Cocoa import to India has risen sharply as sluggish production of beans has failed to catch up with the escalating demand for chocolates in the country.
Chocolates are fast displacing traditional sweets, triggered by a shift in consumer taste and changing lifestyles. Imports surged 25 percent in FY22, compared to a single-digit growth in the past few years.
Another change taking place in the country is the increasing preference for dark chocolates. This trend has become stronger after the outbreak of COVID-19. Milk chocolates account for a major share of chocolate sales in the country now.
“Demand for dark chocolates has been going up because of health concerns. Earlier, people did not favour them much because of the bitter taste,’’ said G S Ram, CEO of Lotus Chocolate Company.
According to industry reports, the pandemic did not affect the chocolate market. While the closure of retail outlets hit offline sales, home consumption saw a steep rise. Chocolate companies are trying to lure customers through innovative marketing by taking advantage of the rising awareness about health safety.
Organic, vegan, sugar-free, and gluten-free chocolates are finding wide acceptance, especially among the younger generation.
Dark chocolates are red-hot
Vikas Temani, business head and founder of three-year old Paul and Mike Chocolates, said that a couple of factors have fuelled this trend towards dark chocolates.
"One is health consciousness. Doctors have started recommending dark chocolates as part of a regular diet as they are rich in antioxidants. The other factor is the growing vegan trend. Dark chocolate is essentially vegan as it does not contain milk. We recently launched a chocolate made with rice milk as it comes from a plant," he said.
The chocolates with 70 percent cocoa have the biggest demand and people don’t mind paying a higher price.
"They are cheaper, compared to foreign chocolates. While foreign chocolates have become costly over the last few years, we have kept the price unchanged. In terms of quality, our chocolates may be better as we use finely flavoured cocoa and real dark cocoa butter," Temani said.
The company is part of the Kerala-based Synthite group, the leading exporter of spice oils and oleoresins in the world. Most of its customers are young and educated and come from metro cities with half of its revenue coming from online sales.
‘Indian chocolate market to touch $3.8 billion by 2027’
According to market research and consultancy firm IMARC, the Indian chocolate market, one of the world’s fastest-growing ones, touched $2.2 billion in 2021. It expects the market to reach $3.8 billion by 2027 at a CAGR of 9.1 percent.
India’s strong economic growth over the past decade has catalysed the country’s per-capita disposable incomes, resulting in the strong growth of the chocolate industry. As a result, consumers are now buying chocolates for everyday consumption rather than just special occasions.
Besides a large young population which represents a key consumer segment for chocolates, changing lifestyles, westernisation, growth of the food services sector and value-addition are major driving factors, it said.
From 89,069 tonnes of cocoa beans and products, which include mainly cocoa powder and butter in FY21, the import rose to 1,11,187 tonnes in FY22, according to the data of Directorate of Cashewnut and Cocoa Development (DCCD). The increase in import was about 5 percent in FY21 from the previous year.
At the same time, cocoa production in the country, led by Andhra Pradesh and Kerala, has been growing at a slower pace. As per the advance estimates of DCCD, it is 28,426 tonnes in FY22, up by 5 percent from a year earlier. The same growth trend was witnessed in FY21 as well.India has been dependent on cocoa imports to meet the rising demand of the chocolate market for the past so many years. It has been rising at 5-10 percent from around 50,000 tonnes 10 years ago and crossed 80,000 tonnes three years ago. Last year, for the first time, it went past 1 lakh tonnes.
Duty structure against local producers
"India’s processing capacity is well over 1 lakh tonnes. While cocoa beans carry import duty, cocoa products like powder and butter can be imported without duty from countries like Indonesia and Singapore. This has affected the local producers of cocoa products who are unable to compete on the price front," said Durga Prasad, managing partner of DP Cocoa Products.
The duty on cocoa beans ranges from 15 percent to over 30 percent, depending on the source of origin. It is lower for African beans and higher for those from South-East Asian countries.
The current year may also see a jump in imports as domestic production has not been good. “Irregular climate has affected production. We are having difficulty in procuring sufficient beans from the local market though we are paying a higher price of Rs 210 per kg, compared to Rs 170 per kg last year,’’ said Vinay Krishnan, head of cocoa marketing division of Campco Ltd.
The cooperative company, a big supplier of processed cocoa to chocolate makers, does not import and depends on purchases from local farmers.
Rising cocoa prices
International cocoa prices started increasing towards the end of 2021 as the relaxation of pandemic restrictions in the US and Europe, the major consumers, led to a rise in chocolate consumption. In the last few months, the demand has dropped as rising inflation affected the purchasing power of the consumers which was reflected in prices.
The International Cocoa Organisation (ICCO) said, as at June 2022, that while a supply deficit is expected for the ongoing 2021/22 season (October to September), cocoa futures prices have followed a downtrend, triggered by economic uncertainties.
This bearish trend in prices was driven by the strengthening of the US dollar and the global economic concerns, stemming mainly from steady inflation and a high level of inventories in the exchange-monitored stocks of cocoa beans.
In June 2021, prices followed a downward trend as during COVID-19, the global cocoa market was expected to end the 2020-21 cocoa year with an excess supply.According to ICCO, demand for cocoa is expected to overtake supply for 2021-22 as arrivals and purchases in Ivory Coast and Ghana, the biggest global suppliers, are expected to be lower.