Commodities
Chocolate makers report slow down of production as margins become squeezed by inflation
North American bean processing slumped to 102,493 metric tons in the second quarter while in Asia, grindings fell 6.5% and declined 5.7% in Europe, according to the Cocoa Association of Asia and the European Cocoa Association.
Analysts fear the latest figures could have an impact on the $117 billion global chocolate industry, which Bloomberg reports saw sales volume slip for the first time in six years in 2022, citing data from consumer research company Euromonitor International.
“Factories are cutting back as high cocoa prices squeeze margins just as inflation hurts consumer pockets,” it said. Factories generally process cocoa several months before products are turned into chocolate. That means the slowdown likely signals the industry is expecting less demand ahead
“The demand issues are multifold,” Judy Ganes, president of consultancy J. Ganes Consulting, told Bloomberg. “There’s not just cocoa prices that are high, but sugar prices are also high, and manufacturers always look for ways to meet margins and work to put fewer chocolate chips in a cookie, or they shrink the bar sizes.”
As reported in ConfectioneryNews chocolate makers are already suffering higher cocoa prices (jumping 22% this year on the London market) with global inventories at their lowest in almost three decades. There is concern that an El Niño weather pattern could also cause a third year of cocoa bean shortages.
In its June 2023 Market Report the ICCO (International Cocoa Organisation) said: "In a context where the global cocoa market has experienced consecutive years of supply deficit since the start of the 2022-23 cocoa year, the supplies of cocoa beans in Côte d’Ivoire have been lower year-on-year. As at 9 July 2023, cumulative arrivals of cocoa beans in Côte d’Ivoire (the world’s larges cocoa grower) were reported at 2.238 million tonnes, down by 4.3% compared to 2.338 million tonnes recorded at the corresponding period of the previous season.
"One of the direct market implications of the bullish price factors was that, compared to their settlement values recorded at the beginning of June 2023, prices of the JUL-23 contract witnessed robust increases on both sides of the Atlantic at the end of the month under review. In London, prices of the JUL-23 contract firmed by 18% moving from US$2,933 to US$3,460 per tonne, while in New York they climbed by 11% moving from US$3,008 to US$3,324 per tonne."
