Entering the Dutch market for cocoa

Although the Dutch cocoa processing industry heavily relies on cocoa supplies from West Africa, the market attracts further interest in cocoa beans from Latin American countries. This is particularly so, given the growing market for organic and Fairtrade-certified cocoa beans, as well as a growing demand for high-quality cocoa. The focus on the high-quality segment offers an opportunity for closer relationships with buyers such as smaller specialised traders and speciality chocolate makers.

1. What requirements must cocoa comply with to be allowed on the Dutch market?

You can only export cocoa to the Netherlands if you comply with strict European Union requirements. For a complete overview of these standards, refer to our study on buyer requirements for cocoa or consult the specific requirements for cocoa in the EU Trade Helpdesk.

Buyer requirements can be divided into the following.

1. Musts: legal and non-legal requirements you must meet to enter the market.
2. Additional requirements: those you need to comply with to keep up with the market.
3. Niche requirements: applying to specific niche markets.

The highlights for these requirements are given below, specified for the Dutch market when relevant.

1. Legal and non-legal requirements you must comply with

Legal requirements

You must follow the European Union legal requirements for cocoa, mainly dealing with food safety and hygiene. Related to this are the legal limits for food contaminants, of which the most common are:

• Pesticides (consult the EU pesticide database for an overview of the maximum residue levels (MRLs) for each pesticide)
• Mycotoxins (ochratoxin A is of special relevance for cocoa)
• Polycyclic-aromatic hydrocarbons (PAHs)
• Microbiological contamination such as salmonella (although cocoa is considered low-risk)
• Heavy metals such as cadmium (which is a particular problem for cocoa from some Latin American countries due to factors like volcanic activity and forest fires).

Quality requirements

If you want to access the Dutch market for cocoa beans, you will have to meet your buyer’s quality standards. They are particularly high within the specialty segment for fine flavour cocoa beans.

Buyers in the Netherlands and elsewhere currently assess the quality and flavour of cocoa beans in different ways and often use a combination of two or more methodologies. The guide Cocoa Beans: Chocolate & Cocoa Industry Quality Requirements provides recommendations on cocoa growing, post-harvest practices and quality evaluation methods that contribute to cocoa quality.

Other common cocoa quality assessment methodologies and international cocoa standards used among chocolate makers and cocoa traders are, for instance:

• ISO’s Standards on classification and sampling for cocoa beans.
• The Fine Cacao and Chocolate Institute (FCCI)’s cocoa sampling protocol and cocoa grading form.
• Heirloom Cacao Preservation’s genetic evaluation of cocoa to identify and value cocoa and its flavour.
• Equal Exchange/TCHO’s quality assessment and tasting guide to assess the quality of cocoa along the value chain.
• The methodology developed by the Cocoa of Excellence Programme, to assess the quality of cocoa in different stages.

There are no harmonised international procedures, nor is there a specific terminology for assessing cocoa bean quality and flavour and its direct relation to high-quality chocolate for buyers and consumers. However, a workgroup, coordinated by the Cocoa of Excellence Programme, is currently developing international standards for assessing cocoa quality.

Labelling requirements

The label of cocoa beans exported to the Netherlands should comply with the general food labelling requirements of the European Union. The label should be written in English and should include the following topics to ensure traceability of individual batches:

• Product name
• Grade
• Lot or batch code
• Country of origin
• Net weight in kilograms

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

Figure 1: An example of cocoa bean labelling

Source: Chocolate Cortés

Packaging requirements

Cocoa beans are traditionally shipped in jute bags, which can weigh between 60 and 65 kilograms. On the mainstream market, bulk shipment of cocoa beans has become more popular. This means cocoa beans are loaded directly into the ship’s cargo hold or in shipping containers containing a flexi-bag (see Figure 4). This mega bulk method is often adopted by larger cocoa processors, which handle cocoa beans of standard qualities.

In the specialty cocoa segment, jute bags are still commonly used. For very high-quality micro lots, vacuum-sealed GrainPro packaging can be used.

