Monday, 2 January 2012

Chocolate. Have we bitten off more than we can chew?

Season ticket purchased ready for January's commute to London and discovered that costs have increased by just a fraction under 5% which was a bonus, as I thought it was going to be nearer 10%.  Life is full of little surprises!  As was the strap line from the Daily Express (13.12.2011) that I came across recently. 

Apparently we'll be paying "£7 for a chocolate bar" in the not too distant future, according to Julie Carpenter of the Daily Express. To quote Julie Carpenter, there is already a huge shortage of cocoa somewhere in the region of a million tons.  Potentially this chocolate calamity is only eight years away.  The rising Asian market is one of the main contributory factors, according to Angus Kennedy, a leading confectionery expert, a steady demand for Western products is increasing and subsequently prices are climbing.  Startlingly the Chinese only have to eat one more bar of chocolate each per year and there will be a shortage.  What about America, where there has been an increased awareness and demand for  'quality' chocolate. A growing range of small Chocolatiers including the likes of Potomac are helping to spread the word in America.

According to some industry experts we might end up with less 'cocoa' and more inclusions such as nuts. But, isn't this already happening?  You just have to look at the products that are coming from Austrian chocolate maker, Zotter. His "double-scooped" bars are already extremely popular, certainly not main stream, but perhaps in the future we're all be trying to make these?

Cocoa production, as many of you will know, is extremely difficult. Cocoa trees are very sensitive to temperature, humidity and also prone to disease which has proved fatal in the past. This makes the cocoa plant almost impossible to farm on a mechanised, industrial scale.  According to Angus Kennedy farmers do not know how to get the best yields from their crops or store it once it has been harvested. 

However, companies like Mars have been working towards more sustainable cocoa production methods to maintain the all important supply chain.  The Rainforest Alliance organisation recently reported that they had teamed up with Olam International Ltd to produce the world's first Climate Friendly cocoa. They are also looking to keep production as the main focus whilst reducing deforestation and improving the livelihoods of their farmers and families.

Only a few months ago an International ban was imposed on importing cocoa from the Ivory Coast.  At the time, everybody was worried that Easter Eggs would be missing from supermarket shelves. Allegedly 433,000 tonnes of cocoa sat rotting in Ivory Coast warehouses? Cadbury's actually stated that production wasn't affected as they bought their crop from neighbouring Ghana. The Cote D'Ivoire is not the only source of cocoa others include Indonesia, Ghana, Nigeria and Brazil. 

Some analysts believe Chocolate is 'recession proof' as many of us will reward ourselves with a small glass of wine or a bar of chocolate.  This year it was reported that amongst the final panic purchases on Christmas Eve chocolate was up there with perfume and lingerie. Haven't these always been the traditional male 'default' purchases at this time of year?  Interestingly, Thorntons has been suffering a downturn in business during the recent turmoil and we're less likely to see them on the high street as they move away from traditional shops to superstore shelves and a greater online presence.  I for one am not convinced that this is a good long-term strategy. Have you seen how many brands there are on supermarket shelves?  Thorntons produce some good chocolate and I've always found their chocolate blocks to be good value and at the same time very innovative.  

So, why are they suffering?  Perhaps, they're just not a la mode unlike Hotel Chocolat who are snapping up new retail locations, upgrading stores and showing a 25% surge in profits this year.  You only have to visit Rabot Estate in Borough Market to see some of the prices people are willing to pay. At the recent 'Chocolate Week' held at Vinopolis one company from Hungary was charging £6.00 for a 100g bar and this did't seem to be affecting their sales. Interestingly, Hotel Chocolat now have 40 different products on sale at discounted prices some as much as 50%! 

Companies like Melt, Chococo, Paul A Young, Duffy, continue to do well and perhaps Angus Kennedy is right when he states that demand for premium chocolate will not be affected but it will be the staple KitKat and Dairy Milk products that may see a change in fortunes. 

If overall business confidence continues to falter then the already saturated chocolate market will begin to choke and splutter with more casualties on the way. Perhaps it's not supply that is the problem but the fact that there are just too many players in the market and we'll see more merges throughout 2012. 

Just remember to savour that next KitKat a bit longer and enjoy each nibble! 

Posted by Richard.

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