The bittersweet impact of COVID-19 on the cocoa and chocolate market
The spread of the COVID-19 pandemic has led to lockdowns in Europe and other international markets. Mainstream chocolate consumption is stable, but the craft chocolate segment is having difficulties. In cocoa-producing countries, lockdowns may disrupt the supply chain. Local initiatives make the cocoa sector stronger. The uncertainty of COVID-19 makes it even more important to follow the developments in the cocoa and chocolate market.
The lockdown effect on chocolate consumption
In the last weeks, consumers rushed to the shops to stockpile on essential items to get through the pandemic. Chocolate might not be an essential item, but it is a source of indulgence and comfort that consumers look for in times of uncertainty. In Europe, the majority of chocolate is sold at supermarkets and other grocery shops. These retail outlets remain open, with e-commerce quickly gaining market share. The chocolate market is expected to survive the current lockdowns without too much damage.
Consumption patterns are changing and will continue to change. This is in part due to the prospect of a global economic recession in 2020. Consumer stockpiling has already led to a general growth in private-label and lower-priced items. This also applies to the chocolate market. At the same time, the current lockdowns have kept consumers away from higher-end and seasonal products. Easter chocolate sales showed disappointing results in countries like France and Belgium. This time of year is usually the peak of chocolate consumption.
All in all, the craft chocolate sector and small chocolate businesses are affected the most. The Fine Cacao and Chocolate Institute (FCCI) recently carried out a survey to better understand the impact of COVID-19 on small chocolate businesses. The survey revealed that the cancellation of industry events is a major source for the decline in craft chocolate sales. Lower consumer demand, of course, also plays an important role.
In response to this, smaller chocolate businesses are making great strides toward online sales. The craft chocolate community is trying to boost sales of craft chocolate by creating platforms such as the Stay Home with Chocolate. This platform, led by FCCI, Uncommon Cacao, and the Craft Chocolate Experience, uses online tools, such as live tastings and e-commerce. This supports small businesses offering high-quality and ethical chocolate products.
How long can cocoa supplies last?
The main chocolate-consuming countries are at the centre of the COVID-19 pandemic. But, the impact on cocoa-producing countries is not yet clear. From country to country, COVID-19 measures will influence the availability of cocoa supplies. These measures include lockdowns and curfews, but also fostering actions, such as credit provision to farmers. Demand continuity and risk perception from buyers, and their capacity to take in existing supplies, will define the fate of the cocoa sector.
On the bulk market, the Ivory Coast and Ghana will set the tone. Together, the two countries account for over 60% of the world’s cocoa production. This means that supply chain disruptions in these countries could lead to major cocoa shortages. The efforts at the origin to keep supplies flowing and COVID-19 from spreading are plenty. The collective action from cocoa and chocolate companies has been key in implementing health guidelines from governments and health authorities. It has also helped optimise local networks and digital tools to deliver technical help, provide funding for emergency response and honour long-term relationships with farmers. Local initiatives also play a crucial role. Ghanaian organisation Farmerline, for example, is currently running a health and safety campaign in 14 local languages to reach smallholder farmers.
The fine flavour cocoa segment is more prone to the immediate effects of the COVID-19 crisis. The maintenance of crops and the implementation of post-harvest protocols and logistics require labour force and capital. The consequences of COVID-19 for cocoa businesses will vary per the lockdown measures in individual countries. For example, Honduras and Guatemala are reportedly experiencing strict curfew regulations that affect the mobility of cocoa farmers. However, supply chain disruptions are not clearly visible at present. The FCCI survey reveals that small chocolate businesses have not yet experienced major supply shortages.
Future developments for this segment will also depend on whether demand picks up. Premium supermarket products are still on offer, but speciality shops, as well as restaurants and other service channels using high-quality chocolate, are currently closed. Small chocolate businesses are reinventing themselves to deal with the current crisis. Their ability to spring back will be influenced by consumer pragmatism and loyalty.
Keeping an eye on the cocoa and chocolate market
As the COVID-19 crisis develops, it is important to track how the cocoa sector behaves. Follow production and price trends. Check out different private-sector initiatives and activities that can help you in the ongoing crisis. Get inspired by success stories. There are many sources to help you stay informed on these developments.
- EUROCOCOA lists the latest EU announcements on border management measures and green lanes. You can also see the temporary EU measures in place to ease official controls on food law. EUROCOCOA publishes quarterly statistics on European cocoa bean grindings. These can indicate developments in cocoa demand for the next months.
- The International Cocoa Organization (ICCO) publishes monthly reviews of the cocoa market. Read about the latest developments on the international cocoa futures markets as well as on the supply and demand for cocoa beans.
- The Fine Cacao and Chocolate Institute (FCCI) publishes research results related to COVID-19. It addresses the effect on small chocolate businesses, cocoa production and trade, and the pastry and chocolatier market. This page includes a living document on resources and updates for small chocolate businesses.
- The Fine Chocolate Industry Association (FCIA) has a FAQs page tackling subjects related to COVID-19 and its impact on the industry.
- Confectionery News provides articles on the impact of the COVID-19 on chocolate and other confectionery products.
- The COCOA INITIATIVE - Cocoa News has up-to-date information on different industry measures and initiatives to reduce the effect of COVID-19 on the cocoa sector.
- The International Trade Centre (ITC) – Market Access Map publishes up-to-date temporary trade measures put in place by government authorities due to the COVID-19 pandemic. These include (phytosanitary) certification requirements and licensing or permit requirements, among other things. To date, these measures have not affected cocoa specifically. The ITC also gives small businesses advice on how to cope with the impacts of COVID-19.
- The United Nations Conference on Trade and Development (UNCTAD) highlights the main news, analyses and resources related to COVID-19.
- The World Trade Organization (WTO) provides up-to-date information on how COVID-19 affects global trade.
This news article was written for CBI by ProFound – Advisers In Development.
To stay informed on the latest developments on the cocoa market, make sure to subscribe to our newsletter.