Business and Strategic Management: Cocoa Industry PESTEL Analysis

This case study provides a strategic analysis of the global cocoa industry, focusing on the cocoa production situations in Ghana and Nigeria. It employs PESTEL analysis to examine the political, economic, social, technological, environmental, and legal factors influencing cocoa production in both countries. The analysis highlights the importance of cocoa as a major cash crop and its impact on the economies of Ghana and Nigeria, along with the challenges they face, such as weather conditions, crop diseases, and inconsistent production patterns. The case study also discusses Barry Callebaut, a leading chocolate manufacturer, its market position, and the industry's competitive landscape using Porter's Five Forces. It concludes by providing strategic insights relevant to the cocoa industry and its key players. This document is available on Desklib, a platform offering a wide array of study resources, including past papers and solved assignments.

Running head: BUSINESS AND STRATEGIC MANAGEMENT
Business Management and Strategic Management
Name of the Student
Name of the University
Author’s note

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PART 1
About the industry
Chocolate is a multi-billion dollar industry, it is one of the largest selling sweet
treats in the world. From 6-60 almost everyone seems to enjoy chocolate. Coco beans are
processed and used to make chocolate, the demand for the product never seems to drop but the
issue that has been surfaced is the supply of the cocoa beans. Due to several reasons like natural
calamities, crop diseases etc this shortage in supply has manifested. Ivory Coast is the biggest
supplier of cocoa beans in the world. Companies like Nestle or Cadbury gather their supply
from Ivory Coast. But it has been issued in a report that there will be significant global shortage
of cocoa beans supply by 2020. Anthony Ward also known as “chocofinger” in the industry is
the founder of Armajaro Asset Management. The company is known to be one of the market
leaders in the cocoa market. In 2010, Ward cornered a considerable amount of the world’s cocoa
supply. The holding is so enormous that it had threatened leading manufacturers of chocolate to
increase the price of some of their most popular items. Since then, there have been several
speculations regarding the supply of cocoa in the market (Leake and Cooper 2010).
With the help of PESTEL analysis of Ghana and Nigeria cocoa production situations the
cocoa market can be determined. Both Ghana and Nigeria has been significant contributor of
cocoa in the world, Ghana being the second largest and Nigeria being the fourth (Goldberg
2015).
Ghana: Generations of people has been involved in the production of the cocoa beans in this
country. The Dutch missionaries at the beginning of the 19thcentury introduced the Cocoa beans
to Ghana by. In the 19th century Ghana was regarded as the largest producer supplying up to 30-

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40 percent of the world’s cocoa. Coco beans have a significant role in the livelihood of the
people as well as have a major impact on the economy of the country (Cocobod.gh 2018). The
crop is known as the “King” and the image of the crop is on the currency as well (refer to the
appendix). Cocoa is the major cash crop in the country but the production process have seen
major setbacks due to the several reasons such as weather conditions, declining area of
cultivation, low yields per hectare, there has been several diseases that has been reported in the
past decade. There is another issue with the process where recommendations from researchers
have not been implemented (Goldberg 2015). On the other hand it is argued that this shortage is
not only due to the above stated factors but also due to lack of management and proper planning
(Goldberg 2015).
PESTEL
Ghana
Political The government of the country has been sporting the farmers as this is the major
cash crop in the country. In 1947, the government realized the potential of the crop
and established the CMB (Cocoa Marketing Board). This institution is the main
author for looking after the cocoa industry. There is a Ghana Cocoa Board that
looks after the quality of the production. Research and development investment is
also looked after by the government (Goldberg 2015).
Economy Aforementioned cocoa beans are the major cash crop and thus it has impacted the
economy of the country significantly. Approximately 800,000 farm families who
are spread over six out of the ten regions of Ghana have been employed in this
industry. This industry has contributed $2 billion in foreign exchange annually and
is a major contributor to Government Revenue and GDP (1).
Social There are generations of people who have been involved in this business, most

