Dear beloved readers:
The magic of the concept of sustainability has taken us to philosophically comprehend the verb “sustain”. To sustain is to provide, to support, to maintain, to keep, to care. “Sustain” means to keep someone or something in existence, to uphold, to supply all the required conditions; to nourish, to thrive, and supply for the integral well-being. We have tried to simplify the definition of “sustainability” by using the most uncomplicated figure everyone can grasp: a Venn diagram with three core elements.

1. All the stakeholders are economically sustained. These are the stakeholders of the global value chains for coffee and cacao, at three levels (upstream, midstream, and downstream).
2. All the land crops and the environment are sustained for the long term by the farmers (small, medium, and large).
3. All the societies (at the communities surrounding the farms of cocoa and coffee) are happy and healthy, and their integral well-being is a priority.

With the last introduction, we open the masterclass of today. We will cover the agenda in two parts. Today is about the global value chain of coffee and cacao, focusing on the common aspects of both, while opening the discussion about the stakeholders’ sustainability. In our next session, we will cover the land-environment sustainability and the social aspects of it. We will dedicate most of our effort today to understanding the global value chain (GVC) of both crops. This is crucial for the rest of the saga.

Your reference material for the class is below. As usual, please print it. Take the time to read it over the weekend. Follow the URLs in the bibliography on the last slide. And share your thoughts with the people around you. You never know which of them will come up with original ideas that might help you strategize with a clear perspective.

We kindly ask that you return next Monday, the 8th of June 2026, to review our strategic reflections on this chapter.
We encourage our readers to familiarize themselves with our Friday master class by reviewing the slides over the weekend. We expect you to create ideas that are or are not strategic reflections. Every Monday, we upload our strategic inferences below. These will be discussed in the next paragraph. Only then will you be able to compare your own reflections with our introspection. We always give our students a couple of days to prepare well before our final reflection.

Strategic reflections on this episode.
These will be in the section below on Monday, the 8th of June 2026.

Strategic Reflections Cacao and Coffee 101. Success Strategies for Small Farm Holders. Episode 3. Sustainability. Beyond Caring for the Land. Part I.

Coffee and Cacao Common Key Sustainable Factors. Slides 4 to 6.
Sustainability comes from the verb “sustain.” Sustain means to hold, to keep in existence, to maintain something, or somebody in tip-top conditions, to provide the means for its future excellence, to source and supply all the essentials and basic wants, and more for that matter, to flourish and be properly upheld “for the long term.” Sustain means to preserve not only in the present, but also considering numerous generations ahead. “Sustaining” is more than caring. Sustain holds a tripartite philosophical pillar:

1. It implies a compromise, a sense of profound responsibility, a conscious concern or duty for the well-being of that something or someone to provide for its excellence in all its greater potential.
2. it implies a condition of resourcefulness: the one that sustains must have economic freedom and theoretical know-how resources to withstand for himself (or herself) and for the thing that is supported with his/her resources, and finally
3. it implies a state of certainty: the geographic locations where the act of “sustaining” occurs must be secure, transparent, with healthy and safe communities, with domestic-international sound governance and bold regulatory conditions, without any social insecurity, without ambiguous rules of the business game at the upstream-midstream and downstream levels, and with solid mitigation measures and contingency strategic plans against climate change and other natural crisis, political threats, financial disasters, etc.

In this specific case, we have defined sustainability in slide 4. The slide is more than self-explanatory. For the smallholders and family farmers of the tropical belt, to sustain agriculture crops denotes not just caring for the land and the workers where the coffee and cacao trees are being planted and harvested; it also entails studying all the aspects of the global supply chain at every single phase of it: from the farm to the ultimate consumer.

What is the core business of coffee and chocolate in their respective entangled phases of the global supply chain? Despite the fact that both value chains hold common aspects and similarities, the manufacturing processes of both products are different, because the cacao has multiple end-consumer formats, which are then reprocessed again for other industries (such as pharma or beauty care). Before our general analysis of both crop value chains, we will provide certain definitions for those who are inexperienced in strategic management.

Upstream-Midstream-Downstream in a global supply value chain. The basic concepts are from Mintzberg et al. (1), and we have applied the concepts, expanding them for this saga.

