Europe and North America cocoa grinds slump in Q1

The Q1 cocoa grind in North America slid 6% on last year to 121,508 metric tons (MT), according to the US National Confectioners Association (NCA).

Europe’s Q1 cocoa grind also fell and was the lowest 2009. Cocoa processing in Europe dropped 2% on last year to 337,706 MT, the European Cocoa Association (ECA) found.

The figures were provided by the world’s leading cocoa processors including Barry Callebaut, Cargill, Mars and Hershey.

The International Cocoa Association (ICCO) said last month​​ that it expected the cocoa market to revert to a deficit in the 2014/15 season. It said that while global cocoa grinds were expected to decline 1.7% due to moderate growth in demand for chocolate, production would drop 3% to leave a small 17,000 MT deficit. Production is expected to be affected by seasonal Harmattan winds and dry hot weather in West Africa.

Chocolate demand strong despite grind declines​

Judith Ganes-Chase, president of J.Ganes Consulting said today at a workshop at the Asia Choco Congress in Singapore that grinds had not declined because consumers were consuming less chocolate, but because of industry buying patterns for cocoa last year.

She said the industry panic bought cocoa last year in response to Ebola fears and consequently processed more than usual. New factories also came online in Asia last year causing a further spike in prior year grinds, she continued. 

“Demand isn’t poor…but industry action is changing. I think demand is holding up quite well given rising cocoa prices,” ​said Ganes-Chase.

She added that wholesale chocolate price increases by major brands last year had caused retailers to buy before the hikes were introduced and was another factor in rising grindings last year.

Price hike fallout?​

Analysts said​​ after weak cocoa grinds in Q4 last year that consumers may be responding negatively to chocolate price hikes from the major players.

Nestlé, Hershey, Mondelēz International and Mars Chocolate North America all introduced chocolate confectionery price hikes in the first half 2014 in response to rising input costs, particularly from cocoa.

But Ganes said consumers remained loyal to brands and it was chocolate manufactures that were changing consumer habits by downsizing  products and changing recipes to use less cocoa.

J.Ganes Consulting forecasts 2014/15 grinds to be up 1.6% globally, excluding Asia. It expects Asia cocoa processing rise 2.4% as capacity grows in the region. “The grind is moving closer to where growth in demand is,” ​said Ganes.