The Cocoa Association of Asia today reported that the collective cocoa grind in Indonesia, Malaysia and Singapore plummeted to 141,396 MT in what the International Cocoa Organization (ICCO) called a ‘dramatic decline’.
“This contraction was anticipated but the size of the contraction was not expected to be that strong,” Laurent Pipitone, director of the International Cocoa Organization’s (ICCO’s) economic division, told ConfectioneryNews.
Not easy processing cocoa
The Asia figures came after the Q4 cocoa grind in Europe reached its lowest level for nine years and North American cocoa processing fell for the first time in two years in data released last week.
Pipitone linked the declines to slow economic growth harming consumption and lower profit margins for cocoa processors.
“It’s not a good business to be cocoa processing these days,” he said. “There are some stocks of finished products but they are powder. This means prices are not very high and processing companies have low margins.”
Pipitone said that the low margins could mean further consolidation in cocoa processing.
Cocoa processing declines
Q4 Cocoa Grind (MT)
He added that slow economic growth was taking its toll on cocoa and chocolate consumption.
“There’s a slowdown in the emerging markets for chocolate because of a slowdown in economic growth," he said.
GDP in China – one of Asia’s most promising markets - grew 7.4% in 2014, its slowest growth in 24 years, according to official figures. The International Monetary Fund (IMF) expects GDP growth in China to slow further in 2015 to +6.8%.
Growth in Chinese chocolate market
But chocolate sales growth in China still outpaced the world market in 2014.
According to Euromonitor International, retail value sales in the Chinese chocolate confectionery market reached $2.7bn in 2014, up 11.8% in 2014 compared to the previous year. The global market rose 5.6% over the same period.
Stronger growth in India
However, India’s chocolate market - which is roughly half the size of China’s - grew at an even faster rate. Retail values for chocolate in India were up 24.3% to $1.6bn in 2014, Euromonitor data shows.
The country’s economy is expected to outpace China by 2016. The IMF projects China’s GDP will rise 6.3% in 2014 and 6.5% for India.
Mondelez International, formerly Cadbury India, commands 62% of the Indian chocolate market, according to ValueNotes.
Cocoa supply outlook
The ICCO forecasts a ‘relatively good’ cocoa supply for the current crop year – albeit slightly lower than an exceptional season last year. Pipitone said the cocoa supply was anticipated to pick up between January and March after a lower output in the first half of the crop year. But he warned about the likely impact of dusty winds from Harmattan, the winter weather phenomenon in West Africa. “This year was a strong Hammatan and it will impact the March to April crop,” he said.
Flat cocoa grinds
The ICCO anticipates that cocoa processing will shift to Côte D’Ivoire and from Malaysia to Indonesia, but the organization doesn’t expect global cocoa processing figures will greatly improve in future.
“There won’t be much dynamic growth this year in terms of processing. In the current cocoa year, we expect very low growth in cocoa processing – possibly flat,” said Pipitone.