Economic Analysis Describe Illustrate International Cocoa/Chocolate Market Essay
- Length: 6 pages
- Sources: 2
- Subject: Agriculture
- Type: Essay
- Paper: #55187703
Excerpt from Essay :
economic analysis describe illustrate international cocoa/chocolate market 20 years. Within essay refer: forces directed change cocoa/chocolate market; form/s market structure evident industry; strategies companies market strategies; macroeconomic implications industry.
The international cocoa / chocolate industry of the past two decades
Chocolate is the best preferred treat across the entire globe, for all categories of the population, from the most economically endowed ones, to the most economically challenged ones; from the younger members of the population, to the oldest members of the population. In the setting of the immense popularity of cocoa and chocolate, the industry supporting these products is also impressive, with numerous players, cutthroat competition and numerous forces which generate change.
Throughout this project then, the emphasis is that of conducting an analysis of the cocoa and chocolate industry in order to identify the changes which have been occurring throughout the past two decades. In this approach, emphasis would be placed on the forces generating change, the market structures, the strategies of the industry and the macroeconomic implications within the industry.
2. The cocoa / chocolate industry
Throughout the past two decades, the cocoa and chocolate industry has been registering notable fluctuations, which a general trend being however difficult to establish. Between 2000 and 2009 for instance, the fluctuations in the production of cocoa and chocolate products have ranged from -- 10 per cent to 13 per cent; the demand for the items has also been fluctuating.
Before the 2000s, the cocoa industry had also been fluctuating as a result of numerous macroeconomic factors, such as production forces or political measures. During most of the 20th century, the production of cocoa followed a generally decreased trend, due to often mismanagement in the industry. Still, starting with late 1980s however, the industry began to revive and register growth due to internationally supported liberalization of the cocoa industry.
"However, from the late 1980s, cocoa production increased substantially. This was due to the implementation of from 1983 of a World Bank structural adjustment programme, notably encompassing devaluation, increased marketing competition and a decline in taxes, as well as the anti-export bias of trade policy" (Campbell, 2003).
As the market was liberalized, the prices of the past two decades came to be established within the global market place, with the principles of demand and offer. In other words, the dominance of the cocoa producing countries was challenged by economic principles which forced the price to no longer be imposed, but freely established within the international market place.
In other words, the most important outcome of industry liberalization was represented by the changes in the prices of cocoa and chocolate. These features in turn generated subsequent changes.
"Following liberalization of the cocoa marketing systems in the 1990s, farm gate prices in most cocoa producing countries have been largely determined by international prices. As a result, farm gate prices during the period under review have shown greater fluctuation in most cocoa producing countries, reflecting, inter alia, changes in international cocoa prices, variations in the international value of the domestic currency, and specific local market structures and conditions, including taxation, competition, distance from port and quality" (International Cocoa Organization, 2010).
In terms of consumption, this has gradually increased throughout the past recent years, and the tastes of consumers have also evolved. As the countries across the globe have become more able to purchase cocoa beans, they have come to process them in a wide array of forms, developing country specific cocoa-based products, such the Swiss cocoa beverages or the French truffles.
Overall, the past two recent decades in the history of the cocoa and chocolate industry have revealed an increased demand for products, in the fields of both luxury items, as well as poorer quality cocoa products. In such a setting, the demand for the cocoa and chocolate-based products is expected to be maintained in the future as well, with the overall evolution of the industry being influenced by the supply of cocoa beans. And on the side of cocoa supply, this evolution would be directly linked to three specific factors: the state of the tropical forests where cocoa beans grown, the labor force and the governmental policies (Campbell, 2003).
3. Forces of change in the cocoa/chocolate industry
Change in the cocoa and chocolate industry is pegged to a wide array of forces and Gwyn Campbell has argued that the three most important forces to generate change within the industry are represented by the state of the tropical forests, the labor force and the governmental policies. A decaying state of the tropical forests for instance could easily and immediately lead to an increasing cost of cocoa and chocolate products. Then, at the level of the labor force, a decrease in the labor force or the need to better train the labor force could also lead to an increase in the costs of production for the cocoa and chocolate products. Finally, the governmental policies could influence the industry in any direction, such as stimulation of the demand or a restriction of the supply, as well as other changes.
Aside from these three forces however, there are also several other dimensions which generate change within the cocoa and chocolate industry. Amongst others, these include:
Local features in the production and consumption of cocoa and chocolate-based products
Social and cultural traits linked to the consumption of chocolate; modern day nutritionists for instance recommend the consumption of black chocolate, rather than others types of processed cocoa. Another socio-cultural trait is represented by the increasing responsibilization of the consumers, who seek products that are healthier for them and the environment. In such a setting, the field of organic cocoa beans is increasing at a rapid pace (International Cocoa Organization, 2012)
International economic forces, such as interest rates, exchange rates policies and so on The evolution of technology impacting the industry and the level of research conducted within the industry
The import and export practices and policies, which can both stimulate as well as reduce the growth of the industry
Business factors within the industry, such as the operational efficiency, the existence of economies of scale and their adjacent advantages, the level of labor force skill, the quality of supply chain management, the marketing campaigns and so on.
4. Market structures in the industry
The market structure is generically divided into two sections. On the one hand, there are the countries of origin for the cocoa beans, most of which are African countries. On the other hand, there are the companies which process the cocoa beans and transform them into finite products that reach the end consumer.
At the level of the countries of origin for the cocoa beans, these are mostly African countries, with Cote d'Ivoire being the largest producer and exporter of cocoa beans, with an estimated 1.4 million tons of cocoa beans per year. The second largest producer of cocoa beans is Ghana, with an estimated production of 600,000 tons. Other important cocoa beans producers include Indonesia, Ecuador, Brazil, Togo, Mexico or Papua New Guinea. Aside from these, several countries in Latin America also produce cocoa beans, yet their market share in the total global production is decreased (All Chocolate).
In terms of the industry processing the cocoa beans and transforming them into finite products, these are listed in the table below, in order of the size given by their net sales in 2011.
Kraft Foods Inc.
Hershey Foods Corp
Chocoladefabriken Lindt & Sprungli AG
August Stork KG
Source: International Cocoa Organization
5. Strategic actions in the industry
The cocoa and chocolate industry is highly competitive and the players engaged in it develop and implement a wide array of strategic efforts in order to improve their competitive positions. Some examples in this sense include the following:
The creation of scale economies to generate cost efficiencies
The development of favorable contracts with various purveyors from reputable cocoa origin countries
The continuous development and enlargement of the product line of cocoa and chocolate-based products
The development and implementation of powerful marketing programs
The research of the market and the customization of the product offer to the new demands identified within the market place, such as the increasing demand for organic cocoa beans.
6. Macroeconomic implications within the industry
The cocoa and chocolate industry is extremely complex and its internal implications are not only a result of industry specific forces, but they are also generated by the macroeconomy. The most relevant evidence in this sense is represented by the modern day economic crisis, which is a macroeconomic force that has generated numerous implications for the cocoa and chocolate industry.
One important stance is represented by the restriction of the funds, as a result of the contraction of the…