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Navigating the cocoa crisis: balancing profitability and sustainability

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The El Nino weather pattern could trigger more hardship ahead as dry conditions typically set in across West Africa and it’s expected to stay that way for several more years

By Zumi Njongwe, Business Executive Officer: Confectionery, Nestlé East & Southern Africa Region

In recent years, inflation has surged in many economies, impeding economic growth and impacting consumer choices. This inflationary trend significantly affects the food and consumer sector, leading to food insecurity locally and globally.

Meanwhile, the cocoa industry faces unprecedented challenges, particularly with soaring cocoa prices and supply shortages. These developments have profound implications not only for chocolate manufacturers but also for millions of cocoa-farming families worldwide, whose livelihoods depend on this commodity.

The situation is exacerbated in Ivory Coast and Ghana, the leading cocoa producers, where excessive rainfall has hampered output and delayed harvests. This shortfall has propelled wholesale cocoa prices in New York to their highest levels in 46 years. According to Maxar Technologies Inc., total precipitation in West Africa has exceeded the 30-year average, compounding the damage to cocoa yields.

Ghana anticipates its lowest output in 13 years, while Ivory Coast expects its smallest harvest in seven years. Together, these countries account for approximately 60% of the world's cocoa production.

The surge in cocoa prices has led to fluctuations in the shares of major chocolate companies like Nestlé and Mondeléz, impacting their earnings growth projections. Experts attribute this price surge to various factors, including adverse weather conditions affecting cocoa crops in West Africa, particularly strong Harmattan winds damaging cocoa trees.

These market dynamics are reflected in the futures market, where benchmark London cocoa futures have hit record highs, along with New York cocoa futures reaching all-time highs. Industry stakeholders, including exporters and pod counters in cocoa-producing regions like Ghana, are concerned about the significant drop in output for the current season compared to previous years.

However, addressing the cocoa crisis and ensuring a sustainable future for cocoa-farming communities requires more than just changing farming and production methods. It also involves reshaping consumer preferences towards more sustainable options. Studies indicate that around 65% of consumers are inclined towards making choices that contribute to a more sustainable lifestyle.

To meet this demand, food producers, suppliers, and retailers must make sustainable options easy, affordable, and attractive. This involves overcoming barriers such as price and availability and ensuring that sustainable options are as tasty and appealing as less sustainable alternatives. Innovation, reformulation, and the use of quality ingredients are essential in achieving this balance.

A recent Reuters cocoa poll forecasted a global deficit in the cocoa market for the 2023/24 season, indicating a third successive supply deficit. This deficit is expected to exacerbate the challenges faced by chocolate manufacturers and consumers alike, raising questions about the sustainability of cocoa production and the potential implications for future supply and prices.

In addition to cocoa, other soft commodities such as sugar and coffee have also experienced price fluctuations, reflecting broader trends in the agricultural commodities market. These developments underscore the interconnected nature of global commodity markets and the challenges faced by producers, traders, and consumers alike.

Despite these challenges, the Nestlé income accelerator programme represents a promising step towards addressing the underlying issues in cocoa farming and fostering sustainable practices. Aligned with the findings and recommendations of the recent World Economic Forum (WEF) report, this programme aims to improve sustainable cocoa production while further improving the lives of farmers and their families.

However, as the cocoa industry grapples with supply shortages and price volatility, broader collaboration and innovative solutions will be needed to ensure a stable and sustainable future for cocoa-farming communities worldwide, this collaboration will allow us to drive positive impact for consumers, cocoa farmers, communities and the planet.

The climate crisis is having a profound effect on the continent, with many communities facing significant challenges related to food security. Rising temperatures, changing rainfall patterns, and increased frequency of extreme weather events are all contributing to decreased crop yields and increased food prices.

Addressing these challenges requires a coordinated and sustained effort involving governments, non-governmental organisations, the private sector, and local communities. By investing in sustainable agriculture practices, modernizing agricultural infrastructure, and promoting public-private partnerships, we can ensure food security and sustainable growth in Sub-Saharan Africa and beyond.

The private sector also plays a critical role in addressing these challenges. Companies can support sustainable agriculture practices by investing in research and development, developing sustainable supply chains, and supporting local farmers. By leveraging the strengths of each sector and working together, we can build a more resilient and sustainable future for cocoa-farming communities and tackle the broader challenges posed by climate change in Africa and beyond.

Nestlé East and Southern African Region (ESAR) 
Mota Mota
Head: External Communications
Tel: +27 72 206 9015 
Email: [email protected]  

About Nestlé
Nestlé is the world’s largest food and beverage company. It is present in 187 countries around the world, and its 291,000 employees are committed to Nestlé’s purpose of unlocking the power of food to enhance quality for everyone, today and for generations to come. Nestlé offers a wide portfolio of products and services for people and their pets throughout their lives. Its more than 2,000 brands range from global icons like Nescafé or Nespresso to local favourites like Ricoffy. Company performance is driven by its Nutrition, Health, and Wellness strategy. Nestlé is based in the Swiss town of Vevey where it was founded more than 150 years ago.