Question and Answer

Kristen Hallam

Anna, this is a really fun way to explore the treasure trove of trade data that we have. What inspired you to look at the trade? Are you a chocolate lover like me?

Anna Rybicka

Yes, I am chocolate lover. But I was also inspired by the commentary I watch on internet. It was about cocoa farming on Ivory Coast. And I got some idea of how cocoa is grown, cultivated, harvested. I learned that the cocoa fruits are eaten in Africa, where it's grown.

But the local people very rarely know the taste of the final product, the chocolate itself. And it triggered my curiosity. I was curious if the data that we have here confirmed this geographical gap between our consumers and farmers and how the trade looks.

Kristen Hallam

So tell us a little bit about the data that you used for your report.

Anna Rybicka

I looked at the trade data from 2022 and 2023. And I split the chocolate products into two categories, raw materials and finished products. So raw materials consist of cocoa beans, cocoa paste, cocoa butter, fat and oil, cocoa powder and cocoa byproducts.

While finished products are chocolate in bulk form, so blocks, slabs or bars, and not in bulk forms such as assorted chocolates, also cocoa powder with sugar or sweeteners, so hot chocolate, yes, filled chocolate products, not filled chocolate products. And apart from that, I also checked the forecast for chocolate trade till 2040 and compared the trends with chocolate competitors, so sugar confectionery and coffee.

Kristen Hallam

All right. I look forward to hearing more about that forecast. But Agnieszka, would you be able to tell us more about some of the other categories of sweets using those data that Anna just described?

Agnieszka Maciejewska

Yes, yes, of course. We have the data from the whole world in the database GTAS within the S&P Global. And we are able to look at, for example, sugar confectionery that do not include cocoa. And I was very interested in that after I read the article that Anna prepared about chocolate. And I was curious who is exporting sweets. It wasn't very surprising for me as a jelly bean lover.

So Germany is exporting a whole lot of jelly confectionery but also toffees and caramels, which surprised me a little bit. On the second place of sweets exports would be China, then Belgium, where it's not jelly, it's white chocolate. I know that Belgium is also exporting cocoa preparations in chocolate. But white chocolate, marzipan, nougat is also very popular as an export material. Mexico, white chocolate exporter. Then when we are looking still at European countries, Netherlands and Spain, and also Turkey are exporting some kind of jelly and jelly beans and fruit jellies, so the other kinds of sweets.

And as I am based in Poland, I was very glad to see Poland on the position #8. And Poland is exporting pastes, marzipan and nougat. I think that Anna will tell us a little bit more about the position of Poland as a traditional chocolate exporter. So let's hear about it. But I love nougat. I love jelly beans. And I know where to get it right now.

Kristen Hallam

And you said marzipan. Oh, I love marzipan, too. So Anna, who are the major players in the trade of raw materials for chocolate?

Anna Rybicka

So the top 5 exporters of cocoa beans include Ivory Coast, Ghana, Ecuador, Nigeria and Cameroon. And they accounted for 79% of the global trade in 2022 and 85% in 2023. This indicates a significant concentration of cocoa resources. Ivory Coast itself held the largest stake of 46% in 2023. And what's important, almost 77% of cocoa beans for export originated from Africa in 2023. The only non-African country among the top 5 exporters was Ecuador and the rest are from Africa.

Kristen Hallam

And who would be the biggest importers of the raw materials for chocolate?

Anna Rybicka

So it starts with Netherlands, then it's followed by Germany, Malaysia, the U.S.A. and Belgium.

Kristen Hallam

I'm not surprised to see the Netherlands and Belgium on that list. But Malaysia is interesting. What is the story there?

Anna Rybicka

There are at least two reasons for that. The first reason is that Malaysia acts as a local exporter of cocoa beans in Asia. So it exported more than 278,000 tons of cocoa beans in 2023. And it exports primarily to Singapore, Indonesia and Korea. So it acts as a local hub. And it also exports final chocolate products. In 2023, it was 145,000 tons. And it is also mainly to Singapore. The second place is taken by Australia, Indonesia and China.

However, there is also another reason for that situation. The local cocoa forests are shrinking. So Kuala Lumpur is surrounded by cocoa forests. However, those forests are being replaced by palm oil and durian plantations. But still, there is this very strong local cocoa processing industry. So to keep it going, Malaysia needs to import cocoa beans.

Kristen Hallam

That definitely makes sense now. And if we look at other categories of sweets, who would be the biggest importer of sugar? And where are they taking it from, Agnieszka?

Agnieszka Maciejewska

Well, the biggest importer of sugar is United States. But as we can see, they do not have to be the biggest producer of sweets. So this may be for consumption and it may be not for sweets, may be for drinks or beverages. The other importers that I checked and were on top of the list were Indonesia and China, then there was Italy.

