Confectionery Manufacture and the Rising Price of Cocoa
The chocolate and confectionery market has been turbulent lately. The price of cocoa (the raw material for chocolate) has been particularly volatile. Poor weather, changeable subsidy programmes and political instability in the main growing areas have all affected cocoa production.
According to the International Cocoa Organisation (ICCO), cocoa prices rose steadily (and sharply) from April to July 2015. They dropped after August 2014, but even so, are now higher than ever before (take a look at the ICCO monthly average of daily cocoa prices July 2014 to July 2015 from the ICCO here). What’s more, cocoa prices look set to continue to rise. For example, one of the major key cocoa producing countries, Ghana, is expecting a shortfall in its cocoa crop this year. In addition, the influence of El Nino on the cocoa harvest is predicted to be worse than usual this year.
To add to the turbulence, chocolate demand was, until recently, forecast to rise significantly. This was largely through increased demand from developing economies, in particular from China. However, this forecast increase has been downgraded somewhat, mainly due to a slow down in the Chinese economy and their government’s strong anti-bribery initiatives (in China, luxury chocolate products are often used as gifts). While demand is still forecast to increase, the forecasts seem to lack the confidence they had previously.
It’s not surprising then that rising cocoa prices and unpredictable demand, along with increased prices of other confectionery ingredients such as some types of nut, have affected confectionery and chocolate producers. Many major chocolate and confectionery production companies have reported declined sales and reduced revenue.
What Can Chocolate Manufacturers Do?
There’s a lot to chocolate production. The cocoa beans alone need growing, harvesting, drying, transporting, roasting, grinding and pressing before they are anywhere near ready for making in to chocolate. It’s also a disparate system. Over 5 million small-scale traditional farmers grow about 90% of the world’s cocoa. They tend to get only a small percentage of the price of the final chocolate product. And they’re just at the start of the chain. So, although there may be efficiency gains to be had in the supply chain, it’s not going to be easy; it’s takes a long-term, visionary approach.
There are a number of other strategies chocolate and confectionery manufacturers can take (and some are already taking) to reduce the impact of rising cocoa prices. For example, they can simply pass on price increases to their customers. The risk in this however, is reduced sales as customers may decide not to pay higher prices (after all, chocolate and confectionery are non- essential items, and often considered luxuries). They can also reduce the size or weight of their chocolate bar or confectionery product while charging the same price. This is again risky as consumers may be dissatisfied with their purchase and could see it simply as a price rise in disguise. Another option is to reduce the amount of cocoa and other expensive ingredients in each product. However, changing recipes, particularly the long-standing ones, could well turn some customers off completely.
Increasing Production Efficiency through Product Recovery
A large part of maintaining prices, competitiveness and the bottom line comes down to efficiency. Although many plants are already highly optimised, there are arguably the most gains to be had by improving the efficiency of chocolate production and manufacture even further. And that’s where HPS Product Recovery Solutions can help.
HPS works with a number of chocolate and confectionery manufacturers to increase their efficiency through product recovery and hygienic (often referred to as sanitary) pigging solutions. These include Kraft/Mondelez, Ghirardelli, Blommer Chocolate, Masterfoods, Nestle and other companies (here are some case studies on pigging and product recovery systems used in chocolate and confectionery manufacturer).
Multiple Efficiency Gains
As well as recovering up to 99.5 per cent of product from within process pipelines (which is perfectly good, useable product – the pigging process doesn’t affect quality at all), pigging also cleans the pipelines, reduces changeover times, reduces the amount of water and cleaning fluids required and significantly lowers the risks of cross-contamination. And because of the reduction in waste, HPS solutions also help improve environmental credentials. Here’s an infographic on how pigging helps the environment.
Find Out More
To find out more about using hygienic pigging and product recovery systems that improve the efficiency of chocolate and confectionery production and manufacture, then please contact HPS!