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The European market potential for semi-finished cocoa products

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Cocoa processing at origin has seen a boom in recent years. However, this market is dominated by large global multinationals. In general, the European market potential for semi-finished cocoa products is limited, and competition is fierce. However, the growing importance of concepts such as sustainability, traceability and authenticity on the European cocoa market may open up opportunities. Unique products of excellent quality may find a market in Europe, if they are marketed well.

1. Product description

This study focuses on the European market for semi-finished cocoa products, which are derivatives of roasted cocoa beans. This includes cocoa liquor, cocoa butter, cocoa powder and couverture. Couverture is made of both cocoa butter and cocoa liquor. It is a high-quality chocolate used for the manufacturing of chocolate.

Which cocoa-derived product is needed and used by a chocolate manufacturer depends on the capacities and scale of the manufacturer. In general, semi-finished cocoa products are mainly used for the manufacturing of chocolate and other food products. They are usually not sold directly on the consumer market.

The beverage industry mainly demands cocoa powder, while the baking industry demands both cocoa paste and cocoa powder. The chocolate industry uses cocoa liquor, cocoa butter and couverture. Other industries tend to replace cocoa butter with cheaper vegetable oils and fats.

The figure below shows which steps are involved in the production of semi-finished cocoa products.

Figure 1: Steps in the production of semi-finished cocoa products and chocolate
Steps in the production of semi-finished cocoa products

Source: adapted from UNCTAD, 2008

Cocoa products can be made of the three main cocoa varieties, which are given below:

  1. Forastero is the predominant cocoa variety. It is mainly cultivated in Africa but also in Central and South America. It accounts for around 80% of global cocoa production. Forastero grows faster and gives a higher yield than other cocoa varieties. The beans have a strong, earthy flavour. Bulk cocoa beans generally come from Forastero trees. Well-known Forastero subspecies are Amelonado and Nacional. Nacional trees in Ecuador produce fine flavour cocoa.
  2. Criollo (original cocoa tree) is mainly grown in Central America, northern South America, the Caribbean and Sri Lanka. Criollo makes up around 5% of global cocoa production. The beans have a delicate and sweet flavour. Criollo is often mixed with other varieties when making chocolate, since it is scarce and expensive. Fine flavour cocoa beans are produced from Criollo cocoa trees. Well-known varieties are Chuao, Porcelana and Ocumare.
  3. Trinitario is mainly cultivated in Central and South America, the Caribbean and Asia. The beans are a hybrid of the Criollo and Forastero trees. This variety represents around 10 to 15% of global cocoa production. The beans have a floral, fruity flavour. The cocoa beans from Trinitario trees are classified as fine flavour cocoa. There are exceptions, however, as Cameroonian cocoa beans produced from Trinitario trees are classified as bulk cocoa beans. Well-known varieties are Carenero, Rio Caribe and Sur del Lago.

Cocoa beans are covered in our study on the demand for cocoa on the European market. The HS codes for the semi-finished cocoa products discussed in this document are given below:

HS code

Description

1803

Cocoa paste, whether or not defatted

1804

Cocoa butter, fat and oil

1805

Cocoa powder, not containing added sugar or other sweetening matter

180620

Chocolate and other food preparations containing cocoa, weighing more than 2 kg

2. What makes Europe an interesting market for semi-finished cocoa products?

The European confectionery and food industry demands enormous amounts of cocoa products to manufacture its products. While demand is very high and keeps growing, it is important to realise that European manufacturers tend to process cocoa beans and buy semi-finished cocoa products from European manufacturers. Processing at origin is, however, growing in importance.

The European confectionery and food industry demand large quantities of cocoa derived products

The confectionery and food industry in Europe demands large quantities of cocoa products. According to Prodcom figures, the European Union produced an estimated 6.5 million tonnes of products containing cocoa in 2018, at a value of €17.5 billion. These products include chocolate tablets and bars, pralines, spreads and confectionery containing cocoa.

European production of these products registered an average annual growth of almost 12% between 2014 and 2018. Note that this is an estimate, as some country data are not reported due to confidentiality. In 2017, Germany was the leading producer of chocolate products in the European Union, followed by Italy, France and the Netherlands. Several European countries lead the list of global chocolate exporters.

Before the COVID-19 crisis, global demand for chocolate was expected to grow by an estimated average annual rate of 3.4% to 4.5% till 2024. Although it is difficult to predict what the actual effects of the COVID-19 crisis will be, it is expected that the larger part of the chocolate market will survive the effects of the pandemic without too much damage – in spite of a concentrated effect on speciality segments. Long-term market growth is still expected despite the predictions of a global economic recession in 2020. Expectations are backed by the fact that chocolate companies also continued to register growth of 2-8% annually during the severe global financial crisis of 2008-2010.

Although demand is high, chocolate manufacturers in Europe tend to either process cocoa beans themselves or buy semi-finished cocoa products from European processors, making competition fierce. Multinationals such as Barry Callebaut, Cargill, Cémoi, ECOM/Dutch Cocoa, Olam and Nederland SA are based in Europe and supply the whole range of semi-finished cocoa products to the European food and confectionery industry.

Growth in European direct imports of semi-finished cocoa products

Total European imports of semi-finished cocoa products in 2019 reached 828 thousand tonnes for couverture, followed by 673 thousand tonnes for cocoa butter, 664 thousand tonnes for cocoa paste and 344 thousand tonnes for cocoa powder. Between 2015 and 2019, cocoa butter registered the highest year-to-year growth at 5.4%, followed by couverture at 5.2%, cocoa paste at 4.1% and cocoa powder at 2.4%.

As written before, suppliers of semi-finished products from cocoa-producing countries operate in a limited market and face strong competition from European players. The share of direct imports from cocoa-producing countries differs per product. Cocoa paste registered the largest share of direct imports with 52%, amounting to 345 thousand tonnes in 2019. Cocoa butter followed with a 35% market share for direct imports, at 238 thousand tonnes in 2019. Cocoa powder and couverture reported the lowest share of direct imports from producing countries, with a share of 17% (58 thousand tonnes) and 5.8% (48 thousand tonnes) respectively in 2019.

Between 2015 and 2019, direct couverture imports from cocoa-producing countries registered a significantly higher average annual growth rate than intra-European trade. Direct imports from cocoa-producing countries of cocoa butter and cocoa powder also registered higher growth rates than those of intra-European trade. Cocoa butter sourced directly from cocoa-producing countries registered a growth rate of 5.8%, compared to 5.2% for intra-European trade. For cocoa powder, the direct import growth rate registered was 3.2%, versus 2.3% for intra-European trade.

The higher growth rate for cocoa products sourced from cocoa-origin countries is thanks to a growing trend for cocoa processing at origin (see the trend section below to read more).

Table 1: Average annual change from 2015-2019 of European imports of semi-finished cocoa products

 

Total imports

Direct imports from producing countries

Intra-European trade

cocoa butter

5.4%

5.8%

5.2%

cocoa paste

4.1%

3.3%

4.9%

cocoa powder

2.4%

3.2%

2.3%

couverture

5.2%

11.3%

4.9%

Source: Eurostat, 2020

3. Which European countries offer most opportunities for semi-finished cocoa products?

The main importers of cocoa products sourced directly from cocoa-producing countries vary according to the type of product as well as the function of the importing country, as a trade hub or as an industrial or consumer market. In general, Germany and the Netherlands are among the largest and most important European markets for semi-finished cocoa products. At the same time, thanks to their large cocoa-processing industries, both countries are also the largest suppliers of semi-finished cocoa products to other European countries.

