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Which chocolate giants are diversifying – Summary
- Cocoa supply volatility drives major chocolate producers to diversify sourcing
- Mondelēz expands cocoa sourcing across Brazil Ecuador India and Indonesia
- Barry Callebaut boosts Latin American production and explores innovative cocoa alternatives
- Mars invests heavily in research improving climate resilience and cocoa yields
- Nestlé remains focused on West Africa while exploring limited cocoa alternatives
Supply in the cocoa sector has become volatile. That is a simple fact.
For large FMCGs, it does not make sense to rely too heavily on one source for the ingredient. Production in West Africa, particularly Ghana and Côte d’Ivoire, supplies a large part of the world’s cocoa, but volatile weather, coupled with crop diseases and the unaffordability of agricultural inputs for farmers, have made for low yields and high prices
Now, these prices have begun to fall again, bringing a certain amount of relief to the beleaguered sector. But problems like volatile weather and low incomes to buy agricultural inputs still exist. Companies cannot know if the lower prices will last.
For the confectionery giants, it can make sense to look elsewhere. But how are these majors diversifying?
Exploring new locations
One of the big drivers of the cocoa crisis has been volatility of weather patterns in West Africa. Often, the entire process of cocoa farming is made more difficult by weather no longer following a predictable pattern. Meanwhile, crop diseases like swollen shoot virus are rampant.
While the rest of the world is, of course, not immune to these climate-induced difficulties, a diversified approach still makes it less likely that one bad crop will sabotage a company’s entire inventory.
In a recent earnings call, US-based snacking giant Mondelēz International explained that it was focusing more significantly on the Latin America market, particularly Brazil and Ecuador, as well as a small amount in India and Indonesia. These countries have different farming models to West Africa.
“I think it’s just better from an overall long-term risk management perspective that we balance our supply of cocoa into different geographical regions“, says CEO Dirk Van de Put.
Such diversification, he says, will reduce the impact of a bad crop or disease on the overall cocoa market.
Barry Callebaut is also looking to diversify. It has signed agreements in Brazil to expand cocoa production there, and it already has production in Ecuador.
FMCG giant Mars is also expanding its global investments, investing significantly into research centres for protecting supply chains.
In 2024, it opened a research laboratory to enhance yields in Indonesia. In December last year it partnered with commodities broker Sucden to boost climate resilient crop production in the Dominican Republic and Ecuador.
Nestlé, however, is still focused primarily on West Africa. Africa represents around 64% of the cocoa sourced through the Nestlé Cocoa Plan, as opposed to Latin America, which represents 32%.
Côte d’Ivoire remains Nestlé’s main origin, and along with Ghana is the location of its income accelerator programme. This programme represents Nestlé’s efforts to improve yields through encouraging farmers to change their agricultural practices.
Nestlé has also developed technical innovations to improve its cocoa yields.
Cocoa replacements
As well as moving into different regions, some major chocolate players are even looking at replacements for cocoa itself.
Barry Callebaut, for example, has partnered with biotech company Planet A Foods, which produces a cocoa alternative through locally available crops such as sunflower seeds.
It is also looking into cultivated cocoa. In a partnership with Zurich University of Applied Sciences (ZHAW), it is researching the potential of cultivated cocoa to shield itself from supply chain uncertainties.
Despite comparisons to cultivated meat, the process is substantially simpler when done with cocoa.
Mondelēz also plans to invest in ‘lab-grown’ cocoa, which it predicts will have greater availability over time.
CEO Van de Put even suggests that the European Commission and US would be likely to approve it. “Why? Because it has significant beneficial effect in the sense that all the negatives that surround the cocoa supply chain would not be there as it relates to climate and other social effects.”
The multinational has been putting money into the start-up Celleste Bio, which produces cultivated cocoa.
Other companies, including Lindt & Sprüngli, have also been investing in cultivated cocoa.
“Cocoa remains fundamental to chocolate, and we have a broad portfolio that relies on it”
Nestlé spokesperson
Nevertheless, as of yet, cultivated cocoa does not have regulatory approval anywhere in the world. Transitioning to it remains a possibility, rather than a concrete action.
Nestlé, meanwhile, is much less focused on alternatives. “Cocoa remains fundamental to chocolate, and we have a broad portfolio that relies on it,” says a spokesperson for the company.
While it is exploring the potential for the use of alternatives, cocoa remains its priority. “Today, real chocolate still requires cocoa.”
