Which trends offer opportunities or pose threats in the European cocoa market?

The popularity of specialty chocolate is growing in Europe. Demand for high-quality fine flavour cocoa and single-origin is getting stronger. Multinationals increasingly find ways to expand their influence in this specialty market. At the same time, sustainability is becoming more important in the European chocolate market, affecting supplies of both specialty and bulk cocoa. As a result, sustainability programmes have become commonplace among cocoa trading companies. European consumers want to know more about the context of cocoa production and the impact of their purchases.

The market for specialty cocoa is growing in Europe, as highlighted in our study on statistics and outlook in the European cocoa market. As customers seek premium and higher-quality chocolate products, they are also increasingly interested in their origins. Consumers have also become more and more interested in the agro-climatic features of production areas, and the story of producers and their communities. According to Swiss chocolate company Barry Callebaut, single-origin chocolate is perceived as being more premium and sustainable.

The bean-to-bar segment is known for its single-origin offer. Examples of bean-to-bar brands offering single-origin bars include Blanxart (Spain), Willie’s Cacao (United Kingdom), Original Beans (the Netherlands) and Domori (Italy).

Single-origin chocolate has also become commonplace in mainstream segments. For instance, retailers have started to offer a wide variety of single-origin private label chocolates. Examples include the Dutch Albert Heijn’s private label brand Delicata, which offers chocolates from Uganda, Peru, Costa Rica and Tanzania. Another example is the L’origine du goût chocolate collection from retailer E-Leclerc, made from Nicaraguan single-origin cocoa. In the UK, Waitrose offers a line of single-origin chocolates from Ecuador, Dominican Republic and Peru under its No. 1 collection.

Figure 1: Single-origin bars from private label brand Delicata (Netherlands)

Source: Dieline

As the offer of single-origin chocolate has become so common and widespread, high-end brands have increasingly been looking for other ways to differentiate their products. The focus on more specific single-estate products is, for instance, the result of that. An example is the single-estate chocolate line of Valhrona. An example of a single-estate cocoa exporter is Hacienda Victoria (Ecuador).

There have also been programmes aiming to promote single-origin high-quality cocoa from specific regions. For instance, the United Nations-backed programme Alliances for Action supports and promotes small-scale cocoa farming and chocolate production throughout the Caribbean, with projects in Trinidad and Tobago, Jamaica and the Dominican Republic. In addition to technical support and assistance with new product development, the broader goals include sharing the stories of unique flavour and terroir along the entire value chain, all the way to pastry chefs and consumers.

The importance of single-origin and single-estate on the European market increasingly requires cocoa exporters to know the characteristics of their cocoa, share stories about the production context and provide assurance of the origin of their cocoa.

2. Storytelling increasingly important on the cocoa and chocolate market

Storytelling has been listed as a new mainstream trend, and it is something that has a high impact on the chocolate market. Consumers want to know the story behind a product. This is also linked to the growing importance of origin of cocoa, which should be supported with stories, transparency and traceability. An example is the brand Ethiquable, which uses its packaging to tell the story of the cocoa producers and cooperatives and of the origin of the cocoa.

Figure 2: Ethiquable: an example of storytelling for a chocolate bar in the European market

Source: Ethiquable

In general, a good story helps you to market your product to cocoa traders. Cocoa importers and chocolate makers will in turn use your stories in their own communication with their consumers. By telling an appealing story, they are able to connect consumers to the cocoa’s origin and the producers, adding value to the final chocolate product.

Make sure to share your stories for a larger audience, for instance through social media and/or your website. The information presented on your website must be accurate, up to date, clear and appealing. When talking about your mission and the history of the farm or cooperative, give the story a face, by providing good-quality photos of the plantations, the farmers and their families.

Other examples of exporting companies sharing appealing stories about their company and history include Xoco Gourmet (Honduras), Kokoa Kamilia (Tanzania), Rizek Cacao (Dominican Republic), Esco Kivu (DR Congo) and Ingemann (Nicaragua).

3. Demand for bean-to-bar chocolate on the rise

The focus on origin has also spurred a steep increase in the number of European bean-to-bar makers in recent years. Bean-to-bar means that the maker controls every step of the production process, from buying the cocoa beans to the creation of the chocolate bar. There are many examples of European companies making bean-to-bar and single-origin chocolate products, often using fine flavour cocoa beans. You can find them on this list of bean-to-bar producers worldwide.

Although some bean-to-bar makers also work with commercial quality cocoa, most focus on high quality. For cocoa producers, the bean-to-bar concept involves different methods of production, packaging and direct shipping or sales to high-end outlets. Bean-to-bar enables a small number of producers to add significant amounts of value to their cocoa production. This value addition for cocoa producers is mainly done through quality branding and packaging, and by offering superior cocoa qualities.

These high-quality products are mainly sold through specialised channels, such as the web shops Chocoladeverkopers (the Netherlands), the True Chox (Germany) and Cocoa Runners (the United Kingdom) or the web shops of bean-to-bar makers themselves. Specialised chocolate shops such as The Chocolate Shop and Chocolátl (the Netherlands) and organic supermarkets also have some bean-to-bar products in their assortment, such as Planet Organic (the United Kingdom).

There is little effort to promote bean-to-bar products (under private label) in mainstream retail channels. Willie’s Cacao (United Kingdom) is an example of one of the very few bean-to-bar products in Europe already available, for instance in British supermarket Waitrose. There are no definite signs that bean-to-bar products will become mainstream in supermarkets in the short term. The expansion of the bean-to-bar offer at supermarkets would likely drive up sales of this product category in Europe.

Next to bean-to-bar chocolate, there is a new trend on the rise: tree-to-bar chocolate. Tree-to-bar is different from bean-to-bar, as bean-to-bar makers are not necessarily located in cocoa-producing countries. All tree-to-bar chocolate makers have complete control over how their cocoa beans are grown and processed. This implies that tree-to-bar companies tend to safeguard transparency and traceability along the chain. Cacaoteca is a tree-to-bar chocolate maker from Dominican Republic.

4. Direct trade is shortening the cocoa chain

There is a growing number of direct trade relationships in the specialty cocoa market. These relationships are between producers and small and medium-sized chocolate makers. The idea of direct trade is that it maintains long-term, honest and strong relationships between cocoa producers or producer cooperatives and chocolate makers. This requires trust, commitment and clear communication. Eventually, these relationships can lead to improved product quality, transfer of know-how and better price prospects for you as a farmer or exporter.

However, connecting directly to producers is not always feasible for chocolate makers. Dealing with logistics, contracts, customs documentation, and cases of non-compliance can be very complicated for smaller buyers. As such, there is a growing trend of European importers trying to create better connections between chocolate makers and producers, and still act as service providers in the value chain.

Such traders include Silva (Belgium), Walter Matter (Switzerland), Uncommon Cacao (USA/Netherlands), Gaia Cacao, Crafting Markets and Daarnhouwer (all from the Netherlands), which connect producers and chocolate makers. Producers and cooperatives supplying buyers directly include Hacienda Victoria (Ecuador), El Ceibo (Bolivia) and Grupo Conacado (the Dominican Republic).

It is important to note that more direct trading allows producers to also supply tailored, semi-finished cocoa products to chocolate makers. This subject is covered in our study about the European market for semi-finished cocoa products.

5. Health and wellness increasingly influence chocolate consumers

Demand for high-quality cocoa is stimulated by a growing consumer interest in healthy living. European consumers are increasingly concerned about the impact of food on their health and wellness. The COVID-19 crisis has made consumers even more quality- and health-conscious, driving up the demand for healthy and organic foods. It is expected that this increasing demand will continue now the crisis is coming to its end.

Cocoa contains flavonoids, which are associated with health benefits such as lower blood pressure, improved blood vessel health and improvement in cholesterol levels. Health benefits are highest for dark chocolate due to its higher percentage of cocoa. An example of a chocolate brand highlighting the health benefits of cocoa on its labels is The Good Chocolate Company from Belgium.

This focus on dark chocolate due to its high flavonoid content is not new. However, chocolate brands are currently adding extra flavonoids to their bars to optimise their health qualities. One example is the development of FlavaBars by Barry Callebaut and FlavaNaturals. Consumption of cocoa nibs is also growing, which can also be attributed to its associated health benefits.

Besides, the chocolate industry is increasingly adding natural ingredients to their chocolate products. Real fruit, vegetables or nuts are added to cocoa products as these are perceived as healthy by the consumer. For instance, the product line Brut of Côte d’Or consists of chocolate bars containing orange, cranberries, almonds and pecan nuts. Other brands are adding more exotic ingredients to its chocolate products; for example, Lovechock (the Netherlands) had a chocolate bar with baobab fruit.

There is also a growing demand for sugar-free chocolate bars, or chocolates with alternative sweeteners like stevia and coconut sugar. Chocolate makers Stella Bernrain (Switzerland) and Klingele Chocolade (Belgium) are examples of chocolate makers offering chocolate products without added sugar. Big companies are offering chocolate products with alternative sweeteners. For instance, Nestlé has created a chocolate with cacao pulp-derived sugars.

Vegan chocolates are also growing in popularity, because of dairy allergies, lactose intolerance or consumers who are opting to live a vegan lifestyle. Big chocolate manufacturers have increasingly been offering such products in recent years. For instance, in 2022, Lindt & Sprüngli expanded their dairy-free chocolate product portfolio, and Nestlé introduced a vegan KitKat in the United Kingdom in 2021. There is also an increasing demand for protein-fortified chocolates.

