Through what channels can you get cocoa onto the European market?
The confectionery industry (chocolate, sweets and candies) accounts for two thirds of global demand for cocoa. Commodity cocoa represents the largest part of the market, both globally as well as in Europe. This segment is marked by a traditional trading structure and concentration around a few players. Speciality cocoa is an increasingly interesting segment for exporters in producing countries. Especially in this segment, direct contact between European chocolate makers and producers is growing.
Within Europe, cocoa is used in four different industries:
- The confectionery industry uses about two thirds (around 2.5 million tonnes/year, according to the International Cocoa Organisation, 2016) of global cocoa to produce chocolate and other confectionery products. The confectionery industry mainly processes cocoa liquor and butter into chocolate bars, candy bars, and small chocolates such as bonbons and bite sizes. Six companies represent the bulk of the global confectionery market: Mars, Mondelez, Ferrero, Nestlé, Hershey and Lindt. Together, these companies used almost 1.8 million tonnes of cocoa in 2017 (Cocoa Barometer, 2018). Fine flavour cocoa, directed to the production of high-quality chocolates, accounts for around 5% of the total cocoa production worldwide (200,000 tonnes/year).
- The food industry uses cocoa powder and butter as an ingredient in drinks, desserts, ice creams, spreads, sauces, cakes and biscuits.
- The cosmetics industry processes cocoa butter in products such as creams and soaps. Cocoa is also increasingly used in health products, particularly in the form of cocoa nibs. This follows health and wellness claims associated to cocoa, particularly on the function of flavonoids in the maintenance of normal blood flow.
In this study, we focus on cocoa used in the confectionery and food industries. You can find more information on cocoa products in our study on the European market for semi-finished cocoa products.
The market can also be segmented on the basis of the type of cocoa used in these industries:
- Commodity cocoa (>90% of the sector): characterised by high volumes, low value and standard quality. Mainstream European brands for chocolate (candy) bars, such as Kit-Kat (Nestlé), Milky Way, M&M’s and Twix (Mars), Cadbury (Mondelez) and Toblerone (Mondelez) use bulk cocoa mainly from West Africa (Forastero variety). The food industry mostly uses commodity cocoa for the manufacture of other food products too.
- Speciality cocoa (<10% of the sector): associated with lower volumes of mostly Trinitario and Criollo varieties, marked by high quality, fine flavour and single origin. This segment is also associated to special stories and niche sustainability labels (such as organic or fair trade). It is generally purchased by smaller brands and bean-to-bar makers. Examples are: Valrhona (France), Vivani (Germany), Seed and Bean and Divine Chocolate (United Kingdom), Idilio (Switzerland), Amadei (Italy), and Original Beans (the Netherlands). Speciality cocoa is very costly, and not normally used by the food industry as an ingredient. Speciality cocoa products are growing in popularity. See our study on Trends for Cocoa for more information about this trend.
Furthermore, the market can be segmented based on the end markets:
- High end: High-quality, speciality products - premium chocolate with high cocoa content, fine flavour cocoa, single origin cocoa, cocoa with a story. Generally sold in speciality retailers and gourmet shops. Examples are: Valrhona 70%, Organic and Fairtrade (€3.80 per 70 gram), Duffy’s 72%, single origin (€6.70), Friis Holm 100% La Dalia Nicaragua (€13.30 per 80 gram), Ocelot 75% Porcelana Bar (€6.92 per 75 gram).
- Middle range: Good quality chocolate sold in supermarkets, including chocolates with a sustainability certification. Mainstream brands such as, Lindt, Cote D’Or, Cadbury, Ritter and Verkade. Examples are: Vivani 71%, Organic (€1.79), Ritter Sport 73% (€1.60), Lidl FairGlobe 70%, Fairtrade (€1.29), Verkade 75%, UTZ and Rainforest Alliance (€1.41) and Lindt 85% (€1.67 per 100 gram).
- Low end: Cheap chocolate with lower cocoa content sold in supermarkets and discount stores. Private label chocolate bars and lower-quality mainstream brands. Examples: Albert Heijn Private Label (Delicata), UTZ (€0.99), Lidl (€0.45) and Aldi (€0.67 per 100 gram).
- Target specific market segments depending on the quality of your cocoa beans and your volume capacities. If you have very high-quality micro lots and are working through an importer, for example, discuss the possibilities to link up with high-end chocolate makers. If you work with commodity cocoa, discuss certification trajectories and possible industrial applications, and how to get access to those. Some more ideas and market access scenarios are given in the section below, dealing with market channels.