But as a source of the sugar, we may have a problem. Those countries may have a problem. Because, for example, Indonesia and China were taking the majority of sugar from India until 2022. And in 2022, due to the first restriction of sugar export from India was introduced, which was extended in October 2023, and it is concerning the sugarcane.

Well, Anna was mentioning the change in agriculture, the change in the foresting and lax in Malaysia. While here, the lack of rainfall caused the much smaller harvest of the sugarcane in India. That's why the government decided to put in the restrictions and sugarcane may not be exported that extensively. That is a threat for us, Kristen, I think, because it is threatening the sweets production in the long term.

Kristen Hallam

Oh, no.

Agnieszka Maciejewska

Climate change is dangerous for sweets lovers.

Kristen Hallam

Bad for my sweet tooth. Okay, that's one way to make it very salient for sure. Thank you, Agnieszka. Now let's talk about the stuff that we actually eat, the finished chocolate products. Who are the biggest exporters of the finished chocolate product? I imagine it's some of the same countries that import the raw materials, right, Anna?

Anna Rybicka

Yes, that's right. To a very large degree, it's the same countries. So the list starts with Germany, Belgium, Canada, Poland, Netherlands, the U.S., Italy, France, Turkey and Mexico. So it is dominated by European countries. There are some differences between the top importers of raw materials and exporters of the chocolate final products.

While we have Netherlands, Germany and Belgium, who are present in the top 5 exporters both as raw materials, importers and chocolate products exporters, we also have Canada and Poland, which ranked the third and fourth in the chocolate products exported list. But they are not ranked as top raw materials importers. This can be explained because Poland imports cocoa beans mainly from the Netherlands and Germany while Canada imports them from the U.S.A. So still, the supply chains are in place, right?

And it's important to note also that Europe leads as a region, accounting for 54% of global export of final and semi-final chocolate products. But it's immediately followed by North American countries, including the U.S., Canada and Mexico. And there is no single Asian country among the top 10 exporters of final chocolate products with Mainland China ranking only 19th in 2023.

Kristen Hallam

So we've got most of the raw material coming from Africa, most of the finished product coming from Europe, although I'm glad to see the U.S. on that list because that's where I sit. I didn't hear you say Switzerland. And that is definitely a country that leaps to mind when you think of chocolate. One of my favorite brands actually comes from Switzerland. Why isn't Switzerland on that list?

Anna Rybicka

Yes, that's a phenomenon. Switzerland has the largest chocolate consumption per capita in the world. But it is, at the same time, outside of the top 10 exporters ranking, placing 11th in 2023. And the average Swiss citizen consumes almost 12 kilograms of chocolate per year while, for example, Chinese, only 200 grams. So Switzerland has a huge internal consumption per capita.

Kristen Hallam

So they're keeping all the good stuff inside the country is what I'm hearing. All right, just have to go to Switzerland then. And who are the biggest importers of chocolate products? Or should I say, where do you see the biggest appetite for those imports, Anna?

Anna Rybicka

Yes. So the top single importer of chocolate products is the U.S.A. However, the largest importing region is Europe. And there, we have an Asian representative in the top 10 importers list. This is Japan that is ranked 10th.

Kristen Hallam

And what about cocoa powder used to make hot chocolate? You mentioned that earlier. Where do you see the biggest trade in that commodity?

Anna Rybicka

So in cocoa powder containing added sugar and other sweeteners, the top exporter is South Korea while the top importer is Japan. It seems that the hot chocolate's main component is received and sent from Asia. But there is also a very strong bilateral trade between those two countries. So Korea exports cocoa powder with sugar mainly to Japan. And Japan imports mainly from South Korea.

It is related to a strong hot chocolate culture in Japan. And it is very popular there. It is not drunk with milk as we know it, for example, in Europe. It is drunk with hot water. And it has some kind of local flavor. Because there is, for example, so-called miso hot chocolate. So this fermented soybean paste is added to this chocolate to make it very Asia-specific, Japan-specific actually.

Kristen Hallam

That is so interesting. It sounds delicious. All right. I'm going to have to see if I can import some of that over here. So Anna, what did you discover in terms of seasonality? Is the trade in cocoa seasonal?

Anna Rybicka

Yes, it is. We studied the monthly data of the top importer of chocolate, the U.S.A., from 2017 till 2023. And every year, the peak of the import value reaching millions of dollars was seen in October, November. So it illustrated the growing demand for chocolate products before the winter holiday season and possibly also Valentine's Day.

And in the U.S.A., it accounted for 32% of annual value in dollars, so almost 1/3. So this is a huge peak, very similar seasonality with peaks in October, November each year was also observed in Germany as well as in the European Union countries as a whole.

Kristen Hallam

The winter holiday season and Valentine's Day are also popular seasons for other categories of sweets, right, Agnieszka?

Agnieszka Maciejewska

Yes, yes, yes. If we are looking at the sugar confectionery and the end of the year is approaching, if you look at the chart of flows of sugar confectionery to United States, it is growing in the autumn. So it may be holiday season, Valentine's but maybe also something to sweeten the gloomier days that are coming in the winter.

I myself like to cheer myself up with something sweet when the days are becoming shorter. Also, if you are looking at the export side, Germany is sending more jelly beans to the world in the quarter 3 of each year. So it seems that they do want to cheer us up with that.

Kristen Hallam

Nice. I know in the United States, at least Easter is a popular time for chocolate and sweets. And as we're recording this, we're about a month out from Easter. The store shelves are already stocked with many different types of sweets and chocolates. So we still have a bit of a peak going on here. How about in Poland? Is it the same?

Agnieszka Maciejewska

It is completely the same. The marzipan that we are mentioning, recently, yes, it is fully stocked with marzipan, especially on the Easter holiday. And I think that it is all that came to Poland or was produced in Poland. As we know already, the production in Poland of those sweets is quite high. So what was created in quarter 3 and quarter 4 at the end of the year and wasn't eaten in the Christmas season right now is stocked on our shelves in the shops.

Kristen Hallam

Maybe I'll need to make a trip to Poland as well.

Agnieszka Maciejewska

Yes, yes, welcome.

Kristen Hallam

So Anna, you also look into the future in the report. You mentioned earlier the forecast. What is our forecast for total trade in cocoa and its various preparations?

Anna Rybicka

Yes. So the total trade in cocoa and cocoa preparation is forecast to grow, and it is forecast to grow significantly between 2024 and 2040. It is 57% growth. And the annual growth rate is 3%. In 2040, Ivory Coast is forecast to remain the main cocoa preparation exporter while the Netherlands will remain at the top importer.

However, what's worth noticing, the volume of cocoa trade is going to be, and it is as of now, far larger than the volume of sugar confectionery trade and coffee trade, so typically, 40% larger volume than coffee trade and 65% larger volume than sugar confectionery. So that's a large industry.

Kristen Hallam

Yes, larger than coffee. Wow, coffee is something else that I love. So maybe we'll have to schedule another episode to talk about the coffee trade. We have had a lot of fun talking about the trade narrative for cocoa and chocolate. The trade data really can be used to tell some compelling stories as you've shared with us today. But what is the practical use of this kind of data? How might businesses use this data, Agnieszka?

Agnieszka Maciejewska

Yes, of course. I mean, we were speaking about the seasonality and the type of products that are produced by particular countries. So it can be used for planning inventories and foreseeing the busy seasons, as we could just see, for particular commodities. We can break it down even more than we were speaking in the questions before.

So we can look at the particular country and particular type of sweets and see its history and what we are forecasting the trade flows between countries would be. We can be looking for particular suppliers because we have a full comparison of the supply that is available in the countries. We can look for buyers. But also it may be very useful for logistic companies who are planning particular fleet capacity to transport the sweets that we are craving.

And of course, the forecast may be very useful in the cases like changes in trade, like the bans introduced, like the shifts in trade, we are including this in the trade analysis. And we are showing what happened to the trade recently. And for example, the sugar supply changed in the world significantly recently. And that would be mirrored in our analysis.

Kristen Hallam

Lots of good use cases there, very important things for businesses to keep an eye on for sure. Well, I could talk to you both about chocolate and sweets and jelly beans all day. But we have come to the end of our discussion. So any final thoughts for our listeners, Anna?

Anna Rybicka

Yes. One of the final thoughts might be the fact that very recently, cocoa prices have surged beyond $6,200 per ton, hitting an all-time high. And this fuels some concerns over crop conditions in West Africa because there were some high temperatures and insufficient rainfall on Ivory Coast. So we have to realize that the raw materials depend on climate conditions. And maybe it's time to stock up on chocolate.

Kristen Hallam

You don't have to tell me twice.

Agnieszka Maciejewska

Exactly. The same with sugar. We gave plenty of examples that caring for environment would help us to maintain the production of sugar and cocoa. So it's beneficial for everybody to keep the planet safe.

Kristen Hallam

So then all that's left for me to do is to thank you both, Anna and Agnieszka, for sharing your insights with us and for making us all hungry. I'm going to go make myself a cup of cocoa right after this. And thanks to you all, our listeners, for tuning in. Please join us next week to learn more about the forces creating risks and opportunities for business in 2024.

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