Figure 2: Examples of packaging for cocoa: jute bag, container-sized flexi bag and GrainPro

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

2. Additional requirements to keep up with the market

Additional food safety requirements

You can expect buyers in the Netherlands to request extra food safety guarantees from you. Regarding production and handling processes you should think of the following.

• Implementation of good agricultural practices (GAPs): The main standard for good agricultural practices is provided by GLOBALG.A.P. This is a voluntary standard for the certification of agricultural production processes that provide safe and traceable products. Certification organisations (such as Rainforest Alliance/UTZ) often incorporate GAP in their standards.
• Implementation of a quality management system (QMS): A system based on Hazard analysis and critical control points (HACCP) is often a minimum standard required at the level of storage and handling of cocoa beans. If you export semi-finished cocoa products, some buyers will also expect you to have certification, such as International Featured Standards: Food (IFS) or British Retail Consortium Global Standards (BRC) certificates for your manufacturing facilities.

It is good to take into account that your Dutch importer might re-export large quantities of cocoa beans to other destinations in Europe. These other buyers forward their requirements, which might increase the need for other specific certifications or standards. This will depend on the final market and the market channel.

Additional sustainability requirements

Corporate responsibility and sustainability are growing in importance in the cocoa sector. The Dutch cocoa and chocolate industry set the goal to reach a 100% sustainable cocoa consumption by 2025. As such, to enter the Dutch market it becomes essential to adopt codes of conduct or sustainability policies related to environmental and social impacts. Leading companies on the Dutch chocolate market (such as Nestlé and Mondelez) have sustainability policies emphasising the contact with producers, transparency in their operations, as well their social and environmental impact.

Certification standards like Rainforest Alliance (merged with UTZ in 2018) have also become important on the mainstream chocolate market. Several traders and manufacturers (such as Cargill, Cocoanect and Daarnhouwer) operating in the Netherlands are Rainforest Alliance-certified.

3. Niche requirements

The Netherlands represents an important market for organic-certified cocoa products in Europe (although the market is smaller than in countries such as Germany and France). Both small-scale chocolatiers and larger chocolate makers in the Netherlands offer organic-certified chocolates.

In order to market your cocoa as organic in the European market, it must comply with the regulations of the European Union for organic production and labelling. EU Organic is the minimum legislative requirement for marketing organic cocoa in the European Union. A mandatory national organic label does not exist, but the Netherlands has one private organic label: EKO Quality Mark. This private label can be used alongside the EU organic label if you fulfil the EKO Quality mark requirements.

The market for Fairtrade cocoa is also growing in the Netherlands, offering interesting opportunities in this niche market. Before you can market your cocoa beans as Fairtrade and/or organic, an accredited certifier must audit your growing and processing facilities. Examples of accredited certifiers are Control Union, Ecocert, FLOCERT, ProCert and SGS.

2. Through what channels can you put cocoa on the Dutch market?

1. How is the end market segmented?

Cocoa beans are used for processing in four different industries: confectionery, food, cosmetics and pharmaceutical. This document focuses only on the confectionery industry, as this is the main segment for cocoa beans. In 2017, the confectionery industry alone used up to about 43% of total global cocoa consumption. It mainly processes cocoa liquor and butter into chocolate products, such as bars, candy bars and bonbons.

The confectionery industry can be segmented according to the quality of the end products. For cocoa beans, the end products mainly consist of chocolate bars.

Figure 3: Segmentation of the chocolate market based on quality

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

Low end: The low-end segment offers cheap chocolate products, with lower cocoa content. The products are often produced by large chocolate manufacturers, for which they predominantly use bulk cocoa from West Africa (Forastero variety). Bulk cocoa is characterised by high volumes, low value and standard quality. Rainforest Alliance/UTZ-certified cocoa has become mainstream, and is increasingly being used to certify low-end products.

Lower-end chocolate products are usually mass-market products of big brands and lower-quality private label products from supermarkets. The mainstream and most popular brands for chocolate bars and candy bars found on the low end of the Dutch confectionery market are:

• Milky Way, M&M’s and Twix (manufactured by Mars)
• Côte d’Or, Milka and Toblerone (Mondelez)
• Kinder Maxi and Ferrero Rocher (Ferrero)
• Kit-Kat and l’Atelier (Nestlé)
• Verkade.

