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Exporting cocoa beans to Eastern Europe

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Eastern Europe is an emerging market for high-quality chocolate. Trends about quality and consumer education might be lagging behind in the region in comparison to Western Europe, but countries such as Czech Republic, Hungary and Poland offer increasing opportunities for the production and trade of high-quality cocoa due to a growing interest in premium chocolates. There are still fewer companies in the region that operate in this niche. The growing demand for high-quality chocolate offers an opportunity for more direct relationships between cocoa producers and Eastern European speciality chocolate makers.


1 . Product description

The cocoa tree (Theobroma Cocoa) grows in tropical areas between 15 and 20 degrees latitude north and south of the equator in Africa, Asia and Latin America. After extraction from the pod, cocoa seeds are fermented and sundried. A cocoa producing tree can deliver on average 0.5 to 2 kg of dried seeds per year.

The international cocoa market, including Eastern Europe, accepts three types of cocoa beans:

  1. Common grade: Forastero cocoa
    Forastero was originally grown in the high Amazon region and is now the predominant cocoa variety cultivated mainly in Africa, accounting for approximately 80% of the global cocoa production. The beans have a flatter flavour than the fruitier and more citric Criollo and Trinitario beans.
  2. High grade: Criollo cocoa (original cocoa tree)
    Criollo was originally grown in Venezuela, Central America and Mexico, but is now also grown in Ecuador, Colombia, Peru, Bolivia, Nicaragua, Honduras, Guatemala and Sri Lanka. Criollo makes up 5 to 10% of the global cocoa production. The beans have a bitter, aromatic flavour and are easily processed.
  3. High grade, Trinitario cocoa
    Trinitario was originally grown in Trinidad, but is now also grown in Venezuela, Ecuador, Honduras, Nicaragua, El Salvador, Costa Rica, Cameroon, Samoa, Sri Lanka, Indonesia and Papua New Guinea. The beans are a hybrid of the Criollo and Forastero trees. This variety represents between 10 and 15% of the global cocoa production.

Harmonised System (HS) codes are used to classify products and to calculate international trade statistics, such as imports and exports. The focus of this study is on cocoa beans under Harmonised System code 1801.

Other cocoa products are covered in the CBI study on exporting semi-finished cocoa products to Europe.

2 . What makes Eastern Europe an interesting market for cocoa?

Poland is Eastern Europe’s largest importer of cocoa beans, reaching 12.6 thousand tonnes in 2017 with a value of € 37.4 million. That makes Poland the ninth largest European cocoa importer in 2017, but only accounting for 0.5% of total European imports. The second largest cocoa bean importer of the region is Slovakia, with an estimated 8.8 thousand tonnes in 2017 (€ 23.3 million), followed by Bulgaria with around 2.2 thousand tonnes in 2017 (€ 4.5 million). The average annual change of the cocoa imports of these Eastern European countries has increased from 2013 to 2017. The 413% increase in Bulgaria’s cocoa imports could be explained by the 2014 expansion of Nestlé’s KitKat production in the capital Sofia. Nestlé’s factory in Bulgaria is one of three factories in Europe licensed to make KitKat chocolate bars for the entire continent.

Compared to Western Europe, countries in Eastern Europe imported lower shares of cocoa beans directly from producing countries. For example, Poland imported 72% of its cocoa indirectly from other European countries in 2017, mostly from the Netherlands (4,335 tonnes) and Germany (4,330 tonnes). Another 28% of Polish cocoa beans imports were sourced directly from producing countries, the largest share coming from Ivory Coast (2,513 tonnes), followed by the Dominican Republic (629 tonnes) and Ecuador (375 tonnes). Slovakia imported almost all of its cocoa from the United Kingdom (99%). Bulgaria makes for an exception, having imported 99% of its cocoa beans directly from producing countries in 2017. Around 46% (1,001 tonnes) of Bulgarian cocoa beans imports came from Ivory Coast and 45% (999 tonnes) from Cameroon.

