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  • Friday Capital

Chocolate turned sour - an unexpected consequence of the pandemic



In early March when Nigella Lawson coined the phrase “fatten the curve” with reference to her new habit of eating a chocolate bar every night during COVID lockdown, one could have been mistaken for thinking that global chocolate sales were about to skyrocket.


However, as with many industries during these unusual times, the chocolate industry has felt the impact of a significant shift in consumer behaviour. According to a report by Rabobank, a significant proportion of chocolate demand is driven by impulse and gift purchases made at retail shops, vending machines, airports and while travelling. The resultant decline in human movement due to COVID-19 restrictions has had a dramatic reduction on the in-person purchase of chocolate through these channels.

Furthermore, this has been compounded by the prospect of a recession following the current economic disruption which has made consumers more likely to shun indulgent snacks, especially those considered to be a luxury.


So although we have seen supermarket sales of chocolate increase this has not been sufficient to balance the reduction in other channels, leaving retailers overstocked on finished goods and manufacturers heavily overstocked on cocoa, the main ingredient in chocolate production. As well as suffering a downturn in sales, many of the large chocolate manufacturers stocked up heavily on cocoa in February in fear of COVID-induced supply shortages. This momentarily drove up the price of cocoa and - for an industry that in normal times holds an average 10 months of raw material on hand to smooth out supply fluctuations - left some manufacturers holding close to 2 years’ worth of cocoa inventory. One of the most extreme examples of this market disruption can be seen with Toblerone chocolate. Owned by American chocolate giant Mondelez International Inc, Toblerone relies heavily on the travel and airport sales channels and have seen total sales decline over 30% as a result of COVID-disruption, and this after they have leveraged their parent company sales channels to pivot their distribution into traditional supermarket chains.


All of this disruption doesn’t stop at the manufacturer, in this industry it flows all the way down to the cocoa farmers in Ghana and The Ivory Coast, many of whom were struggling to make a living wage even before the pandemic and are unlikely to see a recovery in the near term.