6. EU regulation on cadmium continues to impact the industry

The European Union has strengthened its regulation on cadmium in chocolate and derived products. The cadmium regulation became effective on January 2019. Although the regulation is already a few years old, it continues to affect the industry. But new support initiatives are reason for optimism.

Cadmium is found naturally in the soil, but pesticides and chemical fertilisers containing cadmium are also sources of contamination. The presence of cadmium is a particular problem for cocoa from some Latin American countries, which suffer from high soil contamination from volcanic activity, forest fires and other factors. Intake of high levels of cadmium is primarily toxic to the kidneys, so it is a serious concern for consumer health.

The maximum permitted levels of cadmium relate to finished chocolate products, but controls of cocoa beans have become essential too. If cadmium levels in cocoa beans are too high (usually levels of >0.8 parts per million and above), chocolate makers will either reject the product altogether or will blend the cocoa with other cocoa with lower cadmium content.

European chocolate makers test cocoa from Latin America and other origins for cadmium. Currently, chocolate manufacturers are looking into new cocoa supplier destinations to diversify their sourcing origins and mitigate the cadmium contamination risk. For instance, countries like 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.

Producing countries warn of adverse impacts on livelihoods of smallholder cocoa farmers. As a reaction, the International Cocoa Organization (ICCO) launched a project in 2018 to develop a regional strategy for handling cadmium contamination in cocoa beans in Colombia, Ecuador, Peru and Trinidad and Tobago. This project was sponsored by the European Union. In 2022, ICCO announced a new initiative to address cadmium content in cocoa beans, also partly financed by the EU and the World Trade Organization. Aims of the new initiative include the creation of a platform to share information on standardised testing protocols and best practices for cadmium mitigation and remediation. Other initiatives include the Clima-LoCa project, specifically aimed at understanding how to mitigate cadmium levels in Latin American cocoa.

7. Multinationals increase their influence on the global cocoa market

Multinationals are expanding their influence along the cocoa supply chain in mainstream and bulk markets. Many of these multinationals have their own buyers and processing facilities in cocoa-producing countries. For example, chocolate companies Mondelez and Barry Callebaut, as well as ingredient companies such as Cargill and OLAM, work as both a cocoa processor and exporter in the country of origin and as an importer and manufacturer in Europe. In Ivory Coast, local cocoa traders have called for law reforms that would end the dominance of multinationals in the country’s cocoa exports.

The ongoing concentration and vertical integration of the cocoa supply chain makes it increasingly difficult for small and medium-sized players to enter the market. On the supply side, there is also a growing concern on the availability of cocoa beans, which are absorbed by large companies operating in producing countries. While trading on the futures market is becoming more challenging, margins in the physical trading may remain attractive and may offer opportunities for smaller trading companies.

The European chocolate market also sees the increasing involvement of mainstream chocolate companies in the speciality segment. Chocolate giants are increasingly adopting terms from the speciality market such as bean-to-bar and single-origin or even develop sister companies, like Twenty Degrees, which is part of OLAM. Another strategy is the acquisition of (chocolate) companies active in the specialty segment. This for instance explains the acquisition of Leman Decoration Group in 2021 by Cargill. This acquisition has strengthened and broadened Cargill’s positioning in the specialty and premium chocolate products market. Barry Callebaut acquired the Europe Chocolate Company in 2021 for similar strategic reasons.

In recent years, there has also been a growing imbalance of bargaining power between retailers and food manufacturers. Retailers hold a powerful position in the cocoa value chain as they have the power to cut off margins, put pressure on prices and have the authority to decide what they sell. This allows retailers to set the terms under which they purchase cocoa beans. In addition, supermarkets take on increasing shares of the chocolate market because they are diversifying their private-label range to appeal to various consumer groups. Examples of private label brands are Hacendado of Mercadona (Spain) and Carrefour Sélection (France).

Sustainability in the cocoa sector remains critical worldwide. Poverty reduction and earning a living income continue to be a very important and urgent topics. Child labour is also a returning agenda item, since improvements are hardly visible and the levels remain very high in the cocoa sector, with an estimated 2.8 million children working in cocoa fields in Ivory Coast and Ghana alone.

Generally, farmer income remains a top-line item. Initiatives like the Living Income Differential (LID), implemented in the largest producer countries Ivory Coast and Ghana, seek to improve this issue at an institutional level. Other initiatives on this topic include the Living Income Summit in 2022, hosted by the Sustainable Trade Initiative (IDH) in partnership with the Living Income Community of Practice, the Living Income Roadmap Steering Committee and the Business Commission of Tackling Inequality.