In the Netherlands, supermarkets represent the most important end market for the sale of low-end chocolate products to consumers. Supermarkets had a market share of around 68% of total chocolate sales in 2018. The largest retailer groups in the Netherlands are:

• Albert Heijn (market share of 35% in 2018)
• Jumbo (19%)
• Lidl (11%)
• Aldi (6.8%).

An indication of consumer chocolate prices (based on Albert Heijn's retail prices in 2019) in Dutch supermarkets for lower end products is as follows:

	Product	Price (€/kg)
Lower end	AH (dark chocolate 50%)	4.90
	Milka (Alpenmelk)	10.00
	Verkade (dark chocolate 75%)	14.86

Middle range: The middle-range segment includes chocolate products of good quality, which are commonly sustainably certified. Storytelling and the origin of the cocoa beans are important in this segment, mainly for marketing purposes.

Examples of middle-range products available in the Netherlands include the popular Swiss brand Lindt and the Dutch brand Tony’s Chocolonely. Lindt is mainly known for their wide range of premium chocolate bars from either Trinitario and/or Forastero cocoa. Tony’s Chocolonely offers Fairtrade-certified cocoa, and has as social mission to produce slave-free chocolate.

Supermarkets also increasingly offer premium private label chocolate products. Examples in the Netherlands include: Albert Heijn’s brand Delicata and Lidl’s Fairtrade brand Fairglobe. These products offer the same quality and characteristics as branded products, but are usually offered at more competitive prices.

These middle-range products are mainly sold through supermarkets, among other products in the high-quality category. Supermarkets also increasingly offer private label premium chocolate products. The table below gives an indication of consumer chocolate prices for middle-range products:

	Product	Price (€/kg)
Middle range	Tony’s Chocolonely (dark chocolate 70%)	15.50
	Lindt Excellence (dark chocolate 70%)	16.90
	Côte d’Or (Noir Intense 70%)	19.90

High end: Smaller, more specialised chocolate makers produce high-end chocolate products, for which often fine flavour cocoa is used (usually a mix of Criollo, Trinitario and/or to a lesser extent Forastero). These products are characterised by a high cocoa content. Single origin of the cocoa beans is important, both for the taste as the traceability of the cocoa. Bean-to-bar chocolate is a good example of a high-end product.

Original Beans and Chocolatemakers are examples of Dutch bean-to-bar brands that produce high-end products. These products are mainly sold at trade fairs and in specialty shops. In 2018, 9.2% of all chocolate products were sold through specialty shops. Examples of specialty shops in the Netherlands include Chocolátl and De Bonte Koe.

Chocolate consumer prices for high-end chocolate products (based on Ekoplaza's retail prices in 2019) are:

	Product	Price (€/kg)
High end	Terra Etica (dark chocolate 70%)	31.90
	Chocolatemakers (Gorilla, dark chocolate 68%)	34.33
	Original Beans (Cru Virunga, dark chocolate 70%)	55.57

For exporters it is important to realise that trade prices and retail prices behave independently, thus are not directly linked. As the figure below shows, only 6.6% of added value goes to farmers. In general, 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. The largest shares are kept by chocolate companies and retailers.

2. Through what channels does cocoa reach the end market?

As an exporter, you can use different channels to bring your cocoa to the Dutch market. Entering the market will vary according to the quality of your cocoa beans and your supply capacities.

It is important to realise that the European market is moving towards shortened supply chains. This means retailers and cocoa-processing companies are increasingly sourcing their cocoa beans directly. The below figure shows you the most important channels for cocoa beans in the Netherlands:

Figure 5: The main channels for export of cocoa to the Netherlands

Cocoa bean processors/grinders

Large processors/grinders source their cocoa beans directly from producing countries. They process the raw material into cocoa mass, cocoa butter and/or cocoa powder, which they distribute to the confectionery, food, cosmetic and pharmaceutical industries throughout Europe. Some grinders also manufacture end products to supply directly to the retail or food service sector.

Examples of cocoa bean processors/grinders in the Netherlands are Cargill, Dutch Cocoa (a subsidiary of ECOM Agroindustrial) and Olam. More specialised cocoa processors are the Crown of Holland (the cocoa processing facility of Tradin Organic, focused on processing organic cocoa) and JS Cocoa (mainly focused on the pharmaceutical and cosmetic industries).

For whom is this an interesting channel? If you are an exporter of high volumes of bulk beans, then your direct trading partner is usually a cocoa grinder/processor. These companies tend to buy high volumes of standard qualities. They usually have cocoa-buying stations in producing countries to which you can sell your beans directly.

Importers

Importers of bulk cocoa handle large quantities and have contacts with exporters in producing countries. In most cases, importers have long-standing relationships with their suppliers. Importers either sell the cocoa beans to companies in the Netherlands or re-export them to other European buyers. An example of a large importer of cocoa beans and/or semi-finished cocoa products active in the Netherlands is Theobroma (which has a cocoa processing plant in Nigeria). Facta International is a Dutch-based trader of cocoa beans and semi-finished cocoa products.

Importers active in the specialty segment usually deal with smaller quantities, and often work directly with producers and producer cooperatives. Examples of specialty trading companies in the Netherlands are Daarnhouwer and Dietz Cacao Trading.

Specialised importers could also be interested in value-added cocoa products processed at the country of origin, as described in our study on the European market for semi-finished cocoa products, or even in finished products like chocolate. DO-IT and Huyser Möller are Dutch companies that import cocoa derivatives.

For whom is this an interesting channel? For exporters working with high volumes of bulk beans from producers/cooperatives, large importing companies can serve as a gateway to the Dutch market. If you deal with bulk cocoa, discuss certification requirements and possible industrial applications with your importer. Note that many specialised importers prefer to work directly with producers and/or cooperatives and not through exporters.

A producer association selling specialty or certified cocoa can best sell its cocoa beans directly to specialised cocoa importers. If you produce or have very high-quality cocoa beans and you are working through an importer, it is best to also discuss the possibilities to directly link up with high-end chocolate makers.

If you as an individual farmer have the financial means and technical know-how to organise export activities, then you may also sell your beans directly to specialised importers or chocolate makers.

Large (private label) chocolate manufacturers

The largest industrial chocolate manufacturer worldwide is Barry Callebaut, which has a production facility in the Netherlands (but no grinding facilities). Other large chocolate manufacturers active on the Dutch market are Mars, Mondelez, Nestlé and Tony’s Chocolonely. These companies all have their own importing departments and source their cocoa beans directly from producing countries.

Private label manufacturers may also be an interesting entry point for your cocoa beans. These companies are growing in importance as it becomes more common for large brands to outsource their production to specialised private label manufacturers. The Dutch market share of private label is with around 42% above the European average.

Examples of private label manufacturers in the Netherlands are Baronie, Delicia, Choco Support, the Candy Store and Colbrand.

For whom is this an interesting channel? Selling to these players is interesting if you have cocoa of a standard quality in high volumes. This may also be an interesting channel for local grinders with cocoa mass and cocoa butter which meet high quality standards (which means they do not need to be processed again). Then you can trade directly with European confectionery and food companies. In case of lower quality semi-processed cocoa products, your direct trading partner is usually a European importer or grinder.

Small chocolate makers

Especially in the specialty and fine flavour segment, cocoa beans are increasingly traded directly from farmer (association) to chocolate maker. Although direct trade is growing, it still represents a very small part of the cocoa market. Not all chocolate makers are able to sustain direct trade, since responsibilities that are usually outsourced to traders (such as logistics, documentation and pre-financing) now need to be handled by the chocolate maker.

In this sense, direct trade is also possible with an importer as intermediary, who acts as a service provider and contact point in the transactions between the source and the end market. Such importers can also guarantee traceability and communicate the story of the cocoa beans accurately along the chain.

