GTR Magazine's Cocoa Report: contributing factors, systemic issues and a look at the future
Max Van Coillie, Business Development Manager, Asia & Middle East at Neuhaus says cocoa prices have almost tripled over the last year, making it significantly more expensive to manufacture products
In May, as part of its quarterly bulletin on cocoa statistics, the International Cocoa Organization (ICCO) released its revised forecast for the 2023/2024 cocoa year. The organization reported it is “certain the season will end in a higher deficit than previously expected.” According to the ICCO, far lower cocoa supplies from the leading producing countries (such as Ivory Coast and Ghana) have further extended the supply deficit. At the time, global production of cocoa was projected to decline by -11.7% to 4.5 million tonnes.
As the surge in pricing continues to challenge the travel retail business, it is worth noting contributing factors including climate change, supply disruptions, global shortage and minimal investment in cocoa farms, as well as systemic issues such as the limited price setting power of cocoa farmers that could cause pricing to remain at an all-time high.
“While the limited price setting power of farmers is indeed a significant factor in the increased cocoa prices, it is only one piece of a much larger puzzle,” comments Max Van Coillie, Business Development Manager, Asia & Middle East, Neuhaus. “We must also acknowledge the broader challenges, such as climate change and shifting weather patterns, which are likely to have a lasting impact on cocoa-producing regions. These systemic issues could lead to structurally higher prices in the long term. It is therefore that we believe the sustainability mindset is essential to a modern company’s working.”
At the time of writing this, and as shared by Van Coillie, cocoa exceeded US$9,300 per metric tonne, which he says is a stark contrast to US$3,000 seen 12 months ago. Within the last year, prices have fluctuated wildly, at times reaching US$12,000 per tonne, representing a quadrupling of value.
“These unprecedented price movements reflect the ongoing volatility in the cocoa market. An optimal price for Neuhaus would be the price that the market demands and requires, where every stakeholder receives a fair share of the growing/production process, starting from the farmer all the way down to the final consumer,” he adds.
A look at the Nestlé Sustainably Sourced Cocoa range, which features the tagline “Does Good, Tastes Great”
Mitigating the impact
Nestlé International Travel Retail (NITR) Marketing Manager Aura Sanchez says NITR is fortunate to be part of a large and very efficient company where challenges are quickly recognized and solutions are realized. NITR is actively exploring various strategies to mitigate the impact of the challenges posed by the ongoing high price of cocoa.
“Our commitment to maintaining the exceptional taste, texture and overall experience that consumers have come to expect from Nestlé remains,” she says. “We are positive that efforts to find innovative solutions that strike a balance between managing costs and preserving the quality that defines our brands will minimize any problems within the travel retail channel.”
Suppliers are looking to manage costs and maintain spend per passenger by streamlining operations, increasing promotions and implementing new product formats. “Working closely with retailers is important to be able to drive value and to ensure a positive airport experience, so shoppers maintain their consumption levels,” explains Sanchez. She says NITR achieves this by elevating gifting options, leveraging digitalization and enhancing the overall experience to maintain a consistent value proposition.
Tailoring airport staff training is an effective way to generate awareness of the situation among both industry professionals and consumers. From an outside perspective, it seems suppliers are limited to adapting to the soaring prices and passing that on to the consumer.
Butlers Assorted Chocolates Box (300 grams and 30 chocolates)
Supporting the supply chain
Contrary to discussion that the market could potentially correct itself in the second half, Aisling Walsh, Marketing Director at Butlers Chocolates, shares the company does not see a correction in the short term, or any signs of returning to 2023 levels in the foreseeable future.
“While output is being affected with lower crop yields, this in conjunction with demand outstripping supply, will result in an inevitable uptick in price,” explains Walsh. “Until these factors level out, we are looking at higher cocoa prices. To protect supply in the long term, it is important for all of us who use cocoa-based products to really consider and support the supply chain, and work to help cocoa farmers employ sustainable practices and build better livelihoods for themselves, their families and their communities.”
Premium prices and external pressures
While there was speculation that premium cocoa prices might remain unaffected, Van Coillie says as demand for high-quality cocoa surged and supply remained constrained premium prices have followed the general upward trajectory.
Van Coillie adds, “We anticipate the next five years will bring more changes and challenges than the past two decades combined. To navigate this evolving landscape, it's crucial we stay ready and agile, adapting to whatever market conditions arise and ensuring our ability to maintain quality and excellence, regardless of external pressures.”