Upstream Industries: Upstream industries are performed close to the raw material. These are also called primary businesses (raw materials, extraction, planting and harvesting, and initial manufacturing conversions before the product is transported out of the original geographic point of its sustaining). Upstream industries include some degree of manufacturing after the raw input has been pulled out from its original source. The flow of upstream products for coffee and cacao is divergent: at the origin location of the trees, the fruits are collected and transformed into the basic raw material (green coffee beans or cacao dried beans), while other subproducts, usually called waste residuals, are also relevant in value. For example, high-value waste products that have not yet been marketed properly (coffee husks, coffee pulp, coffee mucilage, coffee silver-skins, cacao white pulps, cocoa pod husk, cocoa shells, etc.).  Upstream production can be capital-intensive, people-intensive, or a mix of both. In the case of agriculture in tropical belt nations, the upstream industries have mainly been people-intensive. However, the upstream business strategy seeks low-cost leadership rather than high differentiation margins, with the explicit motive to favor sales-push over market-pull. Coffee and cacao bean prices are primarily driven by supply and demand, at international pricing. The objective of the farmers in the tropical belt regions is to sell as soon as possible, while the commodity traders with warehouses tend to keep some volume of the beans in inventory for a few months, to sell at the highest international futures price. When elevated trade international tensions or policy uncertainty occur, the price is affected. When the supply of beans is low, the price rises. When the supply is high, the price is reduced.

In the context of this saga, it is important to acknowledge that any small holder with land below 3 hectares can´t profit from covering its operational expenses. Profitability of the farm depends on multiple factors; however, for the sake of minimum yields to become money-making landholders, it is advisable and promising for those farmers who, in association or alone, hold between 3 and 10 hectares of land.

Midstream Industries: This phase begins right when the farmer sells their beans, and these are transported to the locations where a secondary manufacturing process occurs. Most of the cacao and coffee beans are sold directly to corporations or to commodity brokers (intermediaries) who then resell or re-export to European companies or North American enterprises. The international shipping companies bring sacks of 60 kg from the ports of origin to the ports of destination. These bean sacks are guarded at the intermediaries or corporations´ warehouses, and from there, the midstream conversion of the beans begins. Each of these entities, according to its size, has small, medium, or enormous-sized factories. The secondary midstream manufacturing is overseen by personnel who manage plants and expensive machinery in their facilities, but it can also be done by small teams in a petite artisanal location. The secondary production starts with the sorting and classification of the beans, quality control, roasting, grinding, and/or packaging (in the case of coffee). In the case of cacao, the beans are also sorted, classified, graded for quality, roasted, and cracked. Once the cracking machine breaks the cocoa beans, the shells and nibs are separated. This is called winnowing. Afterward, the stone grinding phase starts, and the thick, rich chocolate liquor is born. This pure cocoa thick paste receives sugar, cocoa butter, and the tempering occurs. By hand or using a machine, the tempering triggers a specific consistency, flavor, texture, color, and look. The confectionery phase starts by pouring the tempered viscous chocolate liquid into molds, adding more ingredients or fillings, and then packing the product accordingly. There are multiple formats to sell chocolate at different % of cacao: powder, tablets, chips, blocks for bakeries, luxurious truffles of ganache and other add-ons, bars, etc.

Our readers must comprehend that it is in the midstream industries where the value added to the raw beans arises. Depending on the ultimate market niche (the end users of the products), each of the products manufactured at the secondary industries has a different cost structure. The operational costs (COGS and SGA) vary. (COGS: Costs of Goods Sold and SGA: Selling, General, and Administration). The direct and indirect costs are distinctive in the secondary midstream. For example, let´s see a huge factory from Nestle in Switzerland, the economies of scale make the expenses lower in comparison to an artisanal roasting and processing atelier located in a San Francisco garage. Another example,  the cost per ounce for unsweetened chocolate (one of the inputs) used to make a Godiva Signature Chocolate Truffles Gift Box is different than the unsweetened cocoa used to manufacture the Hershey’s Natural Unsweetened Cocoa Powder that you can buy in Walmart, or the ounce used by Ghirardelli Premium 100% Cacao Unsweetened Chocolate Baking Bar.

It is during the midstream processes that each factory or artisanal chocolatier makes the perfectioning of the quality and value grade of each ounce of unsweetened cocoa used later in the downstream industries.