Table 1. Total Eastern European imports of cocoa beans per country in tonnes, 2013–2017

 

2013

2014

2015

2016

2017

Annual change 2013-17

Poland

10,592

15,049

14,883

10,443

12,648

4.5%

Slovakia

7,577

7,339

7,096

10,993

8,828

3.9%

Bulgaria

3

6

18

46

2,217

413%

Croatia

2,322

1,560

884

1,500

1,774

-6.5%

Estonia

28

236

75

1,800

1,028

147%

Slovenia

7

28

50

55

42

57%

Czech Republic

13

17

28

32

42

34%

Latvia

2,135

2,006

1,555

20

18

-70%

Romania

4

52

10

28

10

25%

Hungary

3

6

4

29

8

32%

Lithuania

3

3

2

2

2

-3.8%

Source: Eurostat, 2018

Mass chocolate market dominant in Eastern Europe

Within Eastern Europe, Estonia and Slovakia have the largest annual chocolate consumption with 6 kg and 5.4 kg per capita respectively in 2014, followed by Poland with a per capita consumption of 5 kg of chocolate in 2015. In comparison, Switzerland had the largest chocolate consumption per capita in Europe overall in 2015 with 8.8 kg, followed by Germany at 8.4 kg per capita.

The purchasing power of eastern Europeans is relatively low compared to that of western European consumers, due to comparatively lower wages on average in the East. This often leads consumers to focus more on low-priced food, including chocolates. Products from mainstream brands offer the highest possible quality for the most accessible prices in Eastern Europe’s supermarkets. Well-known western brands are said to be perceived as offering high-quality chocolate. The big multinational Mondelēz takes the leading market position of producer and trader of chocolate in several Eastern European countries, such as Bulgaria and Poland. Mondelēz even expanded its operations in Poland in order to strengthen its market position.

Growing demand for high-quality and premium chocolate

Although mainstream brands dominate the market in Eastern Europe, there are growing opportunities for artisanal and high-quality chocolate.

Among Eastern European countries, the Czech Republic can be considered a frontrunner in artisanal and high-quality chocolate. Consumer demand for high quality and premium products has been growing in the Czech Republic for some time already. Jordi’s Chocolate was the first company to make high-quality, single-origin, bean-to-bar chocolates in the Czech Republic back in 2012. They have since gained several competitors, including Ajala Chocolate and Míšina čokoláda. Hungary also hosts a range of companies producing premium chocolates, despite having a small average consumption of chocolate compared to other European countries. ChocoMe, for example, produces its own premium bean-to-bar products, just like Choco Card. The Eastern European Chocolatier Competition of the International Chocolate Awards takes place in Hungary’s capital Budapest on a yearly basis.

Traditional chocolate producers have also been joining the premium chocolates trend. Nestlé, for example, launched the special ORION Master Chocolate Edition with 68% cocoa and the premium chocolate tablet brand Nestlé L’Atelier, mainly made from sustainable and local ingredients. By entering the premium market, Nestlé aims to consolidate its leading position in countries such as the Czech Republic. When traditional producers enter a premium market, supermarkets likely remain the main distribution channels for chocolate, given the very wide range of price and quality on offer. Other well-established chocolate producers have also started seeing opportunities in Eastern Europe. Premium chocolate producer Lindt, for example, has been planning to open a boutique in Budapest.

Healthier products gaining traction

Along with the high quality and premium products trend, there has been an increase in health awareness in Eastern Europe. As consumers become more aware of their health, they pay more attention to what they eat as well, helping to explain the slowly growing demand for less processed and more natural alternatives in food products. A growing trend for chocolates that contain less sugar explains the increased demand for dark chocolate. Interest in vegan chocolate has risen in Poland and is also visible in the Czech Republic. Polish chocolate maker COCOA is an example of company joining this trend, producing raw chocolate, creating lifestyle bars and marketing their chocolate as healthy, since their bars are ‘refined sugar free, soy free and naturally gluten free’. Another example is Casa Kakau, a vegan bean-to-bar producer founded in 2016 in Bulgaria.

Organic chocolate market yet to take off

Organics sales in Eastern Europe grew 8.8 percent in 2016 compared to 2015. The number of organic products on offer also increased, as consumer awareness of organic products improved in countries such as Bulgaria and Poland. The market for organic products in Eastern Europe remains a relatively small market though.

On the other hand, thanks to continuing income gains in the region, GFK expects robust growth rates for the 2018 stationary retail turnover in Bulgaria (+5.3%), Hungary (+6%), Czech Republic (+6.5%) and Poland (+5.6%). In combination with a growing organic market, these results may open interesting future opportunities for organic chocolate in Eastern Europe. In Poland, COCOA is still the only organic chocolate producer, exporting their dairy-free, raw, organic chocolate bars to many countries, from Australia to the United Kingdom.

