9:20 am - Saturday July 20, 2019

African Chocolate Shortage Looms as Consumers Demand More

As sales of chocolate hit a two-year high, suppliers from West Africa are having trouble keeping up with demand from major chocolate companies. It is not a very surprising or unexpected shortfall, but it does have the potential to have a fairly substantial impact on the industry.

Prices for cocoa beans could increase by as much as 7.5 percent as we head into 2013, while cocoa growers are experiencing the first shortage of beans in three seasons.

Though this is potentially bad news for consumers, who could see small price hikes for their preferred chocolate treats, it’s a great time for investors to get into the cocoa market. Many chocolate companies are working to make up for the deficit and create a more sustainable future for the industry, but in the short term prices are only likely to head up.

Many chocolate grinders have been using stockpiled cocoa butter for the better part of the past year, but as those reserves are now beginning to run dry there is simply not a large enough supply of new beans coming in to keep up with demand.

Some of the largest cocoa farms are seeing poor harvests this year due to dry weather, but processing is set to expand regardless as companies that sell chocolate are seeing increased business across the board. All of these factors have come together to create the conditions for a fairly sizeable shortfall. The low crop is mainly limited to West Africa, but with so much chocolate business focused on the region it is not something that can be overcome in other parts of the world. The West African nation of Ivory Coast is the world’s largest coca grower.

A number of major corporations have recently begun to make strong moves towards sustainability. The ‘Cocoa Life’ program of Mondelez International, owner of Cadbury, stands to improve conditions for farmers while expanding production. Ferrero, Mars and Hershey have all committed to using only certified cocoa. Nestle has its own major program already up and running, similar to the Mondelez initiative.

The actual number we should expect to see in terms of deficit is just over 100,000 tons of cocoa demand that cannot be met by suppliers, and analysts caution that the shortage could in fact be a bit worse than forecasted. Emerging markets are increasing their own demand by numbers that are not yet fully understood or accounted for.

Filed in: World

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