Summary
The craft chocolate market component has been most severely affected by the demand effects of the Covid-19 pandemic, with supply side issues linked to quality and certification also being faced. Providing public sector support to strengthening partnership relationships between fine cocoa producers and craft chocolate companies to enhance the resilience of marketing infrastructure, could provide an important means of assistance to the recovery of this sub-sector. Issues linked to the distribution of price premiums generated by the trend to single origin chocolate products also need to be addressed, to ensure producers of fine cocoa share in the extra income generated by this new trend.
The impact of the Covid-19 pandemic on chocolate consumption has varied across market segments, with mainstream chocolate consumption being stable and the craft chocolate sector, which makes greater use of fine flavoured cocoa, suffering major disruptions (1). While supermarkets have remained open throughout the Covid-19 lock-down ‘top segment, craft chocolatiers, specialty chocolate shops, and so on, has been hugely affected… as a result of the lockdown or social distancing measures.’ CBI reports that ‘sales in small shops have reduced or even stopped (1), with surveys suggesting some ‘70% of small chocolate businesses saw 50% fewer sales’, with up to 20% being judged as unlikely to survive the crisis (2).
| ACP Fine Flavoured Cocoa Producers
Some 23 countries are now recognized as exporting fine and flavour cocoa. Of these 10 are ACP countries.
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Source: ICCO, ‘ICCO Panel recognizes 23 countries as fine and flavour cocoa exporters’, 26 July 2016,
https://www.icco.org/about-us/icco-news/319-icco-panel-recognizes-23-countries-as-fine-and-flavour-cocoa-exporters.html and EC Market Access Data Base, https://madb.europa.eu/madb/statistical_form.htm
The direct impact of the Covid-19 pandemic will be compounded by the scale of the emerging global economic recession, which is likely to see significant changes in consumption with a ‘general growth in private label and lower priced items’ (2).
In terms of exports a survey of the impact of the Covid-19 pandemic conducted by the Fine Cacao and Chocolate Institute (FCCI) revealed some worrying findings. For example, in the Dominican Republic companies revealed sales were ‘down on average 50%’. This was the result of not only the impact of the pandemic on demand but also the impact on supply. It was reported that in the Dominican Republic ‘the drastic lockdown put in place prevented the producers and the agricultural workers from going to the plantations during several weeks, until exceptions were granted by the authorities. This caused a decrease in labour in the plantations provoking a return of problems due to parasites and pests.’ This has seen a loss of quality, with these problems being compounded by a delay in securing certification for the cocoa beans produced (e.g. for example for organically produced cocoa) (3).
It has been reported that a number of Dominican companies are ‘having a hard time selling their Hispaniola beans on the European market, with only sales of conventional cocoa being possible. This has seen a reduction in the price premiums paid to farmers based on sales into quality differentiated market components, as well as a reduction in income from value added fermentation activities.
Given Dominican Republic is the largest ACP exporter of fine flavoured cocoa beans (see table above), it is to be expected that other ACP fine cocoa producers will have faced similar problems.
There has been a growing recognition of the need to refocus on targeted marketing activities at the level of exporters and to developing better and closer relationships with existing users in developing response strategies. There has also been a certain refocusing on domestic markets.
However, the extent to which individual ACP producers of fine cocoa serving the craft chocolate component of the market will be impacted by these broader evolving trends in chocolate purchases in major EU markets will depend on the strategies adopted by the partner companies to which exports of fine cocoa take place. Some craft chocolate enterprises have responded to the Covoid-19 closure of specialist outlets for premium chocolate by expanding their on-line presence and developing home delivery services. For example, through the ‘Stay Home with Chocolate’ platform which has been led by Fine Cacao and Chocolate Institute (FCCI), Uncommon Cocoa and Craft Chocolate Experience. These types of initiative are serving to support small businesses who offer high-quality and ethically produced chocolate products
| Comment and Analysis As an integral part of Covid-19 recovery efforts, the European Commission and EU member states governments should look to supporting initiatives which develop closer links between producers of fine cocoa and manufacturers of ‘quality differentiated’ chocolate offerings, to enhance the resilience of the marketing chain. This is likely to require investment in on-line sales platforms and a strengthening of at-home delivery arrangements. Many of these initiatives will need to be country specific since they will need to be linked to the local structure of chocolate consumption. It may even require the exploitation of complementary market sectors, where demand has been severely impacted by lock-down measures, such as florists and craft chocolate companies. There would appear to be an overlap in demand for home delivery services between these two sectors, as well as a commonality in infrastructure usage (e.g. cold stores). In addition, greater attention will need to be paid to the distribution of price premiums generated by the production of country specific offerings of single origin chocolate, where even discount retail chains such as Lidl offer single origin chocolate bars from Uganda, Madagascar, Papua New Guinea, Trinidad & Tobago, Ecuador, Peru, Venezuela and Indonesia. While these products enjoy premium prices, it is unclear to what extent this is reflected in the prices paid to cocoa producers in these countries and to what extent it remains with the retailer of cocoa processing company. |
Sources:
(1) CBI, ‘How to respond to COVID-19 in the cacao sector?’, 20 June 2020
https://www.cbi.eu/market-information/cocoa-cocoa-products/how-respond-covid-19-cacao-sector
(2) CBI, ‘The bittersweet impact of COVID19 on the cocoa and chocolate market’, 20 April 2020, CBI
https://www.cbi.eu/news/bittersweet-impact-covid-19-cocoa-chocolate-market
(3) ‘DOMINICAN REPUBLIC THE PANDEMIC, PLAGUE OR OPPORTUNITY FOR THE COCOA SECTOR?’, June 8, 2020
https://www.cnrs-univ-arizona.net/menu-en/covid-am/dominican-republic-the-pandemic-plague-or-opportunity-for-the-cocoa-sector/
(4) Fine Cacao and Chocolate Institute (FCCI), Uncommon Cocoa and Craft Chocolate Experience, ‘Stay Home With Chocolate’
http://stayhomewithchocolate.com/