Entering the European market for speciality cocoa

Both chocolate makers and consumers highly value transparency, consistency and quality, for which they are willing to pay higher prices. As such, it is key in the speciality segment to identify the aspects that differentiate your cocoa from conventional cocoa (examples: certification, origin, quality, genetics). Direct trade, long-term relationships and fair (premium) pricing, based on rewards for quality, are all important features of the speciality cocoa trade, which make it a high-potential market for cocoa producers and exporters.

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

You can only export cocoa to Europe if you comply with strict European Union (EU) requirements. For a complete overview of these standards, refer to our study on buyer requirements for cocoa or consult the specific requirements for cocoa at 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 speciality cocoa market when relevant. In general, as speciality cocoa commands a significant premium over bulk cocoa (in some cases two to three times the price), purchasers of speciality cocoa are much more demanding, and focus on higher quality and strict food-safety regulations.

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).

Note that speciality cocoa tends to have stricter restrictions on the use of pesticides and fertilisers than bulk cocoa. This is particularly so to encourage sustainable farming practices, ensure a healthier environment for the producer and enhance the sensory experience for consumers.

Quality requirements

If you want to access the European market for speciality cocoa beans, you will have to meet your buyer’s high quality standards. Besides flavour, the quality of the speciality cocoa is also related to the uniqueness and scarcity of the origins of specific varieties.

Buyers in Europe currently assess the quality and flavour of cocoa beans in different ways and often use a combination of two or more methodologies. The guide entitled 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.

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 working group, coordinated by the Cocoa of Excellence Programme, is currently developing international standards for assessing cocoa quality.

Keep up to date on the development of international standards for assessing cocoa quality on the website of the International Standards for the Assessment of Cocoa Quality and Flavour.

Labelling and packaging requirements

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

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

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

If 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

Figure 2: Examples of packaging for speciality cocoa: jute bag and GrainPro Sources: Osu.edu and GrainPro

2. Additional requirements to keep up with the market

Additional food safety requirements

You can expect buyers in Europe to request extra food safety guarantees from you. Regarding production and handling processes you should consider 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) 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.

Additional sustainability requirements

Traders and chocolate makers in the speciality segment usually follow the principles of ethical and sustainable sourcing. This means that direct contact with producers, transparency and promoting sustainable practices are key aspects of their operations. Examples of specialised importers include French companies Ethiquable, Alter Eco, Kaoka and Saveurs & Nature and German companies GEPA and El Puente. These importing companies work on projects with cocoa-producing cooperatives in the countries of origin.

3. Niche requirements

Demand for cocoa with organic certification is growing rapidly in Europe, making this an interesting niche market. 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.

Note that the EU organic regulation will apply some changes as of 1 January 2021; the website of IFOAM describes these changes in detail and highlights the implications to suppliers outside of the EU. An important change, already implemented as of February 2020, is that Certificates of Inspection (COIs) must be issued by control authorities prior to the departure of a shipment. If this is not done, your product cannot be sold as organic in the EU and will be sold as a conventional product. COIs can be completed by using the European Commission’s electronic Trade Control and Expert System (TRACES).

If you want to export to countries outside of the EU, check the required legislations for that country. For instance, Switzerland has its own Swiss Organic Law, and the Organic Products Regulations 2009 apply in the United Kingdom.

Before you can market your cocoa as organic, an accredited certifier must audit your growing and processing facilities. Refer to this list of recognised control bodies and control authorities issued by the EU, to ensure that you always work with an accredited certifier.

When exporting organic cocoa, be sure to label your cocoa batches with the name of the control body and the certification number. Labels of cocoa beans should be written in English.

Note that, in addition to certification, supply chain transparency is important in the speciality segment. Communicate a traceable and clear direct link between yourself as a producer and your buyer and/or the consumer.

2. What competition do you face on the European speciality cocoa market?

On the market side, the level of competition in the speciality cocoa market is generally lower than in the market for bulk cocoa. In the speciality segment, there is a strong focus on quality, taste, origin, sustainability and long-term direct trade relations. It is important to take the role of governments in cocoa-producing countries and their policies for the cocoa sector into account as well, as they have a big influence on the opportunities and development of the sector.

