Who Wants Chocolate?

Who Wants Chocolate?

Author: Marisa Mudge 2015

 The global chocolate industry is an $82 billion dollar business.  It is expected to have 2% annual growth per year now until 2030.  A chocolate bar is often considered an “affordable luxury.” (Marcia Mogelonsky, Global Food Analyst at researcher Mintel. Chocolate) Even during difficult economic times when consumers spend less on big ticket items, sales continue to strengthen in the chocolate industry.

 A KPMG industry report segments chocolate consumers into 3 types of buyers.  These segments are: the convenience buyer, the value buyer and the luxury buyer.  Each of these markets have unique demands. (KPMG, 2012)

 First, is the convenience buyer looking to “grab and go.”  This buyer is time deficient and requires accessibility that is in alignment with their lifestyle.  The need for convenience will give rise to new sales channels for chocolate.  The convenience buyer will also want to consume part of their bar and save the rest for later.  Mars has developed the “memory wrapper” it is reusable chocolate bar wrapper, allowing the consumer to keep the uneaten potion of the bar fresh for later consumption.

Second, is the value buyer, this buyer is looking for a premium product at a medium to low price point.  The value buyer is becoming a significant segment in the emerging market economies. The emerging markets are BRIC (Brazil, Russia, India, China) and MINT (Mexico, Indonesia, Nigeria, Turkey) countries.  Research from financial services provider Rabobank, a 45g chocolate bar accounted for less than 1% of the weekly shopping budget in the US and UK in 2010, but in India the same bar made up 18% of the weekly food allowance. (Bhosale, 2014) Three of the major players in the chocolate world Mars, Nestle and Hershey are already set to launch lower priced bars into these EME (emerging market economies).  These companies will lower the cost of the bars by producing a smaller size bar, with lower quality ingredients and less cocoa. However, it is also expected that the growing middle class with disposable income will develop a taste for fine premium chocolate.

            Third, is the luxury buyer, this consumer is the connoisseur.  They possess knowledge about the art and craft of chocolate. Price is a secondary consideration after quality. This buyer seeks extended flavor offerings as well as exclusive chocolates with limited production.  The luxury consumer will go to great lengths to procure the highest quality product.

 

How is chocolate made?

How is chocolate made?

Roasting- the cacao beans are roasted in large, rotating ovens, at temperatures of about 210-290F. Roasting lasts from half an hour up to two hours. The heat brings out more flavor and aroma, and it dries and darkens the beans

Cracking-The husk must be removed from the shell, roasting will make the husk loose. When the husk is cracked the process of removing the husk from the nibs (winnow) can begin.

Winnowing (discarding the shells) - The beans are transferred to a “winnower” that removes the shells of the beans and leaves the “nibs”—the essence of the cocoa bean that’s full of cocoa solids and cocoa butter.

Milling (grinding)-The nibs are then transferred to a mill where they are ground to a liquid. The liquefied beans are called chocolate liquor, but no alcohol is involved. The term means "liquid." The liquor is poured into molds and, when it hardens, is plain unsweetened chocolate.

Pressing- To produce cocoa powder and cocoa butter, the unsweetened chocolate is pumped into giant hydraulic presses that weigh up to 25 tons. Under pressure—up to 6,000 pounds per square inch—the cocoa butter becomes a yellow liquid that drains away through metallic screens and is collected for later use. What remains is a dry, pressed brown cake that is cooled, pulverized, sifted and sold as cocoa powder.

Big Chocolate versus Small Batch

Big Chocolate versus Small Batch

Author: Marisa Mudge May 2015

Figure 2 (Bean, nd)

 “Big Chocolate” is used to describe multi-national food producers. Cargill, Barry Callebaut and ADM. Together they control 40% of global cocoa processing and supply chocolate to industrial food companies that use chocolate in their products. Mars Incorporated, Nestlé, Hershey, Mondelez International, and Ferrero together control 57.4% of the chocolate market.

