Chocolate's Sweet Deals

In addition to giving boxes of chocolates as gifts this holiday season, consider giving stocks in cocoa processing plants. But keep an eye on the competition, since the growing demand for chocolate among billions of people in emerging markets, which is expected to increase cocoa processing by 15% in the next ten years, can raise prices on the supply of cocoa beans which has suffered from drought conditions, and it will put a squeeze on profits.

     As an example of increased competition, check out how Olam International, headquartered in Singapore, has just become a major competitor with Barry Callebaut AG and Cargill Inc. In addition to shelling out $176 million to a U.S. peanut processor, Olam, which recently purchased the cocoa unit of Archer-Daniels-Midland for $1.3 billion, now has eight cocoa processing plants, including one in the Ivory Coast. The U.S. recently acted to block imports of the UK's Cadbury chocolate which has a higher fat content and creamier taste than Hershey's chocolate. Hershey claimed Cadbury's product names and packaging infringed on their trademark rights and licensing agreements.

     Based on projections of a growing demand for chocolate in emerging markets, there is an opportunity for cocoa bean growers in developing countries, by themselves or in conjunction with major processors, to set up their own plants to satisfy local demand. Further, since chocolate can melt when transported in warm weather, local producers have a major incentive to supply emerging markets with locally-produced chocolate products.

     The Kuapa Kokoo Cocoa Cooperative in Ghana, Africa, is already a working model of how cocoa growers can benefit by developing a relationship with processors and distributors. Before selling to the cooperative, growers were at the mercy of a state cocoa buying company that did not always pay on time and sometimes cheated when weighing their cocoa beans. Now, the cooperative, working with Divine Chocolate and the fair trade company, SERRV, (serrv.org/divine), participates in the profits generated from the production and marketing of a wide variety of gourmet chocolate bars, chocolate mint thins, Kosher certified milk and dark chocolate coins, and a day-by-day, chocolate heart-filled Advent calendar.

     For other ideas of how to make a profit in Africa, see the earlier blog posts, "Never Too Young to Invest in the Future" and "Discover Africa."