Latin America largest supplier of fine flavour cocoa beans to Europe

According to the International Cocoa Organization (ICCO), there are 23 countries that export fine flavour cocoa, of which 18 are Latin American. The table below shows that Ecuador, the Dominican Republic and Peru were the largest producers of fine flavour cocoa beans exported to Europe in 2019. Note that not all imported cocoa beans from these countries are defined as fine flavour.

Latin American is currently responsible for about 80% of all fine flavour cocoa production in the world. Ecuador is the main producer, but other Latin American countries, such as Peru, also play an important role. It is estimated that 53% of the Criollo variety, which belongs to the fine flavour segment, comes from Ecuador, followed by Peru (16%), Papua New Guinea (10%), the Dominican Republic (9.6%), Colombia (3.9%), Madagascar (2.9%) and Venezuela (2.6%). The competitive advantages of these countries producing high-quality cocoa, linked to origin, give them great potential to access the European high-value speciality market.

However, the competitiveness of some origins in this region is threatened by the new regulation on cadmium in cocoa for the European market. This has led to stricter controls on cocoa beans by European importers – particularly on supplies sourced from Latin America, as cocoa from these countries often has higher cadmium levels than cocoa from other regions. You can read more about the cadmium regulation in our study covering buyer requirements for cocoa.

Table 1: The main suppliers of fine flavour cocoa beans to Europe, in tonnes, 2015-2019

Country	Fine flavour export shares	Total imports by Europe in 2015	Total imports by Europe in 2017	Total imports by Europe in 2019
Ecuador	75%	57,822	81,785	86,040
Dominican Republic	40%	40,459	31,815	33,644
Peru	75%	42,217	41,458	32,528
Madagascar	100%	7,162	8,303	7,478
Papua New Guinea	90%	4,793	4,154	3,883
Venezuela	100%	2,486	2,491	3,508

Source: Eurostat, 2020

The fine flavour cocoa market is highly competitive and hard to enter

It is difficult to enter the market as a new fine flavour cocoa producer, due to its high quality requirements and the fact that there is not a single set of criteria determining whether cocoa can be classified as fine flavour. In addition, only governments can apply for fine flavour status, which adds a political component to this market. Countries with an organised cocoa sector, governmental support and strong lobbying power have higher chances of success.

Governments that are strongly supportive of the development of the fine flavour cocoa market in their country include those of Peru, Ecuador and Venezuela. Several countries have sought the fine flavour status and were added to the list in 2016, namely Belize, Guatemala, Honduras, Nicaragua, Panama and Vietnam. Other countries are still pursuing the fine flavour status. In 2017, cocoa beans from the Philippines were selected as among the best in the world. The Philippines is now also applying for a membership at ICCO.

Latin America leads organic supplies to Europe

The largest organic cocoa suppliers to Europe are the Dominican Republic and Peru. The Dominican Republic supplied an estimated 27 thousand tonnes of organic cocoa to the European Union in 2018, accounting for nearly 37% of total EU organic cocoa imports. Peru supplied nearly 16 thousand tonnes of organic cocoa in 2018, accounting for 21% of total EU organic cocoa imports.

The Dominican Republic is the world’s largest organic cocoa producer, and Peru ranked as the world’s fourth largest, after the Dominican Republic, Sierra Leone and DR Congo. Both Peru and the Dominican Republic have adopted national strategies to distinguish their cocoa from their competitors, with a focus on quality and sustainability. A large share of their total supply is defined as speciality cocoa.

DR Congo and Sierra Leone are the largest African organic cocoa suppliers

In 2018, DR Congo supplied an estimated 13% of total EU organic cocoa imports, amounting to 9.9 thousand tonnes. This makes DR Congo the third-largest supplier of organic cocoa to the EU. DR Congo is the third-largest organic cocoa producer with an estimated 52 thousand hectares for organic cocoa production in 2018.

DR Congo has grown from an emerging to an established organic cocoa supplier to the European cocoa market, after heavy investments in the country’s cocoa sector by donors and companies. There have also been initiatives to profile DR Congo as a destination for fine flavour cocoa.

Sierra Leone is another important organic cocoa supplier to Europe, ranking as the fourth-largest supplier with 7.7 thousand tonnes in 2018. Sierra Leone is the second-largest organic cocoa producer in the world, with a dedicated organic cocoa production area of nearly 62 thousand hectares in 2018. The organic cocoa sector in Sierra Leone has in part been boosted by Dutch trader Tradin Organic since 2015. Since 2017, Tradin has had its own cocoa sourcing company in the country.

Both DR Congo and Sierra Leone attract greater interest from buyers as alternative sources of organic cocoa beans, with low incidence of cadmium contamination when compared to Latin America.

3. Through what channels can you put speciality cocoa on the European market?

1. How is the end market segmented?

Mainstream cocoa beans and cocoa products are used for processing in four different industries: confectionery, food, cosmetics and pharmaceutical. Speciality cocoa beans are mainly used for the production of middle-range and high-end chocolate products. In the high-end segment, speciality cocoa is usually used without blending, whereas speciality cocoa in the middle-range segment is often in blends with other cocoa, to standardise and stabilise the chocolate’s flavour and aroma.

The figure below shows the general segmentation of the chocolate end-market. The high-end market is the smallest but fastest growing segment, with an estimated share of around 5-7%.

Figure 3: Segmentation of the chocolate market based on quality

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 Europe include the popular Swiss brand Lindt. Lindt is mainly known for their wide range of premium chocolate bars from either Trinitario and/or Forastero cocoa. Another example of a middle-range brand is Green & Black’s (United Kingdom), which is both organic and Fairtrade certified.

Retailers also increasingly develop their own premium private label products, for instance with organic certification. These products are offered at more accessible prices that appeal to consumers of all profiles. The market share of private labels in Europe continues to grow, with Spain (51%), Switzerland (49%) and Germany (45%) taking the lead.

Middle-range products are mainly sold at supermarkets or specialised shops, such as organic supermarkets. Examples are Farmy (Switzerland) and Ekoplaza (the Netherlands). The table below gives some examples of middle-range chocolate brands as well as an indication of consumer prices for these products in 2020:

	Product	Price (€/kg)
Middle range	Lindt Excellence (dark chocolate, 70%, 100 g package)	17.90
Vivani (organic-certified dark chocolate, 70%, Ecuador, 100 g package)	24.50
Chocolat Stella (Demeter-certified dark chocolate, 70%, Brazil, 70 g package)	44.14

High-end: smaller, more specialised chocolate makers produce high-end chocolate products, mainly using fine flavour cocoa (usually Criollo and Trinitario varieties, and/or Forastero, to a lesser extent). The cocoa genetics, cocoa cultivation and post-harvest practices, environmental conditions at origin and chocolate-making techniques all contribute to the final quality of the end product. Single-origin cocoa beans are important, both for the taste and for the traceability of the cocoa. High-end products are characterised by a high cocoa content.

Examples of bean-to-bar brands in Europe are Blanxart (Spain), Original Beans (the Netherlands), Domori (Italy), Willie's Cacao (United Kingdom), Mi Joya (Belgium) and Fjåk Chocolate (Norway).

These products are mainly sold through speciality shops, online or otherwise. Examples of speciality web shops in Europe are Chocolats de Luxe (Germany), Chocoladeverkopers (the Netherlands) and Cocoa Runners (the United Kingdom). High-end chocolate products are also sold at trade fairs, such as Salon du Chocolat (with fairs in France, Belgium, Italy and the United Kingdom), Chocoa and Origin Chocolate Event (the Netherlands).

Chocolate consumer prices for high-end chocolate products are given in the table below (based on retail prices in 2020). To compare, chocolate products on the low end of the market typically range between €7.50 and €15 per kilogramme.

	Product	Price (€/kg)
High end	Original Beans, Cru Virunga (organic dark chocolate, 70%, Congo, 70 g package)	64.29
Friis Holm, Indio Rojo (dark chocolate, 70%, Honduras, 100 g package)	95.00
Georgia Ramon (organic dark chocolate, 70%, Madagascar, 50 g package)	119.00

Source: Chocoladeverkopers

Prices: for exporters of cocoa, it is important to realise that trade prices and retail prices follow different patterns and are not directly linked. 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.

Prices for speciality cocoa have a reference on the international London and New York cocoa market prices but will command differentials. As such, in the speciality segment, these shares of added value for farmers tend to be higher than on the mainstream cocoa market. On the mainstream market, only 6.6% of added value per tonne of sold cocoa goes to farmers, as is depicted in the figure below.

Speciality cocoa usually fetches higher prices than bulk cocoa, as chocolate makers are willing to pay a premium for good quality and a unique product. For speciality cocoa, the premiums paid can go up to €300 to €5,000 per tonne on top of the London or New York stock market price. You can check the daily prices for bulk cocoa on the website of the International Cocoa Organization. Remember that exchange rates fluctuate, which may have an effect on the price you get. Cover this risk by including a clause on currency risk in your contracts.

Generally, prices are set in relation to the uniqueness, scarcity and origin of the particular cocoa. Therefore, storytelling has become increasingly important. Also, in order for you to establish a selling price, it is important to know your production costs. Calculating your production costs and thinking about the margin you want to make helps you make informed business decisions, such as when to sell how much and for what price.

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

The market for speciality cocoa is relatively small and highly specialised, with its own characteristics of supply and demand. In general, the speciality value chain is short and transparent, unlike the longer value chain for bulk cocoa/chocolate. Farmers often sell their speciality cocoa either directly to agents or specific chocolate companies. This increases the possibilities of reaching a more efficient and equitable distribution of prices across different actors along the chain.

Figure 5: The main export channels of cocoa to Europe

The different channels to enter the European market for speciality cocoa are:

Importers: There are several importers active in the speciality cocoa segment. They usually handle smaller quantities, and often work directly with producers and producer cooperatives. Examples of specialty cocoa trading companies are Bohnkaf Kolonial (Germany), Silva (Belgium) and Tradin Organic (the Netherlands). They distribute speciality cocoa in their own country, or elsewhere in Europe. These importers do their own quality checks, and sometimes engage in processing as well. Bear in mind that many specialised importers prefer to work directly with producers and/or cooperatives and not through exporters.

Midium-sized and larger (private label) chocolate manufacturers: Barry Callebaut is the largest industrial chocolate manufacturer worldwide, mainly dealing with bulk cocoa but also processing speciality cocoa. Other chocolate manufacturers sourcing speciality cocoa beans for their chocolate manufacturing are Lindt & Sprüngli (Switzerland) and Valrhona (France). Both companies have their own importing departments and source their cocoa beans directly from producing countries.

As it becomes more common for large brands to outsource their production to specialised private label manufacturers, private label companies can also be an interesting entry point for your speciality cocoa beans. Dillicious (Germany) and Felchlin (Switzerland) are examples of companies offering high-quality private-label manufacturing. Chocolate Naïve (Lithuania) also offers private label, while also producing its own bean-to-bar brands.

Small chocolate makers: : in the speciality cocoa segment, cocoa beans are increasingly traded directly from farmers (or farmers’ associations and cooperatives) to chocolate makers. Examples of bean-to-bar makers in Europe that source part of their cocoa directly from producing countries are Blanxart (Spain), Mesjokke, Original Beans (the Netherlands), Domori (Italy), Friis Holm (Denmark) and Georgia Ramon (Germany).

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 can also have an importer as intermediary (such as Daarnhouwer, in the Netherlands), acting 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.

An example is Kokoa Kamili, a social enterprise which distributes Tanzanian speciality cocoa to several European bean-to-bar makers, such as Krak Chocolade (the Netherlands) and Svenska Kakaobolaget (Sweden). Other examples of such speciality cocoa intermediaries are Uncommon Cocoa and Cocoanect.

Which of these channel is most interesting for you?

A producer association selling speciality cocoa is likely to be successful by selling 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 might be interesting to directly link up with high-end chocolate makers.

Targeting speciality chocolate makers directly is recommended for producers and exporters dealing with speciality cocoa beans. This means you must have 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 subject more in depth.

ProFound – Advisers In Development carried out this study for CBI.

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