precisely dug with a motorized auger as seen below.

Seedlings in nursery

Each seedling must be hand planted in a polyurethane bag, be of the appropriate genetic material for the proposed planting area and must be sourced from the farmer. A detailed care and maintenance regime is followed to ensure vigorous seedling growth.

Budwoods

Sufficient supply of budwood is required for each. A budwood is an 8 cm long stick clipped from a particular mother tree. Each budwood is sourced from neighbouring farms of the appropriate genetic material.

Grafting teams

Skilled grafters must then cut the seedling, create a graft, insert the budwood and then seal the newly created graft in a plastic wrap, a process which typically takes less than 30 seconds. One grafting team, comprised of two field technicians, can prepare approximately 500 seedlings per day. The Directors believe that its trained team of grafters are a significant competitive advantage to the Group.

Professionals

The entire above mentioned process must be overseen by dedicated field professionals willing and able to live on-site for extended periods of time.

The abovementioned requirements significantly limit the ability for corporate investors to rapidly expand area under cacao cultivation when compared to palm oil for example, which has only 143 palms per hectare sourced from a multitude of globally recognized seed suppliers. Irrespective of this, the Group believes that is has a significant first-mover advantage over other potential entrants in the marketplace.

A typical CCN 51 cacao productivity profile per well-maintained hectare, dry tonnage, in Peru is estimated to be
0 – 12 months: nil
13 – 24 months: nil
25 – 36 months: 300 kilograms – 500 kilograms
37 – 48 months: 700 kilograms – 800 kilograms
49 – 60 months: approximately 1.2 tonnes
61 – 72 months: approximately 2.0 tonnes
73 – 84 months: in excess of 2.75 tonnes

The Group intends to maximize the value of its production platform over time through:

Improved fermentation techniques

Traditional cacao fermentation, the field based processing and drying of the wet beans, is widely regarded as an antiquated process and little has changed over the last 100 years.

Full utilization of the cacao pods

Current industry practice is to discard the cacao pod into the field once the wet beans have been removed. Recent studies have shown that the cacao husk is rich in pectin content, a valuable and internationally used food ingredient. Similar to commercialization of pectin from citrus fruit peels, the Group believes this is a valuable product that can be commercialized.

Downstream processing facilities

Currently, Peru exports the majority of its harvested cacao beans to end-users. Given the projected production of the Group’s estates, there is an opportunity to construct a processing facility to process the beans into cacao butter and cacao powder with a large enough capacity to serve the entire Peruvian market.

Small farmer micro-finance program

The Group seeks to substantially expand its small farmer program by which local residents grow cacao under contract with the Group. The Group arranges micro-finance credits to local residents and undertakes to purchase the crop at a discount to the global price. Such an arrangement assists local residents to escape poverty whilst providing the Group with additional volumes for its fermentation facilities.

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