Friday, September 3, 2010

THE COCOA "KING"-TURBULENT DAYS AHEAD FOR INDUSTRY


Cocoa plants grown abundantly in Ghana and other countries have provided mankind with one of the most exciting ingredients, creating the fabulous Chocolate industry turning out a multitude of products with universal appeal, irrespective of age, gender and faith. Leading players in the global arena include Mars Inc, Cadbury Schweppe, Nestle SA, Ferrero Sp, Hershey and Kraft Foods, with a combined market share of almost 75% in a global sale of $ 40 billion. There are a few niche companies also in the scene offering specialty chocolates with various attributes, though their share is less than 1%. Organic chocolate products, in great demand lately, are now available in the main stream market, the total production being around 15000 tons an year.

Cocoa production is concentrated in Africa and Asia and major producers include Ivory Coast (37% of world production), Ghana (21%), Indonesia (13%) accounting for more than 70% of about 35 million tons produced each year by about a dozen countries. Fair Trade cocoa, a distinctly separate category of cocoa production, is produced by several countries who have subscribed to the idea that ethical production can only be sustaining force for the industry to survive in the context of widespread use of child labor by cocoa plantations. It is sad that though many smaller producers have subscribed to the Fair Trade cocoa alliance, only two major producers, Ghana and Ivory Coast are members of this group. The Fair Trade label is now being used by some of the chocolate industry players to indicate that their products are derived from cocoa beans produced by fair means without circumventing any local and international regulations.

As cocoa is a rich source of antioxidants and other nutritional components, chocolate products containing significant levels of cocoa solids are being touted as a health promoting material and an entirely new branch of chocolate industry under the banner of "functional chocolates" is emerging to popularize their consumption in a big way. Unfortunately the health aspects are distorted to a large extent because chocolates by definition are rich in saturated fat and sugar. How can any one succumb to such claims knowing well that like other confectionery items chocolate also can cause same adverse effects like metabolic syndrome and dental decay. Typically a plain chocolate sample contains about 35 gm lipids and more than 60% carbohydrates including white sugar. But the four health promoting constituents in cocoa that include Theobromine, Caffeine, Phenylethylamine and Serotonin contribute to the favorable ratings received by chocolates. These phytochemicals are believed to be working at Central Nervous System and brain levels to promote a feeling of well being, boosting the mood and a feeling of elation. While a dark chocolate version will have about 70% cocoa component including cocoa butter, most of the commercial products have less than 7% cocoa solids.

It is amazing that almost one third of the consumers eating chocolates consider them as a well being product capable of stimulation and relaxation and it such feelings which are driving industry to expand the health chocolate portfolio on a furious pace. To day bitter chocolates with almost 85% cocoa solids are sold in the market under famous brand names. Specialty products like ActiCocoa containing high levels of antioxidants polyphenols, Probiotic Chocolates for gut health and Tooth-friendly chocolates containing isomaltose are marketed targeting the health conscious consumers. What is not condonable is tall claims like heart healthy and similar unsupported statements on the label by some of the responsible industry players and they are probably taking shelter under the ambiguous labeling provisions which do not call for declaring the concentration of antioxidants or polyphenols or the ORAC value which would have enabled the consumers to discriminate between performing and non-performing products.

The multi billion dollar chocolate industry is in for a shock if recent reports about cocoa hording in the UK are to be believed. It is believed that one of the notorious dealers in the UK, Anthony Ward had been buying cocoa beans from where ever they were available during the last few months and his present stock would be adequate to manufacture more than five billion standard chocolate bars! The consequence of his hording is a steep rice in the cocoa price in the London market reaching levels unheard of during the last 30 years. His firm Armajaro holds about 7% of annual cocoa production sufficient to dictate global price of cocoa beans. Though he does not make even a single bar of chocolate, his knowledge about cocoa makes him a formidable player in global trading and closely monitors production in west African countries through local set ups. Though chocolate makers in Europe are making noises about the market "cornering" activities of this UK hedge fund entrepreneur, how far the ultimate price of chocolates will rise eventually due to this phenomenon is uncertain.

While talking about price escalation in chocolate products, there are expectations that with fast approaching cocoa harvesting season beginning October, there might not be much of an impact from the activities of horders like Ward. Besides cocoa forms less than 10% of the production cost of most of the mass produced chocolates and the recent spurt in prices to the extent of 150% may not influence the market price of most of the end products from cocoa. Fears are expressed because a similar effort in 2002 by the same speculator did cause some damage to the chocolate industry from which it was able to recover quickly. Besides many of the major chocolate manufacturers did learn a lesson from the 2002 experience and probably would have built up sufficient stocks to last till the new harvest arrives in October.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

No comments: