Which trends offer opportunities on the European cocoa market?
The popularity of speciality chocolate is growing in Europe. Demand for high-quality fine flavour cocoa is getting stronger. While Ivory Coast and Ghana remain the largest bulk cocoa suppliers to Europe, Ivory Coast has managed to keep its top position, while Ghana’s share is decreasing. Several other West African suppliers are increasing their market share. Sustainability is increasingly important on the European chocolate market. Consumers want to know more about the context of cocoa production, and the impact of their purchases.
Contents of this page
- Increasing demand for fine flavour cocoa
- Health and wellness increasingly influence chocolate consumers
- West African supplies remain stable and Latin American suppliers emerge
- Prices for cocoa beans drop
- Transparency and traceability
- Sustainability and certification in Europe
- Multinationals increase their influence on the mainstream and speciality markets
Fine flavour cocoa accounts for around 5% of the world’s cocoa production (200,000 tonnes/world/year). Even though this is a small percentage, it is the fastest growing segment in the chocolate market due to the expansion of speciality or premium chocolate products.
In Europe, growing demand for speciality chocolate can be found in traditional consuming countries such as Belgium, France, Germany, Italy, Switzerland and the United Kingdom. Consumption in this segment is associated with higher incomes, but also to consumer awareness and market exposure. As is the case in North America, European consumers are also seeking higher quality and higher cocoa content in their chocolates.
This trend is especially driven by a small group of educated, loyal and casual consumers (example: seasonal shoppers during festivities like Easter and Christmas). However, mainstream chocolate companies such as Ferrero, Mars and Mondelez are increasingly investing in premium lines. This makes speciality chocolates accessible to all types of consumers.
Developments in the fine flavour cocoa market partially follow the evolution of the European speciality coffee market, but at a slower pace.
These are the main developments:
- There is an increasing consumer interest in single origin chocolates (in contrast to blends). This is linked to the attention given to the production areas, as well as to the story of producers and their communities.
- The idea of terroir, much present on the wine market and developing on the speciality coffee market, is still in its infancy for fine flavour cocoa. However, the industry is creating mechanisms such the International Cocoa Awards (ICA) of the Cocoa of Excellence (CoEx). This rewards flavour, quality and diversity of different origins. The Cocoa of Excellence is also involved in the development of standardised procedures and language around assessing cocoa bean quality (with the example of those for coffee, wine and olive oil). And also in its direct relation to high quality chocolate for buyers and for consumers to understand. Currently, consultations with industry actors worldwide are being carried out, so as to investigate existing tools and methodologies to assess cocoa quality.
- The market for micro lots also attracts a growing interest from the high-quality chocolate industry. Small volumes of top-quality cocoa are used in special editions and for high-end markets in Europe, which is a very small share of the market. These products attain very high prices, which is itself a limiting factor for the expansion of the consumer base. The cocoa market is a few steps behind the speciality coffee market, which has its own micro lot platform through the Cup of Excellence.
- Direct trade between producers and small and medium-sized chocolate makers is also an ongoing trend on the fine flavour cocoa market. In its strict sense, direct trade eliminates the traditional role of European traders. However, this is not always feasible for chocolate makers who cannot deal with logistics, contracts, customs documentation and cases of non-compliance. As such, there is a growing trend for European importers to create better connections between chocolate makers and producers, and still act as service providers in the value chain. It is important to note that more direct trading allows producers also to 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.
- Online sales gain importance as a distribution channel to the consumer and are expected to increase in the next years. Web-shops come in combination with social media such as Facebook and Instagram, which serve as tools to attract consumer attention and increase online sales.
- Identify buyers which match your mission and business ethics. Within fine flavour cocoa, trust is key to sustainable relationships and market consolidation. Long-term relationships can lead to optimisation of quality, transfer of know-how and better price prospects.
- Discuss with your buyer the possibility to develop limited and special editions for top-quality cocoa which is produced in small quantities or micro lots. Be clear about their requirements and what kind of samples they require (quantities, packaging, labelling, accompanying documentation).
- Develop and articulate your unique selling points as a supplier of cocoa beans. Think about factors which set you apart from your competitors and create your marketing story around these factors. For example, they can be related to the origin of your cocoa beans, the agro-climatic characteristics of the producing region, the culture of the producing communities, the unique quality of your product, or the combination of these aspects.
- Investigate whether you qualify for industry awards such as the International Cocoa Awards (Cocoa of Excellence). This can be an interesting way to profile yourself on the European market for fine flavour cocoa.
- Check the possibilities of local value-addition in your country. Learn more about cocoa production and value addition at the website of the European Cocoa Association
Demand for higher-quality cocoa is also stimulated by a growing interest in healthy living. European consumers are increasingly concerned about the impact of their food intake on their health and wellness. Cocoa contains flavonoids (antioxidants). These 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. This makes high-quality quality cocoa (with well processed beans and preferably a fine flavour variety such as Trinitario) more and more popular.