The largest European importers of semi-finished cocoa products

The main European importers of semi-finished cocoa products are:

  • Cocoa paste: the largest cocoa paste importer in Europe is the Netherlands, with 144 thousand tonnes in 2019, of which 86% was sourced directly from cocoa-producing countries. Spain is the second-largest importer with 103 thousand tonnes, of which 90% was sourced directly, followed by Belgium with 88 thousand tonnes. However, Belgium buys most of its cocoa paste from other European countries, as only 4.3% of imports was sourced directly from cocoa-producing countries. France is the fourth-largest importer with 87 thousand tonnes, of which 62% was sourced directly from cocoa-producing countries;
  • Cocoa butter: the largest cocoa butter importer in Europe is Germany, with 166 thousand tonnes in 2019, of which 30% was sourced directly from cocoa-producing countries. Belgium is the second-largest importer with 118 thousand tonnes. Belgium’s direct imports accounted for 11% of total imports. The Netherlands imported 102 thousand tonnes in 2019, of which 81% directly from cocoa-producing countries;
  • Cocoa powder: the largest importer of cocoa powder in Europe is the Netherlands, with 74 thousand tonnes in 2019, of which 67% was sourced directly from cocoa-producing countries. Germany is the second-largest importer, with 53 thousand tonnes (1.9% sourced directly), followed by France with 43 thousand tonnes (1.8% sourced directly);
  • Couverture: the largest importer of couverture in Europe is France, with 168 thousand tonnes in 2019. About 22% of French imports were sourced directly from cocoa-producing countries. Germany follows as the second-largest importer, with 142 thousand tonnes, of which only 0.1% was directly imported from cocoa-producing countries. Belgium’s imports reached 89 thousand tonnes in 2019, of which 0.3% were sourced directly from cocoa-producing countries.

Germany and the Netherlands dominate imports of semi-finished cocoa products in Europe

Within Europe, the Netherlands plays an important role in supplying its neighbouring countries with cocoa products, and it also has a significant cocoa-processing industry. The Netherlands has the world’s second-largest cocoa-processing industry, second only to Ivory Coast. Additionally, the country imports a significant volume of cocoa products, including cocoa butter. Apart from confectionery and other food, cocoa butter is refined in the Netherlands for further use in cosmetics and health products.

Examples of companies based in the Netherlands that deal with semi-finished cocoa products are TheobromaHuyser Möller, Daarnhouwer, Cocoa Supply, DO-ITRhumveld Winter & Konijn and Tradin Organic. The latter three companies only handle organic cocoa products.

Another leading market for semi-finished cocoa products is Germany. This country has a large demand for cocoa products, since it has the largest chocolate consumer market and food-processing industry in Europe. At the same time, Germany functions as a trade hub due to its central location and well-developed logistical network.

Example of companies dealing with cocoa products based in Germany are Albrecht & Dill Trading and Naturkost Übelhör (only organic-certified products).

Belgium’s chocolate manufacturing industry provides interesting opportunities

Belgium is an interesting market for semi-finished cocoa products, given its large chocolate-manufacturing industry. Belgium is the world’s second-largest chocolate exporter. In addition, a core activity for Belgian companies is the production of industrial chocolate.

The large chocolate-manufacturing industry in Belgium requires high volumes of cocoa butter and cocoa liquor. Although Barry Callebaut, Cargill and Puratos have grinding facilities in Belgium to produce these derivatives, Belgium also imports large volumes of cocoa products.

In 2019, Belgium imported most cocoa derivatives from the Netherlands. For instance, about 50% of its cocoa butter imports (59 thousand tonnes) were supplied by the Netherlands. With 12 thousand tonnes in 2019, a significantly smaller share was supplied by Ivory Coast. Nevertheless, supplies by Ivory Coast grew at a high average annual rate: from 2015 to 2019, year-to-year growth reached 153%. The average annual increase for cocoa paste imports from Ivory Coast reached 52% in the same period. These high growth rates are explained by recent investments in cocoa-processing facilities in Ivory Coast, aimed at increasing processing capacities.

Well-known Belgian chocolate companies are GodivaLeonidas and Neuhaus. The largest chocolate manufacturer in Belgium is multinational Mondelez, thanks to its popular brands such as Côte d’Or and Milka.

