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Global Chocolate Industry: From Bean to Bar

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As all things chocolate are celebrated on World Chocolate Day (7th July), Euromonitor International offers insights from multiple research industries to provide an overview of the changing landscape of the chocolate industry, from production through to consumption. On the cocoa production side, traditional African producers are facing growing competition from newcomers in Asia Pacific (mainly Indonesia) and Latin America. As an ingredient, there is no consensus on the benefits of cocoa. However, Ruby chocolate has recently been identified as the fourth type of chocolate and could benefit health-conscious consumers looking for a chocolate hit without the additives. Chocolate confectionary is a major global market. 43% of global cocoa consumption in 2017 came via chocolate confectionery, while it is the largest snack category in the world. At the bar end, consumers still demand ethical values and brands supporting sustainably farmed chocolate. However, companies are now seeking to take ownership of their own ethical standards and responsible sourcing strategies.

Natural Resources: Africa dominates global cocoa production but Latin America and Asia Pacific are growing  

  • In 2017, the global production of cocoa beans was 4.4 million tonnes, with two countries in Sub-Saharan Africa (Côte d'Ivoire and Ghana) accounting for over 50% of this;

Source: Euromonitor International from UN Food and Agriculture Organisation (FAOSTAT)/ United Nations (UN), International Merchandise Trade Statistics

  • Indonesia is the third largest producer of cocoa beans in the world holding 16.5% of global production in 2017. The cocoa sector in Indonesia has grown exponentially in the last 30 years largely a result of an increase in smallholder farmers;

Source: Euromonitor International from UN Food and Agriculture Organisation (FAOSTAT)

  • Between 2012 and 2017, the biggest growth in cocoa beans production was in Latin America (+59.0%) and Asia Pacific (+48.8%), driven by Indonesia, Brazil, Peru and Ecuador;

Source: Euromonitor International from UN Food and Agriculture Organisation (FAOSTAT)

  • Latin America has the most efficient cocoa plantations and is the only region in the world that has experienced a growth in yield (+45.3%) between 2012 and 2017;
  • However, the volatility of cocoa prices tells a story of uncertainty in the sector. Abundant supply along with a weakening demand for chocolate due to growing health consciousness has caused a recent drop in prices.

Source: Euromonitor International Commodity Price Model

Ingredients: Cocoa’s role in chocolate continues to evolve

43% of global cocoa consumption in 2017 came via chocolate confectionery, more than in any other category. This makes cocoa’s reliance on the chocolate industry clear, however, the chocolate industry’s interpretation of cocoa is more opaque:

  • With no obvious detrimental health impact, or any association with artificiality, cocoa should fit the maxims of simplicity and naturalness which consumers increasingly look for. Nestlé’s 2017 campaign to promote a reformulated Kit Kat “with extra milk and cocoa” seemed to do this, implying that more cocoa presented a benefit to consumers;
  • However, since 1968, Ferrero has emphasised the use of more milk and less cocoa in Kinder products, reasoning that this is nutritionally better for children and therefore reassuring for parents. These mixed messages have the potential to confuse consumers and cocoa suppliers will be wary.

Ruby Cocoa could signpost the way to additive reduction in chocolate:

  • In 2017, Barry Callebaut launched Ruby chocolate, made from Ruby cocoa, which it claimed to be the fourth type of chocolate. The chocolate produced has a pink colour and a fruity, berry-like flavour. On launching the new innovation, Barry Callebaut emphasized that no flavourings or colourings had been added, and said that it had “unlocked the flavour and colour tone naturally present in the Ruby bean.” Nestlé echoed these sentiments when they released Kit Kat Ruby, the first chocolate confectionery brand made with the new cocoa;
  • As further development of ruby cocoa takes place, to refine taste and appearance, manufacturers could see this as the first step towards producing flavoured chocolate which does not rely on additives. With 6,398 tonnes of flavours and 3,036 tonnes of colouring additives added to chocolate confectionery products in 2017, this could signal the start of a major shake-up in the chocolate confectionery industry.

Packaged Food: Chocolate confectionary is the largest snack category globally

At over US$100 million in 2017, chocolate confectionery is the biggest snack category in the world, accounting for a fifth of total snack sales:

  • Chocolate is very dynamic in terms of channel development. In recent years, there has been a surge in e-commerce with almost 30% of chocolate sales coming from internet retailing.

Consumer Expenditure: Danes have the sweetest teeth

  • Nearly US$386 billion was spent across the world on sugar and confectionary in 2017. The USA was the largest sugar and confectionary market, with total category spending of US$48 billion, followed by Japan at US$47 billion.
  • The Danes spend the most per person on sugar and confectionary globally, at US$422 per person in 2017, followed by the Japanese at US$370.

Ethical Labels: Beyond Fairtrade

Chocolate confectionery from sustainably farmed cocoa accounted for 8% of the total global market in 2017. The three key certifiers – Fairtrade, UTZ and Rainforest - accounted for two thirds of sustainably farmed chocolate. But 2017 has seen more confectionery players take ownership of responsible sourcing strategies in a bid to increase yields and trim down production costs.

Mondelez exemplifies how global manufacturers are increasingly setting their own ethical standards:

  • The announcement by Mondelez, the second biggest chocolate player globally, in late 2015 detailing the planned expansion of its own Cocoa Life sustainable sourcing programme has sparked uncertainty over the future of Fairtrade and other traditional certifiers;
  • The shift away from Fairtrade certified cocoa was most prominent in its flagship brand Cadbury. Dairy Milk was the first product to display the Cocoa Life logo in 2016 with the intention to cover the entire Cadbury’s range in the UK and Ireland by 2019. More recently, the confectionery giant raised eyebrows in the British press with its 2017 announcement to remove Fairtrade and organic certification from Green & Blacks, a premium brand known for its ethical positioning, again in favour of its own programme.

As retailers and manufacturers continue to be swayed by emerging alternatives, there remains the danger of diluting the quality of commitments to achieve a quick win. Consumers value trust, and abhor being misled for the sake of profit. For traditional schemes to survive, they must adapt. While some industry voices might question the tangible impact that these initiatives have, for consumers they remain the gold standard in terms of being the most recognisable stamp of an ethical supply chain in operation today.

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