Top 10 “Big Chocolate” Companies

Mars, Inc: Brands- Snickers, Mars Bar, Milky Way, M&Ms, and Twix

Nestl USA: Brands- Baby Ruth, Butterfinger, Kit Kat, Milky Bar, Matchmakers, Nestl Crunch, Oh Henry, and the Wonka Bars

Ferrero SpA: Brands- Nutella, Ferrero Rocher, Mon Cheri, and Giotto

Cadbury (Kraft): Brands- Cadbury, Fry's and Green & Black's

The Hershey Company: Brands- Hershey's Milk Chocolate, Hershey's Special Dark and Hershey's Cookies & Cream

Barry Callebaut AG: Brands- Sarotti in Germany, Jacques in Belgium and Alprose in Switzerland

Kraft Foods, Inc: Brands- Toblerone and Oreo

Chocoladefabriken Lindt & Sprngli AG: Brands –Lindor

Meiji Seika Kaisha, Ltd: Brands - Hello Panda and Yan Yan

 Russell Stover Candies Inc: Brands – Russell Stover

(O'Coughlin, 2009)

The “Big” mass market chocolate companies must compete on a global scale and typically at competitive price points.  Big chocolate can offer lower priced chocolate and maintain profitability because they lower the cost and quality of the inputs. Mass produced chocolates may contain more than the basic ingredients in an attempt to lower cost.  Production costs can be decreased by reducing cocoa solids content or by substituting cocoa butter with another fat.  Wax may be used to achieve a high gloss instead of the more costly tempering technique. “Big Chocolate” will abandon quality and technique in exchange for lower costs and higher margins.

Small-batch producers are interested in producing a high quality premium chocolate. Craft Chocolate contains a simple list of ingredients: pure cacao, butter, cacao powder and a sweetener. This craft makers produce in small batches and often from beans they have personally sourced. A small batch producer will use between 2 and 200 MT of cocoa beans per year. They will make bean-to-bar chocolate in one facility using traditional techniques

Small batch chocolate and Big chocolate have different goals. Big chocolate targets the mass market with a medium to low price point. Craft chocolate targets the connoisseur at the premium price point. (Green, 2014)

The Micro-Chocolate Industry: Small Batch Chocolate

The Micro-Chocolate Industry: Small Batch Chocolate

Author : Marisa Mudge – May 2015

According to an article “The emerging world of small batch chocolates”, author Sara Green points to 2006 as the defining year for the acceleration of the Craft Chocolate Movement.  (Green, 2014) Starchef.com published an article on November 2013 “The New American Chocolate Movement”.  The authors interviewed multiple chocolatiers participating in what some have named a renaissance for the chocolate industry. (Sean Kenniff, 20132) “Just as with beer, cheese, and coffee before it, chocolate is being reconsidered by artisan producers and by consumers with high standards. Makers are taking a thoughtful approach to sourcing, origin, sustainability, and traditional manufacturing methods, in order to take chocolate to a new level of quality and craftsmanship,” says Jael Rattigan of French Broad Chocolates, who set up shop in 2006 with husband Dan Rattigan in Asheville, North Carolina.

The bean-to-bar producer takes the cocoa beans direct from the people who grew them and produces a bar containing one kind of bean alone. Similar to the “farm-to-table” movement, “bean-to bar” craft chocolatiers are touching each point in the supply chain. The result is high visibility and traceability of the sourced ingredients. (Culliney, 2012)

Sustainability is typically important to the craft chocolatier. Many of the entrepreneurs invest in the communities from which they source their beans as well as their home community where chocolates are manufactured.  Bean-to-bar manufactures are engaging in direct trade versus fair trade.  Fair trade gained popularity in the coffee industry but the certification is expensive and typically only held by the industry Goliaths. Direct trade allows the micro-chocolate manufacture to interact with the farmer to insure the quality of the product and fair treatment without an expensive certification. (Ness, 2006)

The small batch micro-chocolate industry can be sub-divided into a few product categories. Bean-to-Bar; this manufacture is involved in the complete supply chain. (Shute, 2013) Molded Artisanal Chocolates (MAC); this producer does not have relationships at the source of the supply chain. But this producer carefully selects their chocolate supplies, maintains craft quality chocolate standards and unique product offerings.  Premium chocolate producers may be a small batch company owned in part or entirely by “Big Chocolate”.  A premium company operates from corporate visions as opposed to the artistic vision that drives bean-to-bar (craft) and MAC chocolates.  All the manufacturing types are motived by some or all of the 10 drivers of the artisanal movement. (arsal810, 2011)

The fledgling Micro- Chocolate industry is taking steps to preserve its integrity.  A couple groups have formed Craft Chocolate Makers of America and Cacao Direct.   Both groups have outlined guidelines for membership based annual usage of cacao, technique and ownership stake. (Bruno, 2013)