Comprehensive Report: Chocolate Industry, Supply Chain, and Challenges

This report provides a comprehensive overview of the chocolate industry, examining its structure, supply chain, and key vulnerabilities. It begins with an introduction to the chocolate market, discussing its size, growth, and consumption patterns in different regions. The report then delves into the intricacies of the cocoa supply chain, from production to distribution, highlighting the roles of various stakeholders. A significant portion of the report focuses on the vulnerabilities within the chocolate industry, including challenges related to sustainable livelihoods for farmers, the impact of climate change and deforestation, the issue of child labor, and diseases affecting cocoa production. The report emphasizes the importance of sustainable practices, government interventions, and industry initiatives to address these challenges and ensure the long-term viability of the chocolate industry. The report uses figures and tables to illustrate key points, providing a detailed analysis of the chocolate industry and its complex challenges.

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Table of Contents
3. Chocolate Industry in Nutshell...............................................................................................3
3.1 Overview of Chocolate Industry......................................................................................3
3.1.1 Supply Chain of Cocoa Industry...............................................................................5
3.2 Supply Chain Vulnerability in Chocolate Industry..........................................................6
3.2.1 Sustainable Livelihoods for Farmers in Cocoa Industry...........................................6
3.2.2. Climate Change and Deforestation.....................................................................7
3.2.3. Child Labour in Chocolate Industry.....................................................................8
3.2.4. Swollen Shoot Virus Affecting Cocoa Industry...................................................9
3.3 Interim Summary...........................................................................................................11
References................................................................................................................................12
Table of Figures
Figure 1: Chocolate & Cocoa Market Size in North America (source: Statista, 2021).............4
Figure 2: Top Listed Cocoa Producing Countries (source: International Cocoa Organization,
2021)..........................................................................................................................................5
Figure 3: Logistics & Supply Chain of Chocolate Industry (source: World Cocoa Foundation,
2021)..........................................................................................................................................5
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3. Chocolate Industry in Nutshell
North American nations eat most of the world's chocolate, followed by European countries in
terms of consumption. The vast array of chocolate items on the market, from candy bars and
cakes to truffles and chocolate-covered everything, is truly mind-boggling. The quantity of
cocoa in a piece of chocolate can be used to categorise it. Most of the chocolate consumed in
the United States comes in milk chocolate with less than 10% cocoa. According to our
prediction, the worldwide cocoa and chocolate market will grow at a CAGR of 4.4% between
2019 and 2027, bringing the industry's total value to USD 61.34 billion (The Guardian,
2021). The worldwide chocolate confectionery industry's strong development trajectory has
fueled the market's rapid expansion. Entrepreneurs who want to get into the chocolate sector
have a wide range of options, as well as an industry that weathers economic downturns and
continues to thrive. People adore chocolate, which is a significant factor in the growth of the
confectionery industry. A recent survey in Great Britain found that 91 percent of women and
87 percent of men eat chocolate goods regularly (World Cocoa Foundation, 2021). China and
India, both of which have large populations and a rising middle class, are also discovering the
pleasures of chocolate. Changing consumer preferences and rising disposable incomes will
fuel industry expansion abroad, just as improved domestic economic conditions boost
domestic sales. There has been an increase in demand for chocolate in recent years.
3.1 Overview of Chocolate Industry
Milkshakes, candy bars, cookies, and breakfast cereals contain chocolate as a significant
ingredient. In North America and Europe, it's one of the most popular flavours. Many people
have never heard of this beloved dessert, despite its unusual origins. It takes a lot of time and
effort to make chocolate (Wessel and Quist-Wessel, 2015). Coca is harvested, refined into
cocoa beans, and shipped to the production facility, cleaned, coached, and ground. Exports or
imports of cocoa beans from these nations will produce various chocolate products in other
countries.
