World chocolate market at a 'tipping point'

28.09.2016

World chocolate demand is at a "tipping point", undermined by factors including weak emerging market economic growth and a switch in western countries to health foods.

Alan Rownan, ethical labels analyst at market research giant Euromonitor International, termed a "concern" the "slowing growth" in chocolate demand in many key emerging markets, including three of the four so-called Bric countries, an acronym of Brazil, Russia, India and China.

"Brazil, Russia and China are not performing as strongly as we had hoped," Mr Rownan told the ICCO cocoa market outlook conference in London.

Chinese demand was being held back by prices which meant it "does not make sense" for many users to trade up to chocolate from other snacks.

"Sugar confectionery is give times cheaper than chocolate confectionery in China," he said. Naming United Arab Emirates, Turkey and Saudi Arabia among better-performing emerging markets.

'Tipping point'

Meanwhile, in developed countries, demand was falling, in volume terms, in some countries, with German consumers, for instance, eating on average nine fewer chocolate bars a year than in 2011.

Consumption was being undermined by a switch to healthier foods, and meat-based snacks, a prospect being encouraged by sugar taxes, which has been introduced in countries such as France, and is in the pipeline for the UK.

The dynamics had left the chocolate market "facing a tipping point", Mr Rownan said.

"There is growing competition from new markets, such as health snacks, which keep growing exponentially," he said.

The solution for the industry, in broad brush terms, appeared to be in emerging markets to make prices more competitive to lift volumes, while in the West "moving up the value chain", and selling more expensive, high quality chocolate.

Rare decline

The idea of a setback to chocolate demand was backed at the conference by Gerald Stapleton, head of coffee, cocoa and natural rubber research at analysis group LMC International, who said that world cocoa demand had, unusually, fallen last year.

Over the last 10 years, the market had grown by about 2% a year, although a decline was also recorded in 2009, during the world economic crisis.

Last year's decline "points to a decline in income growth in emerging markets," a factor which "has been a main market driver of demand in the past 10 years".

In Russia too, depressed consumer spending power in the face of high prices of cocoa butter, the basis of high quality chocolate, has prompted a surge in imports instead of cocoa powder, the basis of lower-grade products, as well as of butter substitutes based on the likes of palm kernel oil or coconut oil.

However, Mr Stapleton was more sanguine on cocoa demand prospects ahead, foreseeing annual growth of 4% in Asia and 3% in Africa, with slower rates in developed countries.

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