Dive Brief:

• With 60% of the world’s cocoa production coming from Côte d’Ivoire and Ghana, the cocoa industry is bracing for future disruption as a result of the pandemic reaching these West African countries, according to Ingredients Network.
• In previous times of global uncertainty, chocolate has benefitted from its positioning as an affordable luxury. However, if the pandemic proliferates in West Africa, it could be devastating to human life as well as supply chains. This could cause chocolate sales to fall dramatically.
• Barry Callebaut said the gourmet sector, which includes single-origin, premium chocolate will be heavily affected due to the closure of shops and restaurants as well as travel confectionery retail, Ingredients Network reported.

Dive Insight:

The coronavirus is another challenge for the cocoa industry already plagued by overproduction, fluctuating prices, low farmer incomes, persistent child labor issues and negative impacts from climate change. While chocolate manufacturers have not yet experienced a shortage in ingredients, sales have been impacted by lockdowns and quarantines.   

In a recent poll conducted by the Fine Cacao and Chocolate Institute, more than 70% of the respondents reported a 50% decrease in sales while 17% have seen a 90% drop in sales. According to data cited by Ingredients Network from market research firm IRI, sales for the week before Easter, one of the largest chocolate holidays, were down 17% year over year.

Although a beloved sweet treat, cocoa has been recognized as a problematic product by consumers. To respond to growing calls for transparency and sustainability, large chocolate companies such as Nestlé and Hershey have pledged to play a more positive role in the environmental and economic issues involved in cocoa production. Despite grandiose promises to combat child labor, improve farmers' wages and slow deforestation, a 2018 report revealed cocoa and chocolate companies’ programs to improve sustainability in the sector have had little impact, Food Ingredients First reports. 

Companies faced with threats of the coronavirus spreading through these cocoa-producing countries have the incentive to support these longer-term initiatives to help stabilize the industry and support farmers. If cocoa production is threatened now during the mid-crop harvest season, it could reduce production. This has the potential to damage companies’ earnings and could lead consumers to pay higher retail prices.

Despite the recent decrease in chocolate sales, demand has been on the rise for years. The U.S. market for chocolate is projected to rise to $30 billion by 2021, according to TechSci Research. With this in mind, chocolate manufacturers have an incentive to keep supply chains in West Africa open in order to meet the growing market for chocolate products.

One strategy companies are taking to combat the increase in transmission is to donate to organizations supporting the emergency response to the pandemic, Confectionary News reports. The publication also indicated that another advantageous strategy is to invest in long-term industry resilience and sustainability.

Promoting sustainability and traceability presents a unique opportunity for companies during the coronavirus pandemic. If companies distributing single-origin chocolates are able to pinpoint the exact origin of their cocoa beans, they will be able to better track the effects of the pandemic on farms and know where farmers are still working and where quarantine measures have delayed production. This information could also be passed onto customers in an effort to connect them with the brand through storytelling – the top trend for marketing, according to Innova Market Insights.