France and Spain also offer interesting market opportunities

Both France and Spain have relatively large chocolate-manufacturing industries, which require large amounts of cocoa derivatives.

Cocoa butter imports by France reached 71 thousand tonnes in 2019, of which 74% were directly sourced from producing countries. The largest suppliers were Ivory Coast (31%), Cameroon (24%) and Ghana (14%). Imports from Ghana increased by an average annual rate of 215% between 2015 and 2019, while imports from Ivory Coast decreased by 5.7% in the same period. The large increase of imports from Ghana is thanks to France’s presence in Ghana through the large multinational Touton Group. An example of a French trading company importing semi-finished cocoa products is SALDAC.

Spain has a growing national chocolate industry. Cocoa derivatives needed for chocolate production are largely produced by Spain itself. Spain has Europe’s fourth-largest cocoa-grinding industry, which is dominated by players such as Natra, INDCRESA and Nederland SA. Nevertheless, about 90% of cocoa paste imports by Spain are sourced directly from producing countries. Cocoa paste imports grew at an average annual rate of 8.2% between 2015 and 2019. The largest suppliers to Spain were Ivory Coast (46%), Ghana (25%), Indonesia (8.4%) and Nigeria (6%). Supplies from Ghana and Nigeria increased most between 2015 and 2019, with a year-to-year growth of 30% and 13% respectively.

Poland’s growing chocolate sector drives up demand for semi-finished cocoa products

Poland imported a total of 40 thousand tonnes of cocoa butter in 2019, of which only 7% was directly imported from cocoa-producing countries. Germany (33% of supplies), France (27%) and the Netherlands (24%) were the largest suppliers in 2019. Ivory Coast was the largest cocoa-producing supplier, with 6.8% of supplies, amounting to 2,736 tonnes in 2019. Although direct cocoa product imports registered very low shares, the total cocoa butter imports by Poland increased strongly between 2015 and 2019 with an average annual growth rate of 13%.

Polish imports of cocoa powder reached over 24 thousand tonnes in 2019, good for 7.1% of total European imports. Between 2015 and 2019, the average annual growth rate of cocoa powder was 7.8%. Only 1.2% of cocoa powder imports were sourced directly from cocoa-producing countries. The largest suppliers to Poland in 2019 were Germany (45%) and the Netherlands (34%).

Regarding cocoa paste, Poland imported almost 52 thousand tonnes in 2019, which is 7.8% of total European imports. About 45% of cocoa paste was imported directly from cocoa-producing countries. The main supplier was the Netherlands (28%), followed by Ghana (26%) and Ivory Coast (20%). Cocoa paste imports by Poland registered a year-to-year growth of 1% between 2015 and 2019.

The increasing import volumes of semi-finished cocoa products by Poland are thanks to a growing chocolate sector in the country. In the past years, both national companies and multinationals have invested in their production facilities in the country. For instance, market leader Mondelez and national companies Wawel and Lotte Wedel have all invested in increasing their production capacity in the country in recent years.

Tips:

Sustainability, traceability and authenticity are important concepts on the European chocolate market, both for industry players and for consumers. As a result, single-origin chocolate and ethically produced and traded products are gaining popularity. Offering Fairtrade and organic-certified cocoa products from a single origin might be an interesting value proposition for your product.

Processing at origin is growing for bulk and fine flavour cocoa

The European cocoa and chocolate industry traditionally sources cocoa beans as raw material. However, cocoa is increasingly processed at origin, evidenced by an increase in cocoa grinding in producing countries. In the cocoa year 2019/20, cocoa grinding at origin accounted for around 49% of all grinding activities worldwide. For comparison, the share of grinding at origin was 43% in 2015/16.

Grinding at origin is most common on the bulk cocoa market. This process has been used as a strategy by large multinationals to lower production costs as well as to target regional markets. Given recent investments of multinationals, cocoa grindings at origin are expected to grow even more in the future. In some producing countries, the growth in grinding activities also aims at increasing the value of exports and protecting the economy from fluctuations on the global cocoa market.