Europe currently accounts for around 45% of the dark chocolate market worldwide, which is expected to grow at an annual rate of over 8% by 2019 at the global level. Cocoa nibs are also increasingly available as a health food through specialised shops.
The focus on dark chocolate due to its high flavonoid content (antioxidants) 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. Flavonoids are associated with health benefits such as lower blood pressure, improved blood vessel health and improvement in cholesterol levels.
The cocoa industry is also increasingly adding real fruit, vegetables or nuts to their cocoa products as these are perceived as healthy by the consumer. These products allow consumers to indulge their passion for chocolate more while still convincing themselves that they are making a healthy choice.
Consumers are demanding more dairy-free options across all food categories because of dairy allergies, lactose intolerance or consumers opting to live a vegan lifestyle. Barry Callebaut, for example, expanded their dairy-free chocolate product portfolio in May 2018.
- Improve the quality of your cocoa beans to cater for the specialty segment. Refer to industry guidelines such as the Cocoa Beans: A Guide to Chocolate & Cocoa Industry Quality Requirements to learn more about the factors determining quality of cocoa beans, and how to address them.
- Do you want to focus on further processing of cocoa? Develop cocoa products with healthier components. Think about dark chocolate, chocolate with added fruit, vegetables or nuts or chocolate with no added sugar or sugar substitutes (including stevia, agave or coconut sugar).
Most cocoa beans in Europe are supplied by West Africa (mostly bulk cocoa of the Forastero variety). The main origins are Ivory Coast (40% of market share in 2017), Ghana (12%) and Nigeria (9%). Others are Sierra Leone and Liberia. These supplies are essential for the production of standard-quality chocolates and are used by most large companies worldwide.
Supplies of most West African cocoa beans to Europe increased between 2013 and 2017. Supplies from Ivory Coast increased at an annual rate of 14% between 2013 and 2017, while supplies from Ghana fluctuated during the same period, averaging an annual decline of 5%. The declining supplies of Ghana could be related to problems with droughts and fungus in the country and to decreasing yields.
Smaller, upcoming West African cocoa suppliers are:
- Sierra Leone (+44% annually between 2012 and 2016)
- Liberia (+26%)
- Guinea (+15%)
Supplies from Latin America are increasing, bringing fine flavour Trinitario and Criollo varieties into the market. The increase in European imports of fine flavour cocoa happens at a small scale and within a niche market, but follows the consumer trend for higher-quality chocolate. This is described in our study focusing on the market for fine flavour cocoa in Europe.
In 2017, around 7% of European cocoa imports came from Latin American countries. Ecuador (3.5%), Peru (1.8%) and the Dominican Republic (1.4%) were the main suppliers. Smaller suppliers were Colombia, Venezuela, Nicaragua and Haiti. These all accounted for less than 1% of total European imports. The strongest annual growth in volume between 2012 and 2016 were seen for:
- Ecuador (14%)
- Peru (+16%)
- Colombia (+24%)
- Collect your own market data and analyse market flows. Look into developments in competitors’ supplies, the growth and emergence of cocoa markets and other aspects. It will contribute to your market entry or consolidation strategy. Some useful websites containing statistics are: ITC Trademap (trade statistics worldwide), Eurostat (European trade statistics), the Trade Helpdesk by the European Commission, Prodcom (European production figures; manufactured goods include semi-finished cocoa products and chocolate), European Cocoa Association and International Cocoa Organisation (production, trade, events and other information).
- Pay attention to legislative developments in Europe. Don’t just comply with legislation, but also anticipate the impact of new laws. One important example is strengthened regulation on cadmium in cocoa and derived products, as described in our study on buyer requirements for cocoa. The new regulation will become effective in January 2019, and is expected to affect mainly Latin American producers and exporters.
The long-term developments in West Africa show an increasing concern on declining production of cocoa beans, bringing worries to the European and international chocolate industry on the sustainability of supplies. However, recent developments show a different scenario in the short term. The current harvest represents the largest surplus in 6 years. Compared to the previous season (2015/2016), this increase reflects a 15% growth in world production. On the other hand, more recent forecasts suggest that production in the 2017/2018 season will be smaller than anticipated, down by 3.3% compared to the previous season.
The cocoa bean surplus in the first half of 2017 surprised the industry, and caused international prices to plummet. A number of suppliers have defaulted on their futures contracts, while demand from consuming countries is expected to increase due to lower prices. This combination of factors may cause supply disruptions in the long run. International cocoa bean prices are expected to remain low until at least the beginning of 2018, but exact developments are hard to predict.
- Keep an eye on international prices of cocoa beans and design long-term strategies to deal with periods of decline. The International Cocoa Organisation centralises market prices for cocoa and has the latest updates and figures on production and demand for cocoa beans.
Food safety is a growing concern among consumers. Several scandals related to imported food have put food retailers under increased pressure to assure customers of the origin and authenticity of food products. This has led to an increasing demand in Europe for transparency and traceability of food products, including chocolate and cocoa.
