Asia’s Chocolate Binge Compounding Global Cocoa ShortageChanyaporn Chanjaroen and Morgane Lapeyre
Surging consumption of chocolate in Asia is pushing cocoa-bean prices to the highest level in three years as buyers including Barry Callebaut AG expand their search for more supply.
While demand in the region ranked as the world’s lowest per capita in 2013, the market will grow at almost twice the global rate over the next four years, according to researcher Euromonitor International Ltd. Barry Callebaut, based in Zurich and the world’s largest producer of bulk chocolate, has doubled capacity in Asia since 2009 as Cargill Inc. and Archer-Daniels-Midland Co. added bean-processing plants.
Growth in Asian demand has contributed to a rally in cocoa, the key ingredient for chocolate, which climbed to the highest level since August 2011 in New York on July 3. Rising consumption in emerging markets including China and India may spur shortages that extend into the next decade, with the global bean deficit seen reaching 1 million metric tons by 2020, according to Hardman & Co., a London-based research firm.
“In the longer term, the scarcity of quality cocoa is a serious concern for our entire industry,” Barry Callebaut Chief Executive Officer Juergen Steinemann said by e-mail in reply to Bloomberg questions.
Asia, home to about 3.7 billion people, or more than half the world’s population, will be the consumption “powerhouse” for cocoa and chocolate, said Gerard Manley, a managing director at Singapore-based Olam International Ltd., which supplies about 10 percent of world beans. The shortage will push up prices at least 10 percent through the end of 2014, he said on June 10.
Futures climbed 14 percent this year to $3,097 a ton on ICE Futures U.S. in New York and reached $3,149 on July 3, the highest since August 2011.
Consumption of chocolate confectionery in the Asia-Pacific region averaged 200 grams (7 ounces) per person last year, less than the Middle East and Africa, according to Euromonitor. Demand expanded 4.5 percent, the fastest rate in the world and almost six times the global increase of 0.8 percent. Australia and New Zealand munched the most chocolate with 4.8 kilograms (10.6 pounds) per person, followed by Western Europe at 4.6 kilograms.
Barry Callebaut doubled chocolate output capacity in Asia to 90,000 tons in 2014 from five years ago and a further increase is possible, Mikael Neglen, the Asia-Pacific chocolate president, said in a June 6 interview. The Swede moved to Singapore last year before his company spent $950 million for the cocoa-ingredients unit of Petra Foods Ltd. in the country.
Bean processors are adding facilities in growing areas to ensure supply, according to Yeong Chye, ADM’s Asia cocoa managing director in Singapore, where capacity has quadrupled since 1984, when the plant opened. Cargill, based in Minneapolis, will start a 70,000-ton plant in Indonesia in the second half, its first in Asia.
Olam is starting a new facility in Ivory Coast this year and another in Indonesia in 2016, according to the company. Ivory Coast, Ghana and Indonesia are the top cocoa growers.
Shares of chocolate makers are advancing. Barry Callebaut climbed 34 percent in the past 12 months, while Mondelez International Inc., based in Deerfield, Illinois, surged 28 percent. Mondelez owns Cadbury India Ltd., which holds a 65 percent market share in a nation with 1.2 billion people.
The race to process more beans may be premature as demand expands more slowly than expected, said London-based analyst Caroline Bain of Capital Economics. Increasing prices may also deter purchases in emerging markets that are sensitive to higher costs, she said.
“While we see cocoa consumption growing steadily in Asia, we’re more cautious than a lot of forecasters who assume that European-style consumption levels will be reached relatively soon,” Bain said in an e-mailed reply to questions on June 17.
Demand in China, ranked 11th in the world in terms of market value, may take more than 10 years to overtake the U.S., according to Mohamed Elsarky, chief executive officer of Godiva, the luxury chocolate maker controlled by Turkish billionaire Murat Ulker. The 88-year-old Belgian firm has opened more than 50 shops in China since 2009 and seeks to double that in five years, Elsarky said.
The chocolate confectionery market in the Asia-Pacific region will expand to $16.3 billion in 2018, a 23 percent climb from last year, according to Euromonitor. The world market, dominated by Western Europe and North America, will increase 13 percent to about $124 billion, it says.
“The Asia market is growing very fast as people are very fond of chocolate,” said Philippe Daue, a fourth-generation Belgian chef who has spent 18 years in Asia and is Godiva’s Beijing-based Pacific Rim chef chocolatier. “The availability of cocoa beans to meet the growing demand for chocolate will become all chocolatiers’ biggest challenge worldwide.”