Europe’s chocolate industry plays catch as Q3 cocoa grind climbs 5%

10-Oct-2013 - Last updated on 11-Oct-2013 at 10:41 GMT

European cocoa processing grows, but escalating cocoa butter prices could see chocolate carrying higher price tags over Christmas, says Euromonitor

The tonnage of cocoa beans processed in Europe in the third quarter by the likes of Barry Callebaut and Cargill has risen by 4.7%. Euromonitor says the industry is playing catch up and rising cocoa butter prices may led to more expensive chocolate for consumers over Christmas.

331,514 metric tons (MT) of cocoa were ground and expelled in Europe during the quarter, according to the European Cocoa Association (ECA), which collates data from industry players such as ADM Cocoa, Mondelez and Nestlé.

Euromonitor: Industry catching up

The European cocoa grind has now grown in the past two quarters, but this was preceded by over a year of decline.

Francisco Redruello, senior analyst for food at Euromonitor told ConfectioneryNews: “The industry is catching up. It’s good but there’s not a massive increase in demand.”

He said the real worries for chocolate manufacturers were increasing cocoa butter and sugar prices.

Cocoa butter price hike

Last year, cocoa butter was cheaper than cocoa powder, but processors spotted that chocolate demand was not as great as once expected in emerging markets due to slowing economic growth in countries such as India, Turkey, Brazil, Argentina and to an extent China.

These developing markets tend to use more cocoa powder in their products for compound chocolate than developed markets, which use more cocoa butter for so-called “real chocolate”.

Redruello said that cocoa processors had shifted the focus towards cocoa butter as chocolate demand in developed regions like North America and Western Europe improved ahead of the busy Christmas period.

Commodity analysts Mintec recently noted that cocoa butter prices had climbed 80% in the past year driving the cost to manufacture a 100g milk chocolate bar up 25%.

Analyst: Christmas retail prices for chocolate could rise

Asked if cocoa butter prices would soon ease, Redreullo said: “I don’t think it will come in the next three months because there is so much demand from Christmas.”

The analyst said that rising input costs for chocolate typically start to impact retail prices after 6 months. “But that depends on the scale of the increase. When we see this huge increase, I think it will definitely be factored in over Christmas.

He added that sugar, which accounts for around 40% of the ingredient cost in chocolate manufacture, had become more expensive, putting further pressure on chocolate makers.

Forecasts: Asia flat, Americas up

Q3 cocoa grind figures for North America are due on 17 October. No date has been set for data from Asia, but they should be released in the coming weeks.

Euromonitor expects the Asian cocoa grind to be flat as the Japanese and Chinese economies make a recovery.

The research organization is more positive about North America and expects a rise in grindings as chocolate consumption gets back on track after a lackluster 2012. Redurello said that this positive forecast largely depended on the US economy, which is facing strains from a government shutdown.

He added that chocolate consumption was growing in South America, particularly in Brazil, Mexico and Columbia.

“Not a lot of people talk about Columbia – but it’s doing very well.”