There is also great concern around climate change and unsustainable farming practices. Research has shown that the area suitable for cocoa production will decrease significantly in the near future due to climate change. Cocoa farming is also a main driver of deforestation in some producing countries like Ivory Coast, which contributes to climate change. Direct effects of climate change such as less rain, longer dry seasons and the increase in pests and diseases can negatively affect cocoa quality and yields. To tackle these challenges, it is increasingly important for farmers to adapt to more sustainable farming practices, such as using fewer synthetic fertilisers and conducting good water management.

As of 2021, the European Union is investing more than €30 million to enhance the economic, social and environmental sustainability of cocoa production in Ivory Coast, Ghana and Cameroon. These countries together produce about 70% of total cocoa worldwide. The EU and the three cocoa producing countries aim to ensure a decent living income for cocoa producers, stop deforestation and eliminate child labour under the flag of the Alliance on Sustainable Cocoa.

The EU has also implemented a Regulation on deforestation-free products, published in November 2021. This regulation bans the sale of goods, including chocolate, produced on deforested and degraded land. It aims to minimise the impact of EU consumption on the cocoa sector, which is seen as a risk commodity for deforestation. The European Cocoa Association (ECA) and the European Chocolate, Biscuit and Confectionery Industry Association (CAOBISCO) members supported an EU-wide due diligence regulation. Buyers will likely forward some of the implications of the regulation onto cocoa suppliers and/or exporters.

It is clear that reaching a sustainable cocoa sector is a responsibility of all. Currently, there are several other international initiatives targeting the cocoa sector, such as the International Cocoa Initiative. This is a platform for chocolate and cocoa companies, civil society and governments to align projects and goals. Another example is the Cocoa and Forests Initiative. This is a platform between industry, donors and the governments of Ghana and Ivory Coast against deforestation.

In 2020, the Cocoa Barometer concluded that, although both public and private sector actors have shown an increasing willingness to consider regulations, the programmes and initiatives have not yet led to significant impact when it comes to farmers' livelihoods or environmental impact. Sustainability issues are pressing both for producers and buyers, and will remain high on the international agenda. As said, the private sector is also engaging more closely with sustainability activities, as elaborated in the next section.

9. Sustainability programmes are commonplace in the private sector

Consumer awareness about sustainable cocoa production has grown in the last decade. This has resulted in an increased demand for sustainably produced cocoa and chocolate, especially in northern and western Europe.

Most importers, cocoa processors, chocolate makers and retailers have designed their own sustainability commitments over the years. Each company follows its own strategy in defining sustainability. Some use the certification schemes of the leading standard bodies (Rainforest Alliance, Fairtrade, organic), some work through their own projects, while others combine both approaches. Depending on the buyer and their enforcement actions, producers will need to comply or commit to comply with the required standards.

Some examples of corporate sustainability programmes include:

• Nestlé: The Nestlé Cocoa Plan
• Mars: Cocoa for Generations
• Mondelez: Cocoa Life
• Lindt & Sprüngli: Farming Program
• Barry Callebaut: Forever Chocolate
• Cargill: Cocoa Promise

Retailers cover their sustainability concerns and requirements in their codes of conduct. See the sustainability webpages of REWE (Germany), Ahold Delhaize (the Netherlands) and Carrefour (France) for examples. Since 2018, retailers have created the Retailer Cocoa Collaboration, with the aim to support existing industry efforts to drive environmental and social improvements in the sector.

Many European retailers also actively promote certified cocoa and increasingly source certified cocoa for their own private-label brands. For instance, Coop (Switzerland) requires all chocolate products to be certified with Fairtrade standard Max Havelaar, and also four major Belgian retailers sell certified chocolate under their private brands. Read more about the developments in certification in our statistics and outlook study.

Some European countries have also set sustainability goals targeting their chocolate and confectionery industry. Companies increasingly adopt their practices to contribute to these targets, such as the endorsement of specific certification schemes or codes of conduct. Examples of countries that work on their own national platforms to achieve their sustainability targets are:

• Swiss Platform for Sustainable Cocoa
• German Initiative on Sustainable Cocoa
• Dutch Initiative for Sustainable Cocoa (DISCO)
• Belgium’s partnership for sustainable cocoa Beyond Chocolate
• French Sustainable Cocoa Initiative

In 2021, these national sustainability platforms signed a Memorandum of Understanding (MoU) to collaborate more closely and to enhance transparency.

In addition, governments' procurement policies in western Europe consistently focus on sustainability criteria for the purchase of products such as cocoa and chocolate. The Dutch government, for instance, has elaborated specific sustainable procurement guidelines which include cocoa. All Dutch public agencies have started to implement them, including imposing conditions in their public tenders.

As these commitments and programmes show, companies and governments recognise the need to reach a more sustainable cocoa sector. The focus on and importance of sustainability for companies active in the cocoa sector will only increase and intensify, broadening the focus to issues such as biodiversity and living incomes.

This study was conducted on behalf of CBI by ProFound – Advisers In Development.

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