Slow movement towards single-origin chocolate bars

Origin does not play a big role in the Eastern European chocolate market yet. Nevertheless, a growing number of chocolate companies have been marketing single origin lines. In the Czech Republic alone, examples of such companies include Jordi’s Chocolate, Ajala Chocolate and Míšina čokoláda. Most chocolate producers in Eastern Europe import their cocoa beans from western European importers. Hungary’s Harrer Chocolat, for example, sells high-quality, single-origin bars from Madagascar, Bolivia and Venezuela in its locations in Hungary and Austria, buying their cocoa beans from a Dutch cocoa importer. In the Czech Republic, Míšina čokoláda also imports its cocoa beans from European suppliers, but choses to source cocoa beans directly from producing countries when the company needs larger quantities. Casa Kakau, from Bulgaria, is an example of Eastern European company already engaged in direct trade, importing their cocoa beans straight from Ecuador.

3 . What are the requirements for cocoa to be allowed on the market in Eastern Europe?

Exporting cocoa to most Eastern European countries requires compliance with strict European Union requirements. In our study on buyer requirements for cocoa, you can find a detailed analysis of these requirements. See some of the highlights below, specified for the Eastern European market where relevant.

Legal requirements

You must follow the European Union legal requirements for cocoa, mainly dealing with food safety. Traceability and hygiene are the most important themes.

Specific sources of contamination require special attention, the most common of which for cocoa beans include: pesticides, mycotoxins (ochratoxin A is especially relevant for cocoa), polycyclic-aromatic hydrocarbons (PAHs) and microbiological contamination such as salmonella, although cocoa is considered low risk for the latter.

It is also important to consider contamination from heavy metals during production and handling, particularly cadmium. The presence of cadmium may be a particular problem for cocoa from some Latin American countries due to issues such as volcanic activity and forest fires.

Quality criteria

You must meet international quality standards to gain access to the Eastern European market for cocoa beans. These standards are particularly high within the fine-flavour cocoa beans speciality segment .

Cocoa of Excellence lists the following factors to define high-quality cocoa:

  • Genetically good trees;
  • Well-cared cocoa, grown in a suitable environment;
  • Properly harvested pods;
  • Good practices to keep trees healthy, free of pests and diseases;
  • Optimum fermentation and drying protocols specific to each bean type;
  • Know-how of cocoa beans processing and chocolate making.

High-grade, fine flavour cocoa beans are generally of higher quality than common-grade cocoa beans, as their distinctive flavour is popular among manufacturers of high-quality chocolate. Fine flavour beans are usually produced from trees genetically linked to Criollo and Trinitario cocoa-tree varieties. Common-grade or bulk cocoa beans for mass production are genetically derived from Forastero trees.

Harvesting and processing techniques are also important in harnessing the qualities of fine flavour cocoa beans. While harvesting, make sure to pick only ripe fruits. During processing, make sure all cocoa beans are fermented and dried homogenously. Cocoa beans should be shipped shortly after harvest because extended storage, longer that six months, may result in losses due to the relatively high humidity in tropical environments.

The grading of cocoa depends on the fermentation process, which is done to moderate the beans’ initially bitter flavour and yield a typical cocoa flavour. Cocoa grading differs across producing and consuming countries. Standard practices have been set by the international cocoa trade associations which classify grades as follows:

  • Well fermented cocoa beans: less than 5% mould, less than 5% slate and less than 1.5% foreign matter.
  • Fairly fermented cocoa beans: less than 10% mould, less than 10% slate and less than 1.5% foreign matter.

Tips:

Labelling requirements

The label on cocoa exported to Eastern Europe should be written in English. The label should include the following topics:

  • product name;
  • grade;
  • lot or batch code;
  • country of origin;
  • net weight in kg.

In case your cocoa is organic or fair-trade certified, the labels should contain the name or code of the inspection body and certification number.

Figure 2: Labelling example

figuur_2_14.jpg

Source: Caribbean Agricultural Network

Packaging requirements

Cocoa beans are traditionally shipped in jute bags weighing between 60 and 65 kg.

Shipping cocoa beans in bulk has become more popular in the mainstream market in recent years. When shipped bulk, cocoa beans are loaded directly into the ship’s cargo hold or in shipping containers that have a flexi bag (see figure 3). This mega bulk method is often adopted by larger cocoa processors, which handle cocoa beans of standard qualities.

Jute bags are still commonly used in the fine flavour and speciality cocoa segment. Vacuum-sealed GrainPro packaging can be used for very high-quality micro lots (see figure 3).