Downstream Industries:
For cacao and coffee, there are innumerable end-products as far as we can comment. In the case of coffee, from a cup of beverage to different mixtures or roasted levels (dark, mild, light), origin classification, decaffeinated, degree of pulverization of the grinding, variety of the plant, packaging, brand reputation, coffee shops (such as Starbucks, Juan Valdéz, Peets, or the coffee-cafeteria of your neighborhood, etc.), Keurig K-Cup Coffee Pods, and others.
There are specialty coffees that are treasured beyond your imagination. For these specialties, the price per pound is out of this world, many times passing the rational values. Examples: The Imagine Organic Kona UltraViolet Blu Light Infused Biodynamic Special Edition is advertised on Amazon at $272 per 16 ounces (2), or one lot of a specialty coffee, the Box of Eden Panama Geisha was sold in action at US$ 14,964.00/kg. Other ultra-expensive coffees are the Black Ivory Coffee and the Kopi Luwak. These hyper-ultra-premium varieties can reach average values above $600 per pound. The factors of differentiation for the high pricing are: extreme scarcity, unique terroir, high-altitude, perfection at artisanal process of grading, drying, and roasting. In summary, the artisanal production is always better with the correct mix of value factors than one that is performed by machines. The same applies to chocolate; the artisan chocolatier always provides better products than those made by machines. The format is multiple: you can buy semi-sweet, unsweet, or super sweet chips, with milk or no-milk, chocolate bars with 50%, 70% or 100% cacao, truffles in numerous flavors in different boxes, chocolate pastries, churros españoles filled and served with chocolate in Madrid, dissimilar retailers (bakeries, luxurious boutiques, Parisian macarons shops, supermarkets, department stores, etc.) In summary, the tertiary industries of coffee and cacao have a wide variety of inputs and a wide variety of end-products for different consumers.

The art of distinguishing the core business in a network of industries.
We prepared two generic value chains in slides 5 and 6. Read them and explore them thoroughly. Each slide was made using meticulous illustrations. Below each illustration, we have added who the main stakeholders are and the main nations involved in each of the levels of the value chains. We have not included numeric data for the time being. At the upstream level, which pertains to us for small farmers, what matters now is that you can perceive that climate change is affecting the terroir: the soil, the land, the wind, the organic matter to enrich the soil, the nutrients of each tree, and ultimately the yields. Climate change is also affecting the degree of humidity, the sun’s impact, the rainfall per year, the timing of the rain season, and the temperature. Cacao trees’ best yields are at altitudes lower than coffee trees’ altitude, but there are certain regions in which you can mix both plantations perfectly well (from 800 to 1300 meters above sea level).
Look at this: The quality of the bean doesn´t occur in the midstream or downstream phases. It happens on the farmer’s land. This is why the whole quality mix of the coffee and cacao value chain occurs in the upstream level industries, and this is why “sustainability” matters much more at the upstream industries and respective tropical-belt companies.

A new design for the coffee and cacao global supply chain. Slide 7.
The main message of this slide is: every level of the industry for coffee and cacao has direct and indirect costs. It has taxes, depreciation, and amortization (financial expenses) to pay. And each level has a certain number of employees, shareholders, managers, and other stakeholders that make the miracle of the quality of the bean. We have identified different value chains inside the huge global supply chain, and we want you to observe that the three levels of industries (upstream, midstream, and downstream) are entangled. Whatever affects the plantations of Ghana, Côte d´Ivoire, Ecuador, Brazil, Central America, or Colombia directly affects the prices paid by Europeans and Americans when they pay for the raw materials for their manufacturing processes of the midstream factories. Additionally, the tertiary industries at the downstream last phase are particularly entangled with the secondary and primary industries, too. The cost of cacao beans paid by the Swiss or German chocolatiers augments proportionately to the processing costs spent to transform them from the imported beans to the truffle or the chocolate bar that you can buy at the duty-free stores or department stores. Every industry has expenses to pay, and depending on its successful management, each level of profits unfolds accordingly.