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Figure 1: Chocolate & Cocoa Market Size in North America (source: Statista, 2021)
People adore chocolate, which is a significant factor in the growth of the confectionery
industry. A recent survey in Great Britain found that 91% of women and 87% of men eat
chocolate goods regularly (World Cocoa Foundation, 2021). China and India, both of which
have large populations and a rising middle class, are also discovering the pleasures of
chocolate. Changing consumer preferences and rising disposable incomes will fuel industry
expansion abroad, just as improved domestic economic conditions boost domestic sales.
It is estimated that the chocolate market is worth around 33,000 tonnes. Many billions are
spent on the counter market, while the balance is spent on chocolate bars. A quarter of all
sweet-tooth items, including sugar-boiled sweets, mints, and chewing gums, are chocolates.
As expected, the highest market share belongs to sugar confections. Chocolate companies are
targeting adults to boost sales. The new target groups are being offered chocolates as a snack.
Introducing smaller editions was a different approach that was contemplated. Despite the
extensive promotional efforts of the players, penetration levels did not rise significantly
between 1999 and 2000. The stop was driven by a 5% to 15% surge in selling prices due to a
surge in cocoa prices, resulting in a grinding halt (World Cocoa Foundation, 2021).
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Figure 2: Top Listed Cocoa Producing Countries (source: International Cocoa Organization, 2021)
3.1.1 Supply Chain of Cocoa Industry
Logistics handles the transportation and delivery of finished items, supervising the
transportation and delivery process (Owusu-Sekyere, Cobbina and Wakatsuki, 2009). A
supply chain is a network of systems or relationships that work together to increase the value
of the final product before it reaches the hands of a specific buyer. You may design the entire
flexible chain cycle so that you can see the movement of raw materials to final goods from
the hands of input materials providers to manufacturers and then to the hands of buyers.
Supply chain and logistics are examined in this research. The link between each stage of the
process has been examined in detail. Supply chain mapping has been done for chocolate
industry analysis. The chocolate industry's supply chain is depicted in the diagram below.
Figure 3: Logistics & Supply Chain of Chocolate Industry (source: World Cocoa Foundation, 2021)
We may look at the different stages of a supply chain map for starters. Cocoa beans are the
primary raw material used in the manufacturing of chocolate. Ghana and other West African
nations are the primary producers of cocoa (Zhang, 2021). These cocoa beans are sourced
from tropical nations and transported into the United States. The beans are collected from the
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farmers and placed in a storage facility. They are carried to harbours when transported to
other continents or nations (International Cocoa Organization, 2021). The coca shipment is
received at the port of entry for the particular country. The cocoa beans are then delivered to
the preprocessing sites from harvesting. These facilities are responsible for separating cocoa
into cocoa butter and cocoa mass. Cocoa butter must be present in large quantities to succeed
in the chocolate production process. Afterwards, the butter mass is delivered to the chocolate
manufacturing facilities. The butter mass is combined with sugar, milk powder, and vanilla
extract to manufacture the chocolate.
Additionally, we should look into obtaining these raw ingredients, which are in addition to
cocoa. The ingredients milk powder and sugar are frequently accessible from local sources.
We can receive this from vendors willing to provide it to us to save shipping expenses.
Vanilla beans are not always accessible in local stores, and they may need to be imported,
just like cocoa beans. After completing the manufacturing process, they are packaged and
delivered to storage facilities. They are then sent to distribution hubs from where they
originate. They are transported from distribution hubs to supermarkets and retail outlets,
where they are eventually placed in the hands of consumers to complete the supply chain.
Logistics is the process of transporting completed goods to their final destinations. It is not a
simple undertaking.
3.2 Supply Chain Vulnerability in Chocolate Industry
Supply chain vulnerability refers to the potential for a disruption in the flow of raw materials
along the supply chain. It is common for the sector to be influenced by demand estimates,
market price movements, environmental concerns and cocoa bean legislation (Gurtu and
Johny, 2021). Costs of transactions and commercial interactions, as well as imbalances in
information between participants- leading to the bullwhip effect, all work against the
industry's best interests. According to a World Bank research (2012), cocoa supply chain risk
may be separated into three categories: production risk, commercial or market risk, and
environmental risk.
