Guest blog: Exploring the dynamics of the global cocoa supply chain

As Confectionery Production has covered extensively over the past couple of years, the cocoa sector continues to face significant multiple challenges on a global level.  Here, Dwiti Gaggar, Associate Consultant, Food and Nutrition, offers an overview on how the industry is navigating present key tests.

In recent years, the cocoa industry has encountered significant setbacks because of a surge in prices, causing disruptions across the global market. These issues have primarily originated as a result of adverse weather conditions and disease outbreaks in the key production regions of Ivory Coast and Ghana. These two West African countries collectively contribute to approximately two-thirds of the world’s cocoa output.

The 2023–2024 cocoa season witnessed a notable decline in production, a consequence of unfavourable weather patterns and the spread of devastating diseases such as cocoa swollen shoot virus and black pod disease. These factors put a heavy toll on cocoa yields, sending shockwaves through the industry and leading to an acute shortage in the global cocoa supply.

As per the recent reports by the ICCO (International Cocoa Organisation), the current global supply shortfall and the ongoing seasonal conditions, such as the El Niño dry spells in West Africa, further escalated cocoa prices. Cocoa prices have increased by more than 150% in just a single year, and those for cocoa butter have increased by as much as 300%.
Cocoa powder and cocoa butter are key ingredients, used for manufacturing industrial chocolates, extracted from cocoa beans.

Over 10 million metric tons of industrial chocolate are consumed worldwide, indicating its widespread use. They are primarily used for the production of chocolate-based confectionery; however, they also have wide usage in bakery sweet goods, snack bars, ice creams, frozen desserts, coatings, inclusions, decorations, ganache, etc.

The price increase has affected chocolate manufacturers and other businesses that depend on cocoa as a primary ingredient, all the way down the supply chain. As per the National Confectioners Association, the sales volume of confectionery sold for everyday occasions decreased by 4% as compared to 2022. This has also led to increasing chocolate confectionery prices and an impact on industry giants like Hershey and Mondelez, leading to a conservative forecast for this year.

Changing dynamics of cocoa and the coming-of-age cocoa alternatives
The high cost and fluctuations in the supply and demand of natural cocoa butter are making cocoa butter substitutes very popular. They mimic the mouthfeel and texture of actual cocoa butter while achieving cost optimisation.

Notably, the alternatives to cocoa butter are produced from vegetable fats to replicate or enhance the qualities of the original cocoa butter. These alternatives, often derived from palm kernel oil, coconut oil, or coconut butter, undergo blending or modification processes to achieve similar characteristics to cocoa butter.

Unlike traditional cocoa butter, the alternatives offer the convenience of not requiring tempering while still delivering crucial texture elements such as gloss and snap, which are particularly valuable in chocolate production. Additionally, these alternatives also reduce the risk of spoilage from fat bloom, ensuring a longer shelf life and enhanced product stability.
Carob powder is a widely recognized cocoa powder substitute derived from the carob tree dried, roasted, and ground pods. It has a similar flavor to cocoa, as it is naturally sweet with a hint of caramel. Carob powder can be used as a substitute for industrial chocolate in the same ratio as cocoa powder because it offers a similar texture and color to food products minus the caffeine content of cocoa. This is beneficial for those who are looking to avoid stimulants.

Changes in value-chain
Vertical integration is a popular trend in the cocoa and industrial chocolate value chain, as seen by industry leaders like Cargill and Barry Callebaut. This approach enables these companies to better meet the demands of their customers in the bakery and confectionery industries by streamlining their operations. These businesses can offer customized products and solutions, increasing customer satisfaction and loyalty, by controlling various stages of the supply chain.

Furthermore, captive consumption is prominent within the industrial chocolate industry, particularly among major confectionery manufacturers such as Nestle, Hershey’s, and Mondelez. Through backward integration as well as long-term partnerships with suppliers, these industry giants ensure a steady and uninterrupted flow of raw materials, thus securing their production processes and maintaining product quality and consistency.

Simultaneously, leading companies specialising in various oils and fats have emerged in the cocoa substitute domain, creating products that mimic the distinct flavor and texture of conventional industrial chocolates.

Industry players and their developments
Over the past few years, Bunge Loaders and AAK have been actively working in the field of cocoa substitutes by developing novel ingredients. Most recently, Bunge announced the launch of CBT Gold, which has a steep melting profile with a high cocoa butter tolerance, to provide the rich texture and melting sensation of real chocolate in products such as chocolate bars, coatings, or pannings. Additionally, it offers up to 40% cost savings when compared to using cocoa butter.

Last year, AAK introduced a patented plant-based alternative to cocoa butter that does not require tempering and allows up to 15% of cocoa ingredients to be used for a better chocolate flavour. It also supports a long shelf life and economical processing.

Multiple end-product manufacturers are hopping on the trend. Lindt also partnered with German cocoa-free startup ChoViva to launch a limited-edition vegan chocolate bar. Another example is the collaboration of prominent retailers such as REWE with manufacturers such as Planet A Foods for the production of cocoa-free chocolates.

Emerging startups are also gaining prominence in the space with the launch of new and innovative products. London startup WNWN Food Labs is rolling out cocoa-free chocolate using barley and carob to replicate chocolate’s flavor and has been closely working with multiple bakery and confectionery customers worldwide. Italian food tech startup Foreverland has launched Freecao, a brand of cocoa-free chocolate made from Italian carob.

Regional Dynamics
Cocoa butter alternatives are widely preferred in Asia, specifically China. They are exhibiting promising growth, particularly in developing markets such as India and Brazil, due to the high price sensitivity of chocolate confectionery products in these economies.

Furthermore, cocoa butter alternatives are considered to be more prominent in Europe as compared to other regions, such as North America, due to the comparatively lenient regulations and labelling requirements in the European regulatory framework.

In Asia and Europe, cocoa butter alternatives can be used to prepare chocolates, with a maximum usage limit of around 5%. These can even be labeled as chocolates; however, in the United States, products using cocoa butter alternatives cannot be labeled as chocolates. Furthermore, the EU has also introduced a law this year focusing extensively on fighting global deforestation caused by cocoa production. This affects the ability of businesses to ensure that the products sold in European markets do not lead to deforestation. This initiative has led manufacturers to focus on their sustainability initiatives as well as an increasing interest in cocoa and cocoa butter alternatives to reach their sustainability goals.
Bakery products such as sweet cookies and biscuits, as well as sweet goods such as pastries and cakes, account for the highest number of new product launches in the last 5 years containing cocoa and cocoa butter alternatives. However, chocolate confectionery has comparatively limited penetration due to premiumization and customers’ preference for couverture chocolates.
These market trends indicate that affordable indulgence is growing in prominence in the current recessionary environment, with consumers increasingly seeking high-quality treats at more modest prices. As suppliers continue to collaborate and innovate, the outlook for cocoa substitutes appears optimistic in the foreseeable future.

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