Caring for the Stakeholders. Slides 8 and 9.
Today, we started with the people and their respective economic element of sustainability. The main message of these two slides is straight to the point: people matter. And people at the upstream level matter more because there is a historical miscalculation of the living wages that need to be carefully reviewed, in conjunction with all the main players of the rest of the global value chain (at the midstream-downstream). The three levels are entangled, no matter if they are located so far away and geographically separate on the planet. Let´s start with the basic theory: look how different the strategies are. For the upstream (raw inputs from the trees), the business strategy applied has always been low-cost leadership. While in the midstream or downstream levels, the business strategy applied is the differentiation one. Both strategies are conceptually and philosophically antagonistic, and this is why the low-cost strategy applied to the farm’s activities in the tropical belt nations doesn´t permit them to adjust the living wages of the farm collectors. According to our research, poverty has not yet been overcome because two different conceptual strategies are clashing for the different segments of the global value chain of both crops. All the players (upstream, midstream, and downstream) need to sit down and formulate potential solutions and alternatives to improve the quality of life of those who produce in the upstream businesses. There is always more than one solution to adjust the living wages. The solution should be negotiated by all the main players, in such a way that all the workers at the upstream level could reach or be near the sustaining threshold of middle class ($20 pppd pay per person per day for a family of 4 wage-earners) in a window of 5 to 10 years from now, or at least to rise to upper-low class (those who earn between $10 to $20 pppd for a family of 4 wage earners), adjusted by purchase power parity of each nation. The solution to this problem is in the whole value chain design. Two antagonist business strategies are colliding between the upstream and the midstream-downstream groups: the low-cost strategy and the differentiation strategy. If theoretically, the global value chain is not congruent or it is not founded under the same strategies, this theoretical mistake must be addressed first. The solution is not to automate the workforce upstream and create a robot army to collect coffee cherries and cacao pods. That will create more poverty and a global second French Revolution.
The problem of low living wages in the upstream tropical nations is there. I am not inventing it. And this problem is not the fault of this century’s 4 generations alive. We are not involved in this trouble. It is an old issue. It has historical roots. The historical cause can be found in the saga that I recently finished in May 2026. I worked 18 months to reveal it. Once you understand the exact grounds of this issue in history, you are capable of having mercy and compassion for the low-wage workers who have migrated desperately for years to find better salaries abroad. This low-wage situation needs to be fixed with the design of a new value chain for coffee and cacao, in which all the players involved can fulfill the dream of leaving poverty behind by becoming middle-class citizens soon. If the wages remain untouched, then the support for the farmers and the harvest workforce should come from other sources (private sector gifts, donations, NGOs, or government welfare). However, the government´s trend now is to cut costs, and the NGOs are disappearing everywhere. So it is unthinkable to believe that the upstream coffee and cocoa sectors will be sustained by the respective tropical governments or NGOs of each nation. So what to do?

There is a historical duty for the agricultural farmers of the tropics. The transition from slaves to indentured servants happened before the Independence movements of the 19th century. Then the new serfs transitioned to become urban factory proletarians or agricultural wage laborers, but the wages in the tropical nations remained so low that the unskilled, non-educated employees could not make a middle-class living. The huge migrations to the cities ocurred. But the low wages remained in urban centers, too. Over time, workers migrated to the nearest rich nations with higher wages. At the present time, in the tropical belt nations, the transition from hyper-low wage workers to middle-class citizens is a historical duty that requires attention from all the stakeholders of the whole global value chain. Agents from the World Bank or the United Nations can help to change this situation with robust, sooner steps,  “petit a petit,” but gradually, otherwise inflationary crisis spirals will create more social and economic chaos than the solution.

Our next publication is about the other two elements of sustainability:  Caring for the land and caring for society. See you then. I will add the closing words of the text then. Thank you for reading this interesting saga that touches historical points that require urgent attention.

Announcement. Our next episode will be the second part of this topic. We will cover the aspects of caring for the land and caring for the societies (communities around the farms).

Musical Section.
This saga is committed to raising the traditional musical instruments and their respective musicians over the digitally produced sounds. This saga is dedicated to the chamber orchestras. 
Today, we have chosen the Australian Chamber Orchestra (ACO) of Sydney. https://www.aco.com.au/. This chamber orchestra is directed by Richard Tognetti. Bach´s Goldberg Variations are a complex arrangement. Look at the clients of Bach: Count Kaiserling, a former Russian ambassador at the Court of Saxony. This Russian traveled with a young musician, called Johann Gottlieb Goldberg, to have lessons with Bach in Leipzig. Bach composed the Goldberg Variations (to be played with the Clavier, the predecessor to the piano). The objective was to help the count who suffered from insomnia.

Enjoy!

Thank you for reading http://www.eleonoraescalantestrategy.com. It is a privilege to learn. Blessings.

Sources of reference and bibliography utilized for today´s inferences. The bibliography is listed on the last slide of the reference reading material. Click the respective URL to trace them.

1. Mintzberg, H.; Lampel, J.; Quinn, J. and Ghoshal, S. The Strategy Process- Concepts, Context and Cases. 4^th  edition. Prentice-Hall. 2003. Chapter 4. Analyzing Strategy. https://archive.org/details/strategyprocessc0000unse
2. Price of the Koona Ultraviolet Coffee at Amazon (08-06-2026) https://www.amazon.com/Imagine-Kona-UltraViolet-Biodynamic-Coffee/dp/B0CTVJZM4J/
3. Price of the auction of the Panama Geisha coffee 2025. Look at the Box of Eden price at the bottom of the page. https://app.haciendaesmeralda.com/auction/a-floral-experience-auction?product=4210

Disclaimer: Eleonora Escalante paints Illustrations in Watercolor. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY. All are used as Illustrative and non-commercial images. Utilized only informatively for the public good. Unless otherwise stated, I do not own any lovely photos or images.