3.2.1 Sustainable Livelihoods for Farmers in Cocoa Industry
Market fluctuations are a common reaction to fluctuating supply and demand, but recent
developments in the cocoa industry have raised worries about the value chain's long-term
health. Due to the present economic climate, cocoa producers will have less money to spend
on food, health care, and education, which might increase poverty (Peprah, 2015). In cocoa-
growing areas, community assets like public water fountains and school management
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committees will be more challenging to support. Tax income reductions may be felt by
producing governments, which are critical for paying high-priority public expenditures like
rural infrastructure. Creating a competitive global cocoa market with solid incentives and
long-term livelihoods for cocoa farmers is a goal shared by the cocoa and chocolate
industries, governments of both the producer and consumer countries, and civil society
groups. The World Cocoa Foundation (2021) recommend several key initiatives to help
cocoa grow sustainably and profitably in the following years.
Cocoa-producing countries need to work together to ensure that long-term supply
management is in line with global demand estimates. It's also essential for cocoa stakeholders
to work together to ensure that long-term cocoa sustainability projects get more money.
Improved plant materials, sound farming, practises, financial inclusion, and changes to
agricultural and trade policies are needed to make farmers more profitable and productive in
good places for the environment (Peprah, 2021). Governments will need to ensure that
smaller cocoa farmers transitioning from marginal cocoa cultivation to other sustainable
industries have a robust safety net in place. At the same time, firms continue to invest in
developing professionalised and empowered cocoa farmers.
Agroforestry systems that integrate cocoa, fruit, and other tree plantings with agricultural
intercropping and other revenue-generating activities are essential to our members. In turn,
this minimises price and supply volatility—the fourth goal (Peprah, 2021). To boost the
profitability of chocolate-producing areas, the government should improve land use planning
and enforce environmental regulations. To avoid a recurrence of this vicious cycle, we must
lower the food price. The cocoa industry and governments created the Cocoa and Forests
Initiative aims to prevent smallholder cocoa-growing from invading protected areas and
encourage sustainable landscape management.
Finally, the World Cocoa Foundation works for more transparency and discussion about how
government-regulated cocoa prices and taxes are established in cocoa-producing countries
and how these public tax funds are utilised. WCF also plans to invest extensively in the
global growth of cocoa and chocolate markets and initiatives by origin countries to boost
cocoa consumption inside their borders. Many cocoa farmers are trying to stay afloat. All key
stakeholders, from industry to governments to civil society groups to development partners,
must find a solution if sustainable livelihoods are to have any chance of success. The business
community is eager to play its role.
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3.2.2. Climate Change and Deforestation
Cocoa beans are a highly sought-after consumer good in many countries worldwide. Cocoa
beans are utilised in various goods, including chocolate, candy bars and beverages (Fortune,
2021). Cocoa planting and the manufacture of cocoa beans, on the other hand, are
exceedingly delicate and time-consuming. Cacao trees are also known as cocoa plants. Where
and how cocoa is cultivated is at the heart of deforestation and chocolate manufacturing.
Cocoa plants grow at the equator, where the temperature is most consistent. According to the
World Cocoa Foundation, approximately two-thirds of the world's cocoa supply comes from
Côte d'Ivoire and Ghana, a non-profit organisation that campaigns for cocoa sustainability.
According to the World Cocoa Foundation, Côte d'Ivoire has lost around 25 percent of its
primary forest since 2002. The organisation believes that 8 per cent of Ghana's primary forest
was destroyed during this period.
The production of cocoa has exacerbated deforestation in the area. This is since growers
typically cut down all other sorts of trees to keep up with demand and develop cocoa
harvests. Growing cocoa production has increased forest destruction, primarily because of
increased consumer demand, declining production capacity due to old trees, poor farming
techniques, and smaller usable acreage due to global warming (Resource Trade, 2021).
