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Cocoa grind up but will chocolate prices grind consumers down?

By Oliver Nieburg+

18-Apr-2014

North American cocoa grind up 1% in Q1
North American cocoa grind up 1% in Q1

The rising North American cocoa grind is a positive sign for the chocolate industry, but many consumers are not prepared to pay higher prices planned by some leading confectioners, according to an analyst.

Cocoa grinds, an indicator of demand for chocolate products, were released yesterday for North America by the National Confectioner’s Association  (NCA) and showed a 1.03% rise on the same period last year to 129,007 metric tons.

The stats cover grinds for Canada, Mexico and the USA and are compiled by company reporting from the likes of Mars, Hershey, Barry Callebaut, Blommer Chocolate, Cargill, and Nestlé.

One cocoa trader told us last week that they expected the grind to be unchanged or up, to a maximum of 2.5%.

‘Cocoa demand strong’

Marcia Mogelonsky, director of insight at Mintel, said that rise was not a huge amount but still demonstrated growth in the US market.

“The increase shows that cocoa demand is still strong - for chocolate confectionery and for all the other products that use cocoa as an ingredient, but it is probably going to take a year's worth of data to see if the US chocolate confectionery market will maintain growth in the current economy.”

She added that US chocolate firms had recently reported mixed results as consumers became weary of increased pricing. Some firms such as Nestlé have committed to rising prices in the face of near record high cocoa butter prices.

21% would not accept steeper prices for chocolate

“Consumers continue to embrace the category, but they are somewhat more price sensitive as the economy continues to look for sustained positive news,” said Mongelonsky.

Mintel recently surveyed chocolate consumers to discover how they would respond to rising prices. A third said that they would not notice price increases and would continue buying the product, but 21% said they would detect price hikes and would stop buying the product.

“The balance between what consumers will accept and what manufacturers must do to show a profit is likely to keep the market growing, but very slowly, in the months ahead,” said continued the analyst.

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