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farmers own their land. Chocolate is not only a part of the economy but is also a
major part of the culture in Ghana. Western, Central, Brong Ahafo, Eastern, Ashanti
and the Volta regions are the major regions where cocoa is cultivated (Läderach et
al. 2013).
Technological The Ghana Cocoa board is responsible for any development of the industry. Cocoa
Research Institute of Ghana (CRIG), the Seed Production Unit (SPU) and the
Cocoa Swollen Shoot Virus Disease Control Unit (CSSVDCU) are the pre-harvest
institutions which deal with the challenges faced by the farmers during faring
process. Quality Control Division (QCD) and the Cocoa Marketing Company
(CMC) is the authorities that deal with post harvest matters. Digital Green is a
program by the World cocoa foundation it involves in helping and supporting the
farmers growing cocoa beans.
Environmental Many farmers in the country has adapted sustainable means of production, the
government also has taken several sustainable actions with the help of the cocoa
board.
Legal . The government has mandated the sale of cocoa through government bodies thus
this has helped in fixing a price for the farmers who grow the crop. The rules and
regulations favor the industry in Ghana supporting the farmers (Goldberg 2015).
Nigeria: Stands fourth in the production list however, Cocoa beans production has been on a
major decline in the country (Agronewsng.com 2018). This decline is because of inconsistent
production patterns, disease and pest infections in the crops, furthermore low levels of
automation with dependence on cutlass and hoe agriculture and declining quality of cocoa fields
are some of the factors responsible for the decline (Worldatlas.com 2018).

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PESTEL
Nigeria
Political The Ministry of Agriculture and Rural Development have invested in The Cocoa
Transformation Plan in order to combat the decline.
Economy The crop plays an important role in the export income of the economy
Social A significant gender biased issue regarding remuneration of the people working in
cocoa industry has been reported.
Technological In order to keep up with the quality of the production there has been incorporation
of several technology in the past decade
Environmental The government is investing in research and development in adapting sustainable
production techniques in the country.
Legal There are no strict legal barriers in the industry though the government is
incorporating rules so that the farmers and the people involved in this industry are
motivated (Agronewsng.com 2018).

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Part 2
About the company
Barry Callebaut is a leading organisation that manufactures high-quality chocolate and
cocoa products. The organisation was set up in 1996 as a result of a merger between the French
company Cacao Barry and the Belgian chocolate producer Callebaut, thus the name of the
company is also explained. Headquartered in Switzerland, the organisation has been divided in
four regions for operation EMEA (Europe, Middle East, Africa), Region Americas and Region
Asia Pacific as well as Global Cocoa business which is regarded as a separate segment as well
(refer the appendix). The organisation is known for being innovative and supporting
development in the process. The revenue of the company is approximately reported to be 6,676.8
million in 2016. The company mainly operates in the B2B sector. The company severs a clientel
of some of the renowned organisations in the industry like Mondelez, Hershey, Unilever and
several other firms in the industry (Barry-callebaut.com 2018).
Present market position and industry analysis
The company holds a position among the top manufactures of chocolate products in the
world. As the organisation serves the B2B sector, the chocolate that is supplied by the company
is like an ingredient to the consumer (Han 2016). The figures that are supplied in Appendix 4
shows a rise in the sales and revenue of the company. The organization has gone on record to
inform the industry regarding the shortage of cocoa supply (Ford et al. 2014).
With the help of Porter’s Five Force analysis an industry overview of the cocoa
production can be determined.

