Q4 cocoa grind analysis

Recoiling at chocolate price hikes? Cocoa grind slumps in developed markets

By Oliver Nieburg contact

- Last updated on GMT

Related tags: Cocoa processing, Chocolate, Cocoa solids, Cocoa butter, International cocoa organization, European cocoa association, Cocoa association of asia

Weak cocoa grind data hints cocoa consumption has been hit by chocolate price hikes: Analyst
Weak cocoa grind data hints cocoa consumption has been hit by chocolate price hikes: Analyst
Weak fourth quarter cocoa grinds in developed markets suggest that consumers have reacted negatively to wholesale chocolate price hikes from the major brands, according to an analyst.

In figures released yesterday, 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.

Consumption hurt by chocolate price hikes

ConfectioneryNews asked Jonathan Parkman, joint head of Agriculture at Marex Financial, if the declines meant last year’s chocolate price increases from major manufacturers had put consumers off.

“It’s a perfectly reasonable conclusion to draw,”​ he said. “All the major chocolate manufactures raised prices for cocoa confectionery and not by minimal amounts.”

Nestlé, Hershey, Mondelēz International and Mars Chocolate North America all introduced chocolate confectionery price hikes in the first half 2014 in response to rising input costs, particularly from cocoa.

Price hikes provoked by soaring cocoa costs

“The recent prices for cocoa and cocoa products has had a significant negative effect on cocoa processing,” ​said Parkman.

Average prices for cocoa futures in October 2014 were 12% higher than the same month last year at $3,100 per MT, according the International Cocoa Organization’s (ICCO’s) monthly average of daily prices.

“Anecdotally, the physical market is reporting a slight increase in cocoa butter stocks in Q4,”​ said Parkman. “When cocoa butter stocks are higher and the cocoa grind in down, it probably points to lower consumption.”

The numbers

The European Cocoa Association reported yesterday that Q4 cocoa processing in Europe had dropped 7.4% to 323,061 metric tons (MT), the lowest Q4 since 2005. This brought the total 2014 grind in Europe to 1,301,527 MT, down 2.1%.

North American cocoa processing fell 2% to 122,886 MT after eight consecutive quarters of growth, according to the US National Confectioners Association (NCA). However, the full-year grind for the US, Canada and Mexico was up 2.4% compared to 2013 to 521,657 MT.

No relief from Asia?

Parkman said that cocoa processing declines in Europe and North America typically meant capacity was shifting to Asia.

The Cocoa Association of Asia has yet to report Q4 cocoa grind stats, but Malaysia - Asia’s second largest cocoa processor behind Indonesia – has already posted a 21% drop.

“As a company we were expecting a transition to Indonesia, but it’s happening much faster than expected….I just don’t think there’s any opportunistic slant you can put on the numbers so far….it’s disappointing.”

He said that he expected a 7% decline in Asia’s Q4 cocoa grind, despite growth in Indonesia.

The world’s largest cocoa processor, Barry Callebaut, is due to report its 3-month key sales figures for 2014/15 next Wednesday.

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