Chocolate makers hope for better times (News Feature)

By Andrew McCathie Mar 16, 2010, 16:20 GMT

Berlin - It's enough to wipe the smile off the face of any chocolate lover.

Chocolatiers around the world are battling to hold down prices in the run-up to Easter following a recent surge in speculation in two of their core ingredients - cocoa and sugar.

Leading Swiss chocolate-maker Lindt & Spruengli reported Tuesday a 35.4-per-cent plunge in 2009 profits as the global economic crisis hit demand for premium chocolates.

'For the first time in ten years, the overall chocolate market declined in volume,' said Lindt, whose distinctive gold-wrapped chocolate Easter bunnies with their red bows are on prominent display in stores around the world this time of year.

'Wide currency fluctuations and record-high commodity prices, especially for cocoa beans, together with liquidity shortages among distributors and a sharp decline in airline passenger numbers in the duty-free sector had an adverse impact,' the company said in a downbeat report.

Belgian chocolate maker Godiva announced earlier this month that it was trimming its 360-strong workforce in Brussels by about 25 per cent.

Recently, however, signs have emerged that the speculators have been retreating from the cocoa market, raising hopes that chocolate manufacturers might be able to keep prices down in the coming months.

'All the fundamentals point to the cocoa bubble soon bursting,' said cocoa market analyst Hermann Hauertmann. 'The signs are for a fall in the price.'

However, some industry analysts also believe that the price of cocoa beans and other commodities could rise later in the year as confidence in the global economic recovery takes hold.

Either way, Juergen Rausch from the German chocolatier Rausch Schokoladen GmbH, warned that without a rapid end to the high cocoa prices chocolate will inevitably become more expensive.

With the price of cocoa having soared by about 150 per cent during the last three years and the price of sugar having jumped 120 per cent, the cost of chocolate Easter eggs and rabbits in some countries has climbed by almost 20 per cent.

At the same time, European chocolatiers claim that manufacturers in some countries without tough food laws have begun to reduce the cocoa component of their products.

With poor crops and rapidly growing demand for chocolate in the fast-moving emerging economies such as India and China, speculators have been beating up the cocoa price, which last year hit its highest price in more than three decades.

This is despite evidence that worldwide demand for cocoa-based products has been on the decline. Production of chocolate in Germany alone fell by about 3 per cent last year.

But with Christmas, Valentine's Day and soon Easter behind it, the chocolate business is now looking to the World Cup football championships in the middle of the year to spur demand for chocolate- based snacks.

Economists are, however, only expecting the global economy to turn in moderate growth in the coming months, with rising unemployment in some parts of the world threatening to undercut consumer demand.

In addition to the muted recovery, fierce competition among retailers in Europe has so far made it difficult to pass on price rises to consumers.

Looking ahead, Lindt is hoping for organic growth this year of between 5 and 7 per cent after what it said was solid start to business this year.

The company is also looking to an expanding chocolate market in Asia, including China, to help drive sales.

In the meantime, some chocolate manufacturers have attempted to bypass the middle men involved in supplying cocoa by going directly to the producers, who are largely based in the Ivory Coast, Ghana, Indonesia, Cambodia and Brazil.

And chocolatiers have been calling on their national governments to take action to ensure greater control of speculators, including increased transparency of the market.