Figure 3: Examples of packaging for cocoa beans: jute bag, container-sized flexi bag and GrainPro

figuur_3-1.jpg  figuur_3-2.jpg  figuur_3-3.jpg

Sources: Osu.edu, Bls.bulk.com and GrainPro

Tip:

Additional requirements

Western and Northern European buyers generally have stricter additional requirements and are more active in the field of sustainability than buyers in southern and Eastern Europe. Nevertheless, you can expect buyers in Eastern Europe to request extra food safety guarantees, such as the implementation of good agricultural practices and Quality Management Systems (QMS) regarding production and handling processes.

The main standards of good agricultural practices are set by GLOBALG.A.P. They are voluntary standards for the certification of agricultural production processes that provide safe and traceable products.

A system based on Hazard Analysis and Critical Control Point (HACCP) is often a minimum standard required for the storage and handling of cocoa beans. Some buyers will also expect you to have certificates from the International Featured Standards (IFS) or the British Retail Consortium (BRC).

Corporate responsibility and sustainability are also growing in importance in the cocoa sector. Adopting codes of conduct and sustainability policies related to your company’s environmental and social impacts can provide you with a competitive advantage. Leading companies in the Eastern European chocolate market such as Nestlé and Mondelez have sustainability policies emphasizing contact with producers, operations transparency, as well their social and environmental impact.

Certification standards such as UTZ and Rainforest Alliance have also become important in the mainstream chocolate market. Both certification standards merged in January 2018 into Rainforest Alliance. Several traders and manufacturers operating in Eastern Europe feature on the UTZ list of certified cocoa supply chain actors, including multinationals such as Nestlé, as well as other chocolate produces such as the Czech Chocoland and the Polish Union Chocolate.

Requirements for niche markets

The demand for organic-certified cocoa products in Eastern Europe is relatively small. Apart from the Polish COCOA there are very few chocolate manufacturers which ask for organic certified cocoa. Organic certification could become more relevant in the future, but the current picture does not indicate any immediate opportunities. The importance of fair-trade certification in Eastern Europe is also relatively small. Nevertheless, in Poland, the Polish Fair Trade Association, and in the Czech Republic and Slovakia the Fairtrade Czech Republic and Slovakia are members of the World Fair Trade Organisation, which may facilitate obtaining fair-trade certification in these countries.

Tips:

  • Check the EUR-Lex website for more detailed information about the regulations concerning cocoa products.
  • Find out which standards or certifications potential buyers in your target segment favour. Buyers may have preferences for a certain food safety management system or sustainability label depending on their end clients and distribution channels.
  • See our study on exporting certified cocoa to Europe for more information about demand, trends and specific trade channels.

4 . What is the competition like in the Eastern European cocoa market?

Most of the cocoa beans supplied to Eastern Europe are re-imports from other European countries, making up 76% of the total supply. The United Kingdom exported the largest volume of cocoa beans to Eastern Europe at 8,788 tonnes, all of which exclusively sent to Slovakia. Other important EU suppliers to Eastern Europe include the Netherlands and Germany, with respectively 6,475 tonnes and 4,353 tonnes. The largest non-EU supplier is the Ivory Coast with 3,789 tonnes of cocoa beans, which accounts for 59% of all cocoa beans sourced directly from producing countries.

Tips:

  • Identify your potential competitors to learn from their practices, including:
    - marketing: website, social media, trade fair participation;
    - product characteristics: origin, quality, oil content;
    - value addition: certifications and processing techniques
  • Check well-structured websites, such as Ingemann (Nicaragua) and Xoco (Honduras).

5 . Through what channels can you get cocoa on the Eastern European market? Which market segments to target?

The Eastern European market does not differ much from Western Europe in terms of segmentation and channels. See for instance our study on trade channels and segments for cocoa. The below analysis looks into current developments in the three segments of the Eastern European cocoa market.

Chocolate confectionery

The chocolate confectionery sector in Eastern Europe is very concentrated by a few large companies, including Mars, Mondelez, Nestlé, Hershey and Ferrero. Supermarkets make up the most important channel for the sale of chocolate products to consumers in Eastern Europe. The leading brands in the Eastern European confectionery sector include Orbit, Kinder, Milka, Snickers and Alenka.

Some of the businesses in the high-quality chocolate segment in Eastern Europe include, by country:

Food industry

Cocoa products are also important ingredients for the Eastern European food industry. Hungary and Poland are among the leading agricultural and food processing locations in the region. Companies producing biscuits, ice cream, pastries and other bakery products are some of the main users of cocoa products. Naturally, chocolate manufacturing companies in Eastern Europe such as Bonbonetti in Hungary, and Wedel in Poland, also use cocoa products.