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Threats of New Entrants Chocolate industry is lucrative and is also been
profitable for investment by many organisations
which make it even more attractive. One of the
major challenges that an organisation aiming to
enter the market will face is the bulk of capital that
is required to compete with the existing cooperates.
Another aspect that a new company should
consider is that there are records of warning
regarding a major shortage in the production of
cocoa beans by 2020 (Ford et al. 2014). A new
organisation requires time to stabilize and hence
this shortage will negatively impact the company.
Bargaining Power of Suppliers
There is a number of suppliers of Cocoa beans in
the industry, the bargaining power of the suppliers
are low in this case, the organisations have
contracts with the suppliers. But with the shortage
in supply the power of the suppliers have increased
significantly (Barry-callebaut.com 2018).
Bargaining Power of Buyers The buyers in this industry do not have a
significant switching cost as there are no direct
substitutes of the product. There are a number of
companies operating in the industry but if there is a
shortage in supply all the organisations will be

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forced to spike up the prices of the products. In that
case the bargaining power of the buyers will
decrease.
Threats of Substitute Products or Services Other dessert items are considered as the substitute,
white chocolate, fruit pulp, toffees or other
confectionery items which are not made of
chocolate are the substitute. Sugar is the major
substitute (Barry-callebaut.com 2018).
Rivals or competition in the market There is intense competition in the market Cargill,
Mondelez International, Hershey Foods Corp,
Ferrero Group etc.

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Reference list:
Agronewsng.com 2018. COCOA PRODUCTION IN NIGERIA; FIGURES. [online]
agronewsng.com. Available at: http://agronewsng.com/cocoa-production-nigeria-investment-
data-statistics/ [Accessed 28 Mar. 2018].
Barry-callebaut.com 2018. About Us. [online] barry-callebaut.com. Available at:
https://www.barry-callebaut.com/about-us [Accessed 28 Mar. 2018].
Cocobod.gh 2018. Cocoa. [online] cocobod.gh. Available at:
https://www.cocobod.gh/home_section.php?sec=1 [Accessed 28 Mar. 2018].
Ford,, T., Vit,, J., Neate,, R., Branigan and, T. and Saner, E., 2014. The cocoa crisis: why the
world’s stash of chocolate is melting away. [online] Theguardian.com. Available at:
https://www.theguardian.com/lifeandstyle/2014/nov/21/cocoa-crisis-world-chocolate-stash-
melting-away [Accessed 28 Mar. 2018].
Goldberg, S., 2015. Ghana’s Inept Policies Driving Cocoa Shortage. [online]
Wallstreetdaily.com. Available at: https://www.wallstreetdaily.com/2015/06/29/ghana-cocoa-
shortage/ [Accessed 28 Mar. 2018].
Han, E., 2016. Bitter battle: chocolate makers fighting to save the world's cocoa supply. [online]
Smh.com.au. Available at: https://www.smh.com.au/business/companies/bitter-battle-chocolate-
makers-fighting-to-save-the-worlds-cocoa-supply-20160323-gnpfg4.html [Accessed 28 Mar.
2018].

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Läderach, P., Martinez-Valle, A., Schroth, G. and Castro, N., 2013. Predicting the future climatic
suitability for cocoa farming of the world’s leading producer countries, Ghana and Côte
d’Ivoire. Climatic change, 119(3-4), pp.841-854.
Leake, C. and Cooper, R., 2010. Choc finger: Meet the real-life Willy Wonka who's just bought
an incredible £658m of cocoa beans. [online] dailymail.co.uk. Available at:
http://www.dailymail.co.uk/news/article-1295608/Choc-finger-Meet-real-life-Willy-Wonka-
Anthony-Ward-whos-just-bought-incredible-658m-cocoa-beans-.html [Accessed 28 Mar. 2018].
Worldatlas.com 2018. Top 10 Cocoa Producing Countries. [online] Worldatlas.com. Available
at: https://www.worldatlas.com/articles/top-10-cocoa-producing-countries.html [Accessed 28
Mar. 2018].

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Appendices:
Appendix 1
Figure: Currency of Ghana
(Source: Worldatlas.com 2018)

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Appendix 2

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Appendix 3
Figure: Yield, Area Harvested and production of cocoa in Nigeria
Source: Agronewsng.com 2018

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Appendix 4:

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Figure: Figures showing the sales in the four regions
(Source: barry-callebaut.com 2018)