Cocoa bean prices have risen significantly, and raw material substitution may become a new way out!

June 06, 2024

In February 2024, the International Cocoa Organization (ICCO) released its annual forecast that global cocoa production will decrease by approximately 11% compared to the previous year. It is expected to be 4.449 million tons, compared to 4.996 million tons in the previous year. The global demand for cocoa grinding is 4.779 million tons, a decrease of nearly 5% compared to the previous year. The decline in cocoa supply has directly affected the normal operation of many food enterprises.

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Cocoa bean prices have seen a significant increase

It is understood that the main reason for the decline in global cocoa production is climate change, with severe drought damaging crops in West Africa, which accounts for about 80% of the world's cocoa production. The International Cocoa Organization stated that pests and diseases, as well as orchard aging, are also the main reasons for the decline in cocoa production. Ghana and Cote d'Ivoire are the main cocoa producing regions, and due to the El Ni ñ o phenomenon, these two countries have been experiencing untimely temperatures and heavy rain.
Theobroma cacao L., also known as Theobroma cacao L., is an evergreen tree in the Malvaceae family. It prefers warm and humid climates and often grows on gentle slopes formed by organic rich alluvial soil. The seeds in cocoa fruit are called cocoa beans, and the dried and fully fermented cocoa beans are the raw materials for making chocolate. Multiple studies have shown that cocoa beans are rich in fat, protein, fiber, various vitamins and minerals, and have extremely high nutritional value. As an important food ingredient, cocoa beans have a wide range of applications worldwide.

The decline in cocoa production directly leads to a significant increase in cocoa bean prices. According to the International Cocoa Organization's April 2024 cocoa bean market report, cocoa bean prices have been rising steadily from January to April this year. On April 19th, cocoa futures prices in London and New York both reached their peak at £ 9080 per ton and $10660.67 per ton, respectively. However, after experiencing consecutive months of increase, international cocoa prices have fallen in the past month. As of May 24th, cocoa futures prices in London and New York were 6274.67 pounds per ton and 7645 dollars per ton, respectively.

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Numerous companies announce an increase in chocolate prices

In the past six months, the continuous rise in cocoa bean prices has had a significant impact on chocolate production enterprises. According to the 2022-2023 financial report of chocolate manufacturer Baile Garibal, the price of cocoa beans is 23.5% higher than the previous fiscal year. The first quarter report for the fiscal year 2023-2024 also showed an increase in sales due to the rise in cocoa prices.
Due to the rising cost of obtaining cocoa beans, chocolate producers have begun to take price hikes to alleviate cost pressures. Among them, chocolate industry giants such as Nestle, Hershey's, and Yizi have all raised the price of chocolate to varying degrees, shifting some costs to consumers. Luca Zaramella, CFO of Yizi, stated in January that Yizi raised chocolate prices by 15% last year and will consider further price hikes to help achieve revenue growth expectations for 2024.
Fuji Oil Co., Ltd. also announced that it will adjust the prices of chocolate products from July 1st. Mainly to cope with cost increases such as a decrease in cocoa raw material production, a significant increase in other raw material and logistics costs, and a weak yen. The measure is to increase the price of chocolate products by more than 1000 yen per kilogram, increase the price of quasi chocolate products by more than 500 yen, and increase the price of other chocolate products by more than 100 yen.
Fuji Oil Chocolate Products/Image Source: Fuji Oil Co., Ltd

The significant increase in cocoa prices has also increased transportation costs. On May 20th, Weizhisu announced that frozen food will modify the shipping costs of 25 commercial frozen foods (frozen candy products) using chocolate starting from September 2nd, and increase prices by 2-17%. This is because the price of chocolate raw materials continues to soar, and it is expected to continue for a long time in the future. According to Wei Zhi Su's judgment, it is also difficult to maintain the current price of chocolate by improving production and other methods.

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Reducing production and replacing cocoa as a way for enterprises to cope

Faced with the high prices of cocoa beans, raising the prices of their end products can only solve the urgent problem for enterprises. Many enterprises have proposed countermeasures, including reducing the size of chocolate products and seeking alternatives to cocoa bean processing products (cocoa powder, cocoa butter, etc.) to cope with the challenges brought by raw material shortages.
·Reduce the size of chocolate product specifications:
Reducing product specifications is one of the ways chocolate manufacturers can reduce costs. For example, the specification of Mars' Smooth Milk Galaxy chocolate has been reduced from 110 grams to 100 grams; The fun size chocolate content of KitKat has decreased from 17 grams to 14 grams; Cadbury has reduced the content of Cherry Ripe chocolate bars to 40 grams, but this approach has sparked some controversy online as the reduced product content has left prices unchanged, causing many consumers to feel at a loss.

·Reduce cocoa powder usage:

In response to the shortage of cocoa, companies are trying to reduce the amount of cocoa powder added to their products. However, the reduction in cocoa powder usage will to some extent affect the flavor and taste of the products. In order to solve this problem, Kaiai Rui has launched a comprehensive solution for cocoa flavor, which uses cocoa flavor optimization technology to replace the amount of cocoa powder used, and uses taste modification technology (odor masking, taste moisturizing, and sweetness modification) to improve the product taste, solving the three major problems of increased product cost, lack of cocoa flavor, and changes in taste texture.
In addition to reducing usage, finding alternatives to cocoa is also a hot topic in the industry. From the perspective of composition, cocoa beans can be fermented, sun dried, roasted, shelled, and ground to obtain cocoa paste, while cocoa butter and cocoa powder are the two main substances separated from cocoa paste. Cocoa substitutes are mainly divided into cocoa powder substitutes and cocoa butter substitutes.

·Cocoa powder substitute:

Bean powder: Studies have shown that bean powder has the potential to replace cocoa powder. Soybean powder can obtain a cocoa like aroma and flavor after baking, and it does not contain caffeine or theobromine. It is also cheaper than cocoa, so it has great potential as a substitute for cocoa.
The main characteristic of bean powder is its high sugar content (mainly sucrose), which can reach up to 50% or more, and the dietary fiber content is around 11%. At present, bean powder has been used in the production of various functional foods, such as baked goods, candies, pasta, and beverages. Research has also found that the taste of bean muffins is sweeter and less bitter than that of cocoa muffins. In some products, it can replace 30% or even 75% of cocoa without significant flavor changes. In addition, soybean powder increases fiber intake, reduces fat content, and has significant free radical scavenging activity, making it an important cocoa substitute in the food industry.
Jackfruit seeds: experiments have proved that baking jackfruit seeds (after drying and/or fermentation) will produce changes in aroma sensory characteristics, thus producing pleasant chocolate aroma. The final volatile components in jackfruit seeds mainly include pyrazine, Strecker aldehyde, alcohols, esters and furan. Replacing cocoa powder with 50% and 75% dried jackfruit seed powder does not change sensory acceptability or characteristics.

·Cocoa butter substitute:

Mango seed fat: Studies have shown that mango seed fat contains light colored fat, and its fatty acid spectrum (palmitic acid, stearic acid, and oleic acid) and triglyceride spectrum are similar to cocoa butter, and its physical properties are also similar to cocoa butter. This indicates that mango kernel fat may become a cocoa butter improver, reducing chocolate production costs and extending its shelf life, thereby solving the problem of cocoa butter scarcity.
Shea butter: shea butter is a vegetable oil extracted from the kernel of shea butter and has a long and extensive history of consumption in Africa. It is considered one of the ideal substitutes for cocoa butter. In 2017, shea butter was declared as a new food ingredient and can be used in chocolate, candy, ice cream, baked goods, and frying oil products.

Exploring cocoa alternatives is a feasible solution to the shortage of cocoa raw materials. In the process of finding alternatives, enterprises need to fully consider factors such as consumer needs and preferences, nutritional value, cost, and processing technology. With the continuous progress of technology and the improvement of processing technology, there will be more and better cocoa substitutes available in the future, which will alleviate the shortage of cocoa raw materials and meet the dual needs of consumers for taste and nutrition.

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2024-06-06

Shaanxi Huike Botanical Development Co., Ltd.

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