The complex world of chocolat
Close your eyes. Imagine your favorite piece of chocolate melting in your mouth. You savour the favors. Is it dark and strong, or is it milky? Is it a Snickers? Or a nut-coated, gooey middle truffle confectioned at your local chocolatier?
Movies like Chocolat (2000) have romanticized chocolate and have us dreaming about the prospect of quitting our day jobs and opening a small chocolate shop in a small French village. Songs, like France’s Lariste’s Chocolat (2016) have got us dancing to the bumping rhythms. Or maybe it’s Roald Dahl’s Willie Wonka and Chocolate Factory that had us hoping Nestle would start sticking golden tickets in their chocolate bars for a whimsical and exclusive factory visit? I remember visiting Cadbury’s world on a visit to the UK. There was a little ride that took you through the chocolate making experience and plenty of chocolate to share (or fight over with my brother and cousins). Sadly no Umpa Lumpas, but still fun.
Over time, my chocolate taste became a bit more refined, opting for the peppery, chilli flavoured organic 75% cocoa independent brand. I sought the small chocolate shops in town that offered speciality treats. I remember one of my good friends used to work at Godiva. Although it’s a chain, the chocolate was oh-so-good and I’d love it when my friend would bring over leftover strawberry covered chocolate. Take me back.
Later during my travels to South America, I saw first-hand the labor intensity in just harvesting cocoa; plucking off the fruit and removing the flesh and drying it out into a cocoa bean. The very early steps in sweet chocolate creation.
Now, in France, one my favorite pastimes is popping into the small ‘chocolatiers’ around town and selecting a small treat for the walk home.
Chocolate is complex, not only in taste, but as a business. Consumption in the world is expanding rapidly, especially to countries like China, with a booming population. We are going to need many more tons of chocolate to meet demand in the coming years.
What makes the chocolate market complex? Chocolate is comprised of three commodities: cocoa, milk and sugar. Agricultural commodities are always subject to the mixed dynamics of 1. climate change which heavily influences the amount and quality of production, 2. politics, which can be complex, especially in West African countries were cocoa tops the 3. trade industry and economics, with jumpy market prices, exchange rates and ratios.
The effects of climate change can be a volatile factor to those working in agricultural commodities markets. Farmers in the chocolate business can have unpredictable yields in the ever-changing climate patterns. Could the planet be doomed? No chocolate or coffee in the future? (See 2 Oct post on Coffee). Or will it be a treat for the elite, those who can afford it, like a bottle of Cristal at the high-end downtown lounge? One solution is diversity. Initiatives like Global Cacao Genetic Resources Network (CacaoNet), a collaboration of cocoa research institutes and organizations that support cocoa research, are working on global strategies for the Conservation and use of cacao genetic resources as the Foundation of a Sustainable Cocoa Economy. They advocate for genetic diversity and sustainable use of cocoa and the ongoing investment in breeding improved varieties.
Many years back, story that hit the hard was child labor in the Ivory Coast, the number one producer of cocoa in the world. The conditions were illegal and dangerous and consisted of children cutting cocoa pods, skipping school, and well basically robbing them of a childhood and rights. Nestle was put on blast. Unfortunately, due to the complexities and length of the chocolate supply chain, despite all efforts, it was still difficult, if not impossible to monitor and control the illegal child labor challenges with the supply chain. Nestle made a good effort via their Cocoa Plan in 2014 (see graphic).
Would you buy chocolate knowing a young child was subject to illegal circumstances, to allow for the goodness of a chocolate truffle? What if we used labels, like child-labor free chocolate? Or does that just add to the confusion? Because perhaps I will have a shopper dilema, do I buy organic, free-trade chocolate as pushed by Oxfam advocating for farmers to get a fair cut of the price? Or child labor free? Or….??
This year The Financial Times presented articles on the rebound of the cocoa industry. In 2016 the price of cocoa took a dive and this year we have begun to see some stability. The London cocoa benchmark rose 2.5 per cent to £1,490 a tonne while, in New York, the price rose 3.2 per cent to $1,879. Well, isn’t that good? Chocolate should be cheaper, more chocolate for all? Willie Wonka get ready, we are back in business!
As a reminder, cocoa is the raw product used in the processing of chocolate products. See below.
As you can see, before the cocoa is sent off to store shelves, it interfaces with steps which constitute multiple supply-chain players, including processing companies. There are about two handfuls of these types of companies that command the market and they must turn the cocoa bean to butter, for chocolatey texture we know and love, and powder, which packs in the flavour and color tone
Next, the economics of chocolate. For processors to be profitable, the “combined cocoa ratio” — which measures the combined sales price for cocoa butter and cocoa powder — needs to be 3 to 3.2 times higher relative to the price of the cocoa bean. Earlier this year, the combined ratio at 3.5 which surpassed the break-even level, thankfully, allowing for a bit of stability for the chocolate industry. Let's say in the future, the ratio is not balanced, do we reduce the size of your KitKat to match the charge?
Fine chocolate with vintage equipment
In the last decade or so, small independent chocolate shops have been popping up all around. Many of them liaising directly with cocoa growers in various parts of the world and using traditional techniques and vintage equipment to create niche chocolate. Fine chocolate creators make smaller batches of chocolate, and tend to source beans directly from producers. For the consumer, this means a novelty experience, taste, heightening of the senses and a higher price tag. Would you trade your daily Milky Way to a small morsel of lavender floral dark chocolate knowing that it not only comes from a Panamanian cocoa farmer and his family will directly reap the benefits, but the shorter supply chain means less dubious actions along the way from the farm to your taste buds?
What’s your preferred type of chocolate? How much would you be willing to pay for a bar of chocolate? Do you have a favorite chocolate shop? If so, what do you like to get? Is it fair-trade/organic/or other? Does it matter?