Food companies in Europe, including importers and retailers, are now required to have traceability systems in place, registering the path and the history of a product and monitoring the processes it goes through along the supply chain.
Particularly in the fine flavour cocoa sector, traceability is becoming an essential aspect. This is not only for food safety but also as a marketing tool. From bean to bar, buyers are eager to trace and show to their customers that their cocoa products are fully identifiable and correspond closely to the characteristics, origin and quality that are described. Traceability is strongly related to certification, it is the most important aspect of conformity with certification requirements and standards.
A relatively new concept used for supply chain transparency is blockchain technology. In a blockchain information from all steps in the supply chain is recorded in blocks and locked into a system. An example on the global cocoa market is: Bit & Nibs.
- Focus on traceability by making sure that you know the supply chain of the cocoa you export. Know and document from whom you buy your cocoa, which products are used during the production process and to whom you supply your products. For further information on traceability, refer to the manual A Guide to Traceability produced by the United Nations Global Compact (a large corporate sustainability initiative).
Demand for certification of cocoa and chocolate is growing. In some European market channels certification is becoming a minimum requirement.
Certification is an important tool of commitment to sustainability, and usually provides a premium to producers and exporters. However, certification is not necessarily related to fine flavour or high-quality cocoa, nor is it always the norm in high-end markets.
The main certification schemes for cocoa are:
UTZ, Rainforest Alliance and Fairtrade certified nearly 2.0 million tonnes of cocoa together in 2016, according to the State of Sustainable Markets 2018.
Global Fairtrade (retail) sales of cocoa increased by +57% in 2016. UTZ certified cocoa grew more than 10 times between 2010 and 2015. As a result, around 9% of all cocoa farmers worldwide were UTZ certified in 2015.
About 3.4% of cocoa is grown organically worldwide. The global cultivation area of organic cocoa increased by 8.5% between 2015 and 2016. The demand for organic cocoa is expected to increase (example: Lindt & Sprüngli’s organic sales in Europe are growing much faster than their overall chocolate sales). However, cocoa is a difficult crop to grow organically. As such, a supply shortage is expected in the long run.
Cocoa with multiple certifications, for example both organic and Fairtrade, represents a growing segment within the global chocolate market. In 2014, 15% of Fairtrade certified cocoa beans were also certified organic.
The market for sustainable cocoa does not only consist of certifications. Consumers are increasingly interested in the social and environmental aspects of cocoa production. There is a growing concern on issues such as climate change, as well as child and forced labour. These issues make consumers increasingly suspicious of the mainstream market and on how sustainable 1 euro chocolate bars really are.
Despite several approaches to alleviate poverty in recent years, the price drops caused the earnings of producers to decrease by about 30% on average. With this in mind, child labour becomes a higher risk, as more and more children drop out of school in order to work on their family’s farm. Child labour is a returning agenda item, since improvements are hardly visible and the levels remain very high in the cocoa sector, with an estimated 2.1 million children working in cocoa fields in the Ivory Coast and Ghana alone.
In April 2018, the 4th World Cocoa Conference that took place in Berlin released the Berlin Declaration. The declaration recognised that a sustainable cocoa sector is a collective responsibility of all stakeholders within the sector, and that this goal should be achieved through collaboration. In addition, emphasis was placed on the living income that farmers should earn in order for the sector to be sustainable.
- Check the website of the platform of Cocoa Connect for more information about the production, markets and policies for sustainable cocoa. On this website you can also share, meet and learn from other players in the cocoa sector.
- Check the website of the World Cocoa Foundation to stay up-to-date on the main sustainability issues affecting the sector, as well as the main initiatives targeting those issues.
- See our study on buyer requirements for cocoa for further information on European requirements for sustainability certifications.
- See the website of the International Federation of Organic Agriculture (IFOAM) for more information about the European organic market.
On the mainstream market, multinationals are expanding their influence along the supply chain. 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 like Cargill and OLAM work as both an exporter in the country of origin and as an importer and manufacturer in Europe.
The ongoing concentration and vertical integration of the cocoa supply chain makes it increasingly difficult for small and medium-sized players (producers, importers, chocolate makers) to enter the market. On the raw material side, there is also a growing concern on the availability of cocoa beans, which are absorbed by large companies operating in producing countries.
Another interesting development is the involvement of mainstream chocolate companies in the speciality segment. Chocolate giants increasingly adopt terms from the speciality market such as bean-to-bar and single origin. They are thus appealing to consumers who look for signs of quality and self-assurance.
- Stay away from the mainstream market if you have a high-quality products. Our study on finding buyers on the European cocoa market gives you a few ideas on where to search and how to consolidate contacts with buyers operating on the high-quality/ fine flavour cocoa segment.
- 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 multinationals in Europe.
- See our study on how to do business with European buyers for more information about compliance with buyer requirements, how to send samples and how to draw up contracts.
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