Emerging Markets Seem A Bit Reluctant

India and China are to the chocolate industry what emerging markets were to the financial speculators of the late 1990s. A promise of untold riches to any company that got its feet into the door. The new middle classes, so the theory went, are eager to adopt western tastes and, with it, chocolate. The dream of 100 million Indians eating Mars or Nestlé was a powerful lure.

And so investments were made. Barry Callebaut opened centers of chocolate excellence in China and India to teach cooks how to use chocolate. Everything seemed to be going well. Then the economic crisis hