This study investigates the Indonesian cocoa production to reveal the possibilities for poverty alleviation. We estimate, using 1,290 panel observations from 722 households and stochastic frontier analysis, the technical efficiency of cocoa production and disaggregate productivity growth. Our results indicate that the average efficiency of the cocoa farmers is 50%. Farmers' educational attainment and their experience in cocoa farming are significant factors increasing efficiency. We also find that the productivity of Indonesian cocoa farms increased by 75% between 2001 and 2013. Technical efficiency growth and the increased chemicals use supported by government subsidies were responsible for the majority of this gain. Furthermore, large distortions in input allocation were found. Hence, policies that encourage the efficient use of farm inputs would be highly beneficial. Weather‐ and pests‐induced volatility in cocoa production could be decreased by promoting agricultural research on drought‐ and disease‐resistant cocoa varieties (EconLit citations: D24, O13, Q12).