Examples of specialised chocolate (bean-to-bar) makers in the Netherlands are Alexandre, Lovechock, Krak Chocolade, Heinde & Verre and the Chocolate Makers.

For whom is this an interesting channel? Targeting specialty chocolate makers directly is recommended for producers and exporters dealing with specialty cocoa beans. This requires having the financial means and technical know-how to organise export activities. You could also consider setting up local processing facilities to add more value to your cocoa beans. Our study on the European market for semi-finished cocoa products discusses this more in depth.

3. What competition do you face on the Dutch cocoa market?

The intensity of rivalry on the market is generally high for bulk cocoa with low added value. This segment is mainly dominated by major suppliers and cooperatives able to deliver large quantities so they can compete on price. It is difficult for small and medium-sized companies to compete with this segment. The level of competition is lower in the specialty cocoa market. In this segment there is more focus on quality, taste and sustainability.

Dutch cocoa processing industry relies on West African supplies

By far the largest share of Dutch cocoa bean imports comes from West Africa. In 2018, the Netherlands imported nearly 92% of its cocoa beans from West Africa. More than 50% was supplied by Ivory Coast, amounting to 589 thousand tonnes. Other large suppliers include Ghana (181 thousand tonnes), Nigeria (147 thousand tonnes) and Cameroon (130 thousand tonnes).

These supplying countries have well-established cocoa supply chains. Multinational processing companies (such as OLAM and Cargill) maintain a strong presence, with which small cocoa producers and cooperatives are strongly linked, especially in Ivory Coast.

These countries mainly produce Forastero cocoa, generally producing large volumes of lower quality. A large share of cocoa produced in Ivory Coast and Ghana is Rainforest Alliance/UTZ-certified, which is a market entry requirement for large manufacturers and retailers operating in mainstream markets.

Between 2014 and 2018, Dutch cocoa bean imports (both direct and indirect) from Ivory Coast increased by an average annual rate of 31%. This steep increase is partly explained by the overall increase of cocoa imports by the Netherlands (16% between 2014 and 2018). Ghana (8.5%) and Nigeria (5.7%) showed lower average growth rates. Cameroon saw its supplies to the Netherlands increase only slightly by 1.1%, due to the country suffering from social unrest in some of its main cocoa growing areas.

Latin America increases its specialty cocoa bean supplies to the Netherlands

Latin American countries supply about 5.2% of the beans imported by the Netherlands. Ecuador was the main Latin American supplier in 2018, with a volume of 34 thousand tonnes (3.0% of total Dutch imports). The market shares of those that follow are smaller: Dominican Republic (1.2%), Peru (0.8%) and Venezuela (0.1%). Latin American countries are known for their high shares of fine flavour cocoa in total production, as well as for the production of organic cocoa. About 70% of organic cocoa is produced in Latin America.

Imports from Ecuador increased at an average annual rate of 39% between 2014 and 2018. This increase was largely due to an increased demand for fine flavour cocoa. As much as 75% of Ecuador’s cocoa exports are fine flavour beans. Ecuador’s cocoa production is growing in general, mainly thanks to the development and introduction of the high-yielding, disease-resistant CCN-51 cocoa variety. Ecuador has set the aim to become the world’s fourth largest cocoa supplier. Ecuador is also strongly promoting the origin of its cocoa beans. This is important, as chocolate products with cocoa origin claims attract a 51% higher retail price and higher consumer appreciation in the growing online retail space.

The world’s largest organic cocoa producer is the Dominican Republic. A major share of organically produced cocoa from the Dominican Republic is also Fairtrade certified. Imports by the Netherlands from the Dominican Republic increased at an average annual rate of 7.3% between 2014 and 2018.

Peru saw its exports to the Netherlands increase by 5.6% between 2014 and 2018. About 75% of Peru’s cocoa exports are registered as fine flavour cocoa. Fine flavour cocoa beans mainly consist of Trinitario and Criollo beans. Peru is also a major producer of organic cocoa beans (the world’s third largest).

This study has been carried out on behalf of CBI by ProFound – Advisers in Development.

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