Deforestation and cocoa production have long been linked. To encourage farmers to do less
harm to forests, environmentalists have long urged chocolate manufacturers to get their cocoa
from sustainable sources and pay them more.
Due to their role in regulating global and regional climates, forest loss is particularly
problematic. As a result of deforestation, climate change is exacerbated locally and globally.
While cocoa production contributes to climate change, climate change also affects the land
suitable for cocoa cultivation in the opposite direction. Due to climate change, the cocoa
output is expected to decline dramatically in Nigeria, Togo, and Cote d'Ivoire and Ghana
sections. In contrast, it is expected to rise significantly in Cameroon and Liberia.
3.2.3. Child Labour in Chocolate Industry
The cocoa bean is grown in tropical areas in Western Africa, Asia, and Latin America. [1]
This article will refer to the cacao bean as cocoa. Ghana and the Ivory Coast contribute
around 70% of the world's cocoa (McKenzie and Swails, 2021). Their cocoa is sold to most
chocolate manufacturers, including the world's largest. Slavery and child labour have recently
been discovered in Brazilian cocoa fields.
Cocoa workers there experience many of the same abuses as in West Africa. Aside from
Western Africa and Brazil, no other cocoa plantations have been reported to use child labour
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or slavery. The chocolate business has grown increasingly secretive, making it harder for
reporters to reach farms where human rights abuses still occur and then alert the public. The
assassination of a journalist reporting on government corruption in the lucrative cocoa sector
by the Ivorian First Lady's entourage In 2010, the Ivorian government jailed three newspaper
journalists for publishing an exposé on cocoa sector wrongdoing. In addition to Hershey's,
Mars, and Nestlé, many small chocolate makers rely on cocoa grown in Western Africa and
Brazil, showing the industry's apparent links to child labour, human trafficking, and slavery.
Most cocoa producers make less than $1 per day in severe poverty. As a result, they
frequently exploit child labour to keep their pricing low. This includes what the International
Labour Organisation deems "the worst types of child labour." These are actions "likely to
endanger children's health, safety, or morals." Around 2.1 million youngsters in Ivory Coast
and Ghana work on cocoa fields, most likely in the poorest conditions. Child labourers on
cocoa fields work long hours, some as long as 14 hours each day. Some of the kids cut down
trees using chainsaws. Others climb cocoa trees to harvest bean pods with a machete.
Children on cocoa fields use these enormous, heavy, hazardous knives in violation of
international labour regulations and a UN agreement on eradicating the worst kinds of child
labour.
3.2.4. Swollen Shoot Virus Affecting Cocoa Industry
In the 1940s, the illness was one of the most severe threats to the cocoa business in what is
now Ghana. It is estimated that CSSVD, one of the most economically significant cocoa viral
diseases, can cause yield losses of 15–50% if the severe strains are infected (Andres et al.,
2017). Since the disease was discovered, cutting and replanting systems have been used in
Ghana to remove the inoculum from damaged cocoa farms and replace resistant cocoa
hybrids. Despite this, several reassessments and illness surveys show that the disease is still
widespread, with various severity in different cacao areas. This has been partly blamed on the
inadequate execution of the cutting out programme for disease management.
A plant disease of the Caulimoviridae family, Cocoa swollen shoot virus (CSSV), attacks
cacao plants. It reduces cocoa yields in the first year and destroys trees within a few years.
Rare in West Africa. Mealybugs spread Togo, Ghana, Cote d'Ivoire, and Nigeria. The
Swollen Shoot Virus entered cocoa from plants in West African rain forests. Between 2006
and 2010, nearly 28 million trees were felled in Ghana due to visible infection or interaction
with diseased trees.
