Lizard Earth

Lizard Earth is a responsible producer and aggregator of high-quality organic cocoa beans in Sierra Leone. Lizard Earth’s inclusive business model strongly centers around an equitable sharing arrangement (over profits, premiums, and use rights) with its host communities.

The problem

Africa produces the vast majority of cocoa beans, yet the level of cocoa processing that occurs on the continent is limited. West-Central Africa currently accounts for more than 70% of the total global cocoa production but accounts for less than 21% of the total global cocoa processing market. Further, in the case of Sierra Leone, owing to civil war and health crises, for most of the past two decades, cocoa exports have centered on the mass production of low-quality cocoa, thus fetching low prices.

Cocoa smallholder farmers in Sierra Leone earn $200 a year, on average. The country’s average cocoa yield per hectare is two-thirds that of Ghana. While cocoa prices in Sierra Leone are generally higher than in neighboring countries, they still earn far below a living wage because of low productivity, limited access to markets, and an unfair global pricing system. 

The cocoa sector in the country is also highly fragmented; national exporters source cocoa through largely informal supply chain channels run by super agents, sub-agents, and micro buyers who serve thousands of smallholder farmers. This results in agents taking advantage of farmers either by not being transparent on the market price or even employing dishonest buying practices.

The solution

Lizard Earth is creating a sustainable cocoa value chain where farmers earn a living wage and consumers can feel good about what they eat. 

By connecting farmers to premium markets and well-developed supply chains, their yields and incomes increase. The Lizard Earth business model has a bundled approach that provides training and extension services to farmers, access to organic certification, and direct access to international markets. The business has also developed a plantation management model that fosters talented smallholders to grow into successful agri-entrepreneurs, who will have the capacity to independently manage sectors of the company’s plantation.

Finally, Lizard Earth has partnered with a local chocolate brand to start adding value at origin in the form of semi-processed products (e.g. producing cocoa liquor for export markets or chocolate for the local market). This would allow the company to improve its gross margins, which could be used to further strengthen the support to smallholders.

The origin

Lizard Earth was incorporated in September 2018 by Daniel Scholler, who was driven to innovate the future of cocoa and chocolate. 

“In 2014, I moved to Sierra Leone,” he says. “Working in an NGO cocoa value chain-project, I realized quickly that the short-term development interventions and millions of aid dollars which had flown into the country since 2001 had neither created long-term structural change, nor substantially transformed the lives of farmers: Only three out of 1,000 households operated at commercial-scale. All others practiced subsistence farming; their traditional methods clearly depleted the existing natural resources. In 2017, there was a growing, though vague, awareness among consumers that current agribusiness models (and associated supply chains) were not sustainable. I understood that this provided a strong opportunity for change.”

The impact

Currently, around 2,300 farmers have been directly impacted as a result of Lizard Earth’s services in Sierra Leone. Per the latest 60 Decibels study, 92% of them are living below the World Bank defined poverty line ($1.90 per day). 

By cutting out middle-men and buying directly from smallholder farmers, Lizard Earth allows farmers to increase their income by $58 per year. In addition, they are working to improve smallholder yields from an average of 120 kilograms to 300 kilograms per hectare, thereby increasing farmer incomes by an additional $410 per year. 71% of the farmers included in a 2022 study reported that their incomes had significantly increased as a result of selling to Lizard Earth.

Further, the Lizard Earth business model enables farmers to sustainably grow and cultivate a crop that is highly sought in the global market. Organic agro-forestry and climate-smart production practices support farmers in preparing for and mitigating the negative effects of increasingly unpredictable weather patterns. By establishing nurseries, providing training, and tools for maintenance, farmers are able to increase their yields thereby improving their income levels and reducing vulnerability to environmental and financial shocks.

The investment

Acumen invested a $550,000 convertible note in Lizard Earth to position the company on a path to profitability. As part of the investment, Acumen gained a board seat, and an opportunity to empirically understand the impact of connecting smallholder farmers in West Africa to global premium commodity markets and their supply chains. 

To provide financing that would enable the company to grow and plan for a realistic exit, without creating an undue debt burden, Acumen structured the convertible note wherein the company would make royalty payments for the first five years that were a small fixed percentage of the preceding financial year’s revenue. This structure allows the company to not be overburdened with debt payments while growing its operations. At the same time, it allows Acumen to earn a reasonable return on our investment and recycle our capital into similar solutions elsewhere. 

Based on how the business progresses, after five years we have the option to convert the note to equity or have the note repaid over the next five years.

“I was nearly losing hope in my cocoa farm before Lizard Earth came. With their presence, I got new skills on how to maintain my farm and how to make soap for sale”

Customer of Lizard Earth

The story

Sierra Leone’s cocoa value chain is highly fragmented; national exporters mainly source cocoa through largely informal supply chain channels run by agents. Smallholder farmers struggle as agents take advantage by not being transparent on the market price and deploying illegitimate buying practices. Furthermore, even though export prices for Sierra Leonean cocoa have increased by more than 150%, farmgate prices have not kept pace. 

The Lizard Earth business model provides an alternative narrative to the existing practices in the cocoa market and also, by extension, the global commodity market. This narrative is rooted in the belief that farmers can thrive on their farms by working with inclusive companies that allow for more value to be shared with them through premiums and profit-sharing.

Lizard Earth’s integrated business value chain enables the company to grow sustainably and to scale its operations, while also distributing more value to smallholder farmers. The combination of the company’s services, including inputs, training, and market access, all together means better incomes for smallholder farmers.

Starting at the first stage of production, Lizard Earth’s training modules help to enhance farmer resilience through the promotion of climate adaptation practices. To elucidate, agro-forestry enhances biodiversity, serves as a carbon-sink, provides important ecosystem services, and puts soil fertility first. In 2023, Lizard Earth began to build awareness among farmers on the problems of deforestation and traditional slash and burn-agriculture, focusing strongly on the implementation of the EU’s new Deforestation Legislation. The company’s unique approach sets aside and protects 30% of the lease area under the High Conservation Value (HCV) Methodology, while also tailoring sustainable practice for smallholders. The respective areas will serve as a future generation bank and help maintain the humid microclimate which is so critical for the farmers to thrive. 

At the next step of the value chain, Lizard Earth’s post-harvest and purchasing practices challenge existing norms within the cocoa industry. Traditional buyers purchase beans that farmers have dried and fermented themselves, often at lower and less consistent quality which results in lower prices and some beans being discarded. Lizard Earth, on the other hand, operates community level fermentation and drying centers that post prices for wet beans to ensure consistent high quality. Along with transparent processing and purchasing, the company also facilitates organic certification for farmers, with on-site Farmer Support Officers coaching farmers on best practices. This certification allows them to earn premium prices, which means more income for farmers. 

In terms of market access, the company is focused on strengthening trade relationships with actors in the global niche-market for ethical and premium cocoa. By making Lizard Earth’s farmers the go-to source for cocoa, global buyers could offer fixed annual prices, enhancing the reliability of incomes for the farmers. While the chocolate industry is currently the biggest user of cocoa, other industries also use cocoa to make products such as soap, cosmetics, and pharmaceutical products. Lizard Earth’s training on value-add processing also helps to increase farmer incomes. 

As per the latest 60 Decibels study, 81% of the farmers had reported “very much increased income” as a direct consequence of working with the company. When asked about their key motivation to work with Lizard Earth, 38% of the farmers noted that it was the additional farm training, and the better pricing. Lizard Earth’s impact on smallholders is notable. By consolidating the different parts of the cocoa value chain, Lizard Earth is demonstrating a model for a more equitable cocoa industry.