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Trends in chocolate and cocoa consumption suggest growing opportunities in China

01 December 2013

According to reports from Euromonitor International, rising demand for dark chocolate, which requires a higher cocoa content, is driving up cocoa prices, with China in the forefront of rising demand for dark chocolate. Some 34% of the retail value of chocolate in China comes from plain dark chocolate, up from a mere 7% in 2008. China for some time has been tipped as a major area for growth in chocolate consumption. According to industry analysts, “China represents a strong opportunity but products must be tailored to fit the market.”

Dark chocolate consumption is also rising in other major markets. In Switzerland, some 30% of chocolate consumed is now dark chocolate, up from 8% in 2008, while in the US dark chocolate now accounts for 19.9% of retail sales.

The growth in the use of cocoa in dark chocolate comes against a background of worries over cocoa supplies arising from production setbacks in West Africa, resulting from poor rainfall in Ghana, Côte d’Ivoire and Cameroon.  This has seen varied projections of the scale of the pending cocoa deficit ranging from the International Cocoa Organization’s 52,000 tonnes, through 173,000 tonnes (industry analysts Macquarie), to as high as 209,000 tonnes  (US-based KnowledgeCharts).

These concerns led analysts in September to project that cocoa prices would stay “well supported in the six-to-12 month period”. According to Macquarie, US processors are “‘running close to full capacity’ well ahead of the traditional high demand periods of Halloween and Christmas”. This is held to reflect a process of stock rebuilding by chocolate makers in the face of “rising overseas demand”.

Meanwhile, according to the website Agrimoney.com, “processors’ coverage of cocoa bean supplies has ‘fallen to uncomfortably low levels’, as non-commercial investors have tied up the supplies to be gained from futures markets.”

Overall, according to Goldman Sachs, “cocoa has been one of the best-performing commodities of the summer.”  However, while prices have risen 15% since March 2013, they were still 5.3% below the levels in September 2012, and below price levels from March 2009 and November 2011, which saw peaks in January 2010 of US$3,520/tonne.

According to academic analysis, longer-term issues in some parts of Ghana are faced, as cocoa producers have begun switching to other crops, notably palm oil, following earlier disease outbreaks and active efforts to develop palm oil production by the Ghana Oil Palm Development Company.

Elsewhere in West Africa, the commodities group Agriterra announced in September 2013 that it was doubling its area under cocoa production in Sierra Leone to 3,200 ha, with negotiations under way to bring a further 1,550 ha under cocoa production. These new investments were attributed to expanding cocoa shortages and to increases in chocolate sales to record highs, and were closely linked to corporate partnerships with leading Asian commodity traders. 

Editorial comment

China’s cocoa bean imports have grown strongly in recent years from 21,000 tonnes in 2009/10 to 40,000 tonnes in 2011/12. This growth is continuing, with 40,000 tonnes being imported in the 9 months from October 2012 to July 2013. This can be attributed to both the overall growth in chocolate consumption and the growing consumer preference for dark chocolate. Experience elsewhere suggests that once a taste for dark chocolate is established, consumers seldom return to milk chocolate. This is good news for cocoa exporters to China.

Normally dark chocolate uses fine cocoa, produced largely in Ecuador, Venezuela, the Dominican Republic, Madagascar, Papua New Guinea, Java or (to a smaller extent) CARICOM members, currently over 71% of Chinese cocoa imports are sourced from Africa (41% from Ghana).

While some imported cocoa is derived from barter deals with producing countries, most of it is sold through US, European or Asian trading houses, with very few consignments contracted directly from local African traders.

This issue of developing more direct trading relationships and even partnerships with Chinese companies in developing cocoa-based products for the Chinese market would appear to be an area with considerable scope for growth, given African aspirations to move up agro-food value chains.

However, while the Chinese market is growing, this growth needs to be kept in perspective. Current Chinese consumption is still only equivalent to the consumption of major Western cities such as Paris and London.

Other emerging markets also have scope for growth in chocolate consumption. According to representatives of the French company Touton, the Indian market has considerable growth potential, based on the refined tastes of a growing middle class and the opening up of rural areas to multiple retailers, as problems of rural electricity supplies are addressed.

In addition, it should be noted that dark chocolate consumption in mature markets is also increasing, in part linked to health considerations, with even small growth in these established markets carrying important implications in terms of overall cocoa demand.

Given volatile cocoa prices, unfavourable weather patterns, disease outbreaks, currency fluctuations and growing investment in non-ACP suppliers in Asia, it remains to be seen how well placed ACP cocoa producers will be in capitalising on expanding demand for cocoa in emerging economies.


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