The most extensively utilised control method is removing diseased trees. This strategy
removes the source of inoculum to reduce viral propagation. However, it hasn't significantly
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controlled the illness. Alternative host species that may act as inoculum should also be
removed. Before starting a new plantation, remove all sick trees from the adjacent
plantations. Also, leave a 10-metre distance between the new plants and any existing
plantations, including diseased trees. The cordon should also be planted with a CSSV-
resistant crop to deter mealybug vectors. However, farmers in Ghana who are determined to
produce just the prized cocoa plant are opposed to the concept. Alternative cash crops like
citrus and oil palm are being suggested as CSSV barriers. Farmers are sometimes reluctant to
destroy sick plants if they can still harvest them. In both situations, more strict enforcement
of these principles and education through extension methods have been proposed to convince
farmers to participate.
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3.3 Interim Summary
Chocolate is present in milkshakes, candy bars, pastries, and morning cereals. It's a popular
flavour in North America and Europe. Despite its unique beginnings, this delicious dish is
unknown to many. Making chocolate requires a lot of work. Finished cocoa beans are
cleaned, coached, and processed in a manufacturing plant. Cocoa beans from these countries
are exported or imported to other countries to make chocolate. Chocolate is an unsustainable
food. Cocoa is a critical element in the process. It comes from the seeds of cocoa fruits
(cocoa pods) on cocoa plants. Cocoa production begins in the hot and humid tropical regions
surrounding the equator, where cocoa trees thrive. Integrating and managing critical business
operations along the supply chain may help a company's competitiveness and customer
service. Many firms utilise Supply Chain Management (SCM) to plan, develop, and govern
their business networks. The fundamental ingredient in chocolate is cocoa. Cocoa is primarily
farmed in West Africa. These cocoa beans come from the tropics. The farmers' beans are
kept. They are shipped to harbours and then to other continents or nations. The coca shipment
arrives at the country's port. The beans are then transferred to preparation centres. These
centres split cocoa into cocoa butter and cocoa mass. The butter mass is sent to the chocolate
factories. Chocolate is made from butter mass, sugar, milk powder, and vanilla. Cocoa supply
chain risk may be divided into production, commercial, market, and environmental risks.
Cocoa cultivation has increased deforestation in the area. Because farmers often clear all
other trees to meet demand and develop cocoa harvests, this is the case. Increased consumer
demand, decreased production capacity due to ageing trees, inefficient agricultural practices,
and shrinking useable land due to global warming have contributed to increased forest
degradation. The two have long been related. Forest loss is problematic because forests
regulate global and regional temperatures.
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References
Andres, C., Gattinger, A., Dzahini-Obiatey, H., Blaser, W., Offei, S. and Six, J., 2017.
Combatting Cocoa Swollen Shoot Virus Disease: What do we know?. Crop Protection, 98,
pp.76-84.
Fortune, 2021. Commentary: If we want to keep eating chocolate, we have to end
deforestation. [online] Fortune. Available at: <https://fortune.com/2020/02/16/cocoa-
chocolate-production-deforestation-mondelez/> [Accessed 14 December 2021].
Gurtu, A. and Johny, J., 2021. Supply Chain Risk Management: Literature Review. Risks,
9(1), p.16.
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Organization. [online] International Cocoa Organization. Available at:
<https://www.icco.org/chocolate-industry/> [Accessed 18 December 2021].
McKenzie, D. and Swails, B., 2021. Child slavery and chocolate: All too easy to find.
[online] Thecnnfreedomproject.blogs.cnn.com. Available at:
<https://thecnnfreedomproject.blogs.cnn.com/2012/01/19/child-slavery-and-chocolate-all-
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Peprah, K., 2021. Sustainability of cocoa farmers' livelihoods: A case study of Asunafo
District, Ghana.
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<https://www.statista.com/topics/1638/chocolate-industry/#dossierKeyfigures> [Accessed 18
December 2021].
The Guardian, 2021. Chocolate industry slammed for failure to crack down on child labour.
[online] the Guardian. Available at:
<https://www.theguardian.com/global-development/2020/oct/20/chocolate-industry-
slammed-for-failure-to-crack-down-on-child-labour> [Accessed 5 December 2021].
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