Cosmetics industry

The beauty and personal care market in Eastern Europe grew steadily at an average annual growth rate of 5.9% in the 2013–2018 period, reaching approximately € 22 billion in 2017. The cosmetics industry processes cocoa butter in products such as creams and soaps. If you want to know more about opportunities in this industry, refer to our study on exporting natural ingredients for cosmetics to Europe.

Figure 5: The main channels for export of cocoa beans to the Eastern European market

figuur_5_10.jpg

As an exporter, entering the market will vary according to the quality of your cocoa beans, your supplying capacity and business model. Large importers can serve as a gateway into the Eastern European market for exporters of cocoa beans dealing in higher volumes and standard qualities. Companies such as Wedel and Union Chocolate in Poland and Chocoland in the Czech Republic have integrated activities such as importing, crushing and manufacturing. Two of the world’s leading chocolate manufacturers, Barry Callebaut and Mondelēz also have processing facilities in Poland.

If you are a producer or exporter of fine flavour, high-quality cocoa beans, try targeting speciality chocolate stores and chocolate makers directly. Some of these players in Eastern Europe include Casa Kakau, Ajala Chocolate, Choco Card and Manufaktura Czekolady. Several Eastern European chocolate makers import cocoa beans from specialised importers in Western Europe, such as the Dutch Daarnhouwer and Cocoanect.

Tips:

6 . What are the end market prices for cocoa in Eastern Europe?

Prices for chocolate can be segmented in lower end, middle range and upper end. In general, the lower-end chocolate products are often of standard quality and the cheapest on the market. The upper-end products are chocolate products of high quality, made with fine flavour beans, possibly of single origin. For more details about segmentation in the cocoa and chocolate markets, refer to our study on channels and segments.

Table 2: Indication of consumer prices of chocolate per market segment in Eastern Europe

Market segment

Brand, country

Product details

Price/100g

Upper end

Manufaktura Czekolady,
Czech Republic

Single-origin (Peru, Ecuador or Colombia), 70% cocoa

€ 7.83

Ajala, Czech Republic

Single-origin (Tanzania, Haiti, Dominican Republic), 70% cocoa

€ 9.96

Jordi’s, Czech Republic

Single-origin (Vietnam, Honduras or Madagascar), 70% cocoa

€ 7.41

Misina Cokolada,
Czech Republic

Single-origin (Vietnam or Honduras), 70% cocoa

€ 7.25

Choco Card, Hungary

Single-origin (Nicaragua), 70% cocoa

€ 6.93

ChocoMe, Hungary

Dark chocolate, 66% cocoa

€ 4.17

Raw Cocoa, Poland

Raw chocolate classic bitter

€ 4.98

Market segment

Brand, country

Product details

Price/100g

Middle range

Casa Kakau, Bulgaria

Vegan chocolate, 70% cocoa

€ 3.81

 

Lindt, in Czech markets

Dark chocolate, 70% cocoa

€ 2.89

 

Fairtrade-certified product, in Poland

Dark chocolate, 72% cocoa

€ 2.80

Market segment

Brand, country

Product details

Price/100g

Low range

Milka, in Czech markets

Milk chocolate

€ 0.69

 

Orion, in Czech markets

Dark chocolate

€ 1.23

 

Tesco, in Czech markets

Dark chocolate

€ 0.54

The price breakdown for chocolate is illustrated in figure 6.

Be aware that export prices of cocoa beans and the share kept by cocoa producers will depend on the cocoa bean quality, the size of the lot and the supplier’s relationship with the buyer. However, chocolate companies and retailers keep the largest shares.

Figure 6: Price breakdown for chocolate

figuur_6_4.jpg

Source: Cocoa Barometer, 2015

Tips:

  • Monitor end consumer prices of chocolate to evaluate price ranges. The websites of supermarket chains, chocolate speciality stores and chocolate web shops are good sources for price information. Some of these sites include: Tesco (Czech Republic), Cokolada (Czech Republic), Endorfine (Hungary) and Manufaktura Czekolady (Poland).
  • Monitor price developments for cocoa beans on international markets. Use, for example, the Monthly Review of the Cocoa Market Situation reports published by the International Cocoa Organization (ICCO).

Please review our market information disclaimer.

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