Ivory Coast is the world’s largest cocoa grinder, with 585 thousand tonnes or 12% of global grindings in 2018/19. Between 2015/16 and 2018/19, cocoa grindings by Ivory Coast registered an average annual growth of 5.9%. Cocoa grindings in Ivory Coast are expected to increase in the coming years, as the country has set the goal to grind 1 million tonnes of cocoa beans by 2022, almost doubling its current output.

Ivory Coast houses about 12 cocoa-grinding facilities, yet multinationals dominate the cocoa-grinding industry. Barry Callebaut, Cargill and Olam are the largest and define the substantial exports of semi-finished cocoa products from Ivory Coast into Europe. In 2019, Barry Callebaut announced that it would invest and expand its cocoa-processing facilities in Ivory Coast. In the same year, Cargill also made large investments in Ivory Coast, as well as in Ghana.

Ghana is also a large producer and processor of cocoa beans. The country’s grinding industry consumed an estimated 300 thousand tonnes in 2018/19, accounting for 6.3% of global grindings. Between 2015/16 and 2018/19, cocoa grindings in Ghana increased at an average annual rate of 14%. Ghana also relies on a multinational cocoa-processing industry. Besides Cargill, another large multinational present in Ghana is the Touton Group (France). In general, Africa accounted for an estimated 21% of global cocoa grindings in 2018/19.

Asia accounted for 23% of global grindings in 2018/19. Indonesia is the continent’s largest and the world’s third-largest cocoa grinder, after Ivory Coast and the Netherlands. Cocoa grindings amounted to 490 thousand tonnes in 2018/19, or 10% of global grindings. The average annual growth rate of cocoa grindings between 2015/16 and 2018/19 was 8.9%. The three multinational giants Olam, Cargill and Barry Callebaut are behind Indonesia’s strong position in cocoa grinding. Also, the Indonesian government has implemented an export tax for cocoa beans, aimed at stimulating the local cocoa-processing industry.

With multinationals dominating the cocoa processing at origin, the intensity of competition on the market will be high for semi-finished products made of bulk cocoa with low added value. Therefore, for small to medium-sized exporters (SME), it is becoming increasingly important to offer value-added products, such as cocoa products made of specialty cocoa, backed up with sustainability claims.

In fact, governments and associations in countries that produce fine flavour cocoa have also been pushing for local value addition. An example is Peru, where the volume of semi-finished exports increased between 2018 and 2019 while the export of cocoa beans decreased. Similar value-adding approaches to cocoa exports can be seen in other cocoa-producing countries, such as Costa Rica. Another example is the Meso-American Association of Fine Cacao and Chocolate (AMACACAO), which unites various companies in Central America and takes a regional approach to quality standards and value-addition strategies.

Growing importance of traceable chocolates in Europe

Single-origin cocoa chocolate is gaining popularity on the European market. Traceability plays an important role in the production of single-origin chocolates. This implies that the origin of the cocoa beans is known and safeguarded along the chain. Traceability is one of the key trends driving the cocoa sector today and will continue to increase in importance in the future.

Single-origin cocoa derivatives are already widely for sale in Europe, often produced on the European continent. An example is the offer of single-origin cocoa powders from Barry Callebaut. However, this trend also contributes to growing investments in and demand for cocoa products processed at origin. For instance, in 2019, Cargill invested over US$12 million to boost sustainability and to introduce supply chain traceability programmes in both Ghana and Ivory Coast. These investments were on top of a US$113 million investment to boost the cocoa-processing industries in both countries.

There are several European chocolate makers, traders and distributors that buy their semi-finished products directly from origin, to sell to the European industry or directly to the consumer. Examples are the Estonian trader Panamir and Dutch distributor Vehgro, which both import semi-finished cocoa products.

Fairtrade- and organic-certified chocolate gaining popularity on the European market

Sustainability is an important concept on the European cocoa market, both for consumers and for industry players. As a result, the demand for and sales of certified cocoa and chocolate products in Europe have gone up in recent years. For instance, sales of Fairtrade-certified chocolate products have grown all over Europe. An indication for this is the 2018 commitment of large retailers Aldi and Lidl, which are present in most European countries, to substantially increase the use of Fairtrade cocoa products in their private label confectionery products.

The market for organic-certified chocolate products has also grown over the last years. The popularity of organic certification for chocolate products follows the general market for organic products in Europe. Sales of organic products in Europe reached nearly €41 billion in 2018, marking an increase of almost 8% compared with the year before. Until 2025, organic food sales in Western Europe are forecast to continue to grow at an average annual rate of 6.7%. In 2018, the largest national markets for organic foods were found in Germany (27% of the European market), France (22%) and Italy (8.6%).

The growing importance of Fairtrade and organic-certified chocolates brings opportunities for the export of certified cocoa products. Naranjillo and Organic Crops, both from Peru, are examples of organic-certified exporters of semi-finished cocoa products. Examples of European importers dealing with organic-certified cocoa products are Covitor (Czech Republic) and Tradin Organic (the Netherlands).

Growing interest in specialty chocolates brings opportunities for craft couverture

European demand for specialty chocolates is growing. A strong indication for this is the steep increase of bean-to-bar makers in Europe in recent years. The demand for premium chocolate products in Europe is not expected to slow down soon. In fact, the market is expected to grow by an annual average of 8.7% between 2019 and 2024.

A large share of the couvertures that are used for the manufacturing of chocolate in Europe are produced in Europe itself. Barry Callebaut and Valrhona (France) dominate the couverture market in Europe. There are also numerous European artisanal chocolate makers that produce couverture; examples are Chocolaterie du Pecq (France), Zotter (Austria), Original Beans (the Netherlands) and Chocolate Tree (United Kingdom). An example of a European distributor selling couvertures is The High Five Company (the Netherlands).

The rising interest in higher-quality chocolates in combination with a growing demand for ethical and authentic products also opens up interesting opportunities for exporters of unique high-quality couvertures in cocoa-producing countries. In fact, there is a small but growing interest from craft chocolate makers in traveling to places of origin to develop special and unique couvertures together with cocoa farmers and smaller local processors.

Examples of specialty companies that are already tapping into the trend of offering craft couverture include Cocoa Runners (Colombia), Cafiesa (Ecuador), Montecristi Chocolate (Ecuador), Orquídea (Peru), To’ak (Ecuador), Ingemann (Nicaragua) and Xoco Gourmet (Honduras).

Given this trend, it is becoming increasingly important to develop and express your unique selling points as a supplier of cocoa products. To explore this, it is relevant to think about factors which distinguish you from your competitors and then base your marketing story on them. For example, these factors could relate to your cocoa characteristics (origin, agroclimatic characteristics of producing region, quality and flavour profile) and value addition (your processing techniques, the culture of the producing communities, certifications and accompanying documentation). The companies mentioned above are good examples of companies which manage to successfully promote their cocoa products.

Tips:

  • See our study on trends for cocoa to learn more about current trends on the European market.
  • Promote sustainable and ethical aspects of your production process. Support these claims with certification. See our study on doing business with European buyers of cocoa for more tips on marketing and promotional aspects of your cocoa.
  • Before engaging in a certification programme, make sure to check (in consultation with your potential buyer) that this label has sufficient demand in your target market and whether it will be cost beneficial for your product.
  • Find potential business partners in Europe by checking the lists of Fairtrade-certified operators, Rainforest Alliance/UTZ-certified cocoa supply chain actors and organic-certified companies.
  • Focus on the specialty and fine flavour cocoa products market in Europe. Competition in the mainstream market is very strong. You can only access this premium cocoa products market if you offer high-quality cocoa products. See the chapter about quality requirements below to learn more.

Develop and articulate your unique selling points as a supplier of cocoa products. Consider which factors set you apart from your competitors, as mentioned in the text above, and create your marketing story around these factors.

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

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