- Learn more about the promotion of standard quality and speciality chocolate by mainstream supermarkets such as Albert Heijn (the Netherlands), Sainsbury’s (the United Kingdom) and REWE (Germany). Compare their product assortments with specialised stores such as Chocolátl (Netherlands), The Chocolate Shop (Ireland) and Mast Brothers (United Kingdom).
- See our country studies (examples: Belgium, France, Germany, Switzerland and the United Kingdom) for more specific information on the end markets for coffee. Learn about channels, certification requirements and consumer preferences.
- Check the websites of the International Cocoa Association and the European Cocoa Association for more detailed information about international and European trade statistics and cocoa prices.
- Refer to our study on trends in the cocoa sector to learn more about developments within different market segments.
Figure 1: The main channels for export of cocoa to European markets
Within the cocoa sector there are a few European countries that serve as important trade hubs for cocoa beans. The three largest European trading hubs for cocoa beans are:
In these countries, you can find industry clusters where traders, grinders and manufacturers are well-connected and work in synchronisation. In these country, and elsewhere in Europe, you can use different channels to bring your cocoa to the European market.
Most exporters of bulk cocoa sell their beans directly to processors/grinders of raw cocoa beans. They process the raw cocoa beans into cocoa mass, cocoa butter and/or cocoa powder and distribute the processed products to the confectionery, food and cosmetics industries throughout Europe. Some grinders also manufacture end products to supply directly to the retail or food service sector.
Importers either sell the cocoa to buyers in the country where they are located or re-export them to other European countries. In most cases, importers have long-standing relationships with their suppliers. Around 90% of cocoa beans is produced by small farmers. Importers in the commodity segment handle large quantities and have contact with exporters in producing countries who are not necessarily cocoa farmers themselves. However, some importers deal directly with these producers and are specialised in dealing with smaller quantities, particularly in the speciality segment.
Specialised importers could also be interested in value-added cocoa products processed at the country of origin, as described our study on the European market for semi-finished cocoa products.
Agents act as intermediaries between cocoa exporters and larger manufacturers. Some are independent, while others are hired to make purchases on the behalf of large cocoa manufacturers or other multinationals. Agents take a commission based on their sales.
Especially in the speciality & fine flavour cocoa segment, cocoa beans are increasingly traded directly from producer to chocolate makers. The consolidation and expansion of direct trade is linked to platforms such as Direct Cacao and Cocoanect, which connect producers with chocolate makers. Direct trade has shortened the chain and strengthened the contact between producers and chocolate makers, and consequently consumers.
In spite of this growth, direct trade 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, need to be handled by the chocolate maker.
In this sense, direct trade can also happen 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.
Direct trading also allows producers to supply tailored semi-finished cocoa products to chocolate makers. This subject is covered on our study on the European market for semi-finished cocoa products.
- Are you an exporter and do you buy bulk beans from a producer/cooperative? Then your direct trading partner is usually a European cocoa grinder/processor. Importers or agents are also interesting for you, and can act as intermediaries. However, many specialised importers prefer to work directly with producers and/or cooperatives.
- Are you a local grinder and your cocoa mass and cocoa butter 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.
- Are you part of a producer association selling specialty or certified cocoa? Do you have the financial means and technical knowhow to organise export activities? Then you can also sell your beans directly to specialised cocoa importers or bean-to-bar chocolate makers. 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.
- Provide your buyer with the right information about your cocoa variety, type of processing (example: fermentation level) that was used, the country and region of origin, and other technical specifications.
- Find buyers who match your business philosophy and export capacities (in terms of quality, volume, certifications). For more tips on finding the right buyer for you, see our study on finding buyers in Europe.
- Explore trade platforms such as Direct Cacao and Cocoanect their member companies to search for direct trade opportunities with European buyers.
- Invest in long-term relationships! Whether you are working through an importer or directly with a chocolate maker, it is important that you establish a strategic and sustainable relationship with them. This will help you manage market risks, improve the quality of your product and reach a fair quality/price balance.
- See our study on how to do business with European buyers for more information about communicating with buyers, how to send samples and how to draw up contracts.
- See our study on buyer requirements for cocoa to learn about which European market standards and requirements you need to comply with when supplying to Europe.
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