Cocoa bean market - sourcing strategy

COCOA, the most important raw material of the confectionery industry, has for long been chiefly sourced from Ghana, Cote d’Ivoire and Indonesia. Africa holds the key to the global chocolate and confectionery business. Ghana and Cote d’Ivoire supply about 59% of the total global cocoa supply while Cameroon, Nigeria and Indonesia supply 23%. The global cocoa production is about 4.3 million tonnes annually. The annual global consumption of cocoa is about 3.7 tonnes and the chief end use of cocoa is chocolate.

Global cocoa bean production and grinding volume (2010-2020)

 Cocoa bean is mostly used to make chocolate which requires grinding of beans for chocolate processing. So the global cocoa grinding and processing market is totally dependent on the cocoa bean market. The structural supply of cocoa beans has been increasing at a CAGR of 3.31% in 2011- 2020 and the cocoa grinding market is growing faster than the bean market with a CAGR of 3.73% during the same period. This basically suggests there will be deficit each year between the cocoa bean and cocoa grinding market.

 Problem 1: Overdependence of concentrated cocoa bean sourcing

Cocoa is mostly sourced by cocoa processing companies from Ivory Coast, Ghana and Indonesia. West African countries produce about 70% of the global cocoa produce, but political instability and unskilled labour affect the continuous supply of cocoa beans.

Cocoa sourcing core concentration from sourcing countries

The cocoa processors currently face a short-fall in cocoa bean supply globally from the leading cocoa bean producing countries. The following table highlights the key problems which impact the cocoa bean industry.

Solution: Alternative growing countries

The global cocoa bean supply has been slowly decreasing due to various factors such as environment, lack of maintenance of trees, social risk, etc. This trend has decreased the overall market growth and companies are searching out for new alternatives in order to satisfy the demand of cocoa. Companies such as Mondelēz have started to look for alternate countries in which cocoa may be grown as an inter-crop. Certain parameters are necessary for healthy and continuous growth of any cocoa tree. The following table is a comparative analysis between countries which are suitable for cocoa harvest.

Note: Part 2 of this report will be featured in the March 2014 issue.

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*Nishanth is a senior research analyst with Beroe Inc., a global provider of customised procurement services specialising in sourcing, supply chain visibility, financial risk analysis and environmental impact to Fortune 500 organizations.He specialises in tracking cocoa. He has worked on multiple projects for many Fortune 500 clients involving categories such as cocoa bean sourcing, cocoa – supply chain risks, etc. Nishanth earned his post graduate degree in Financial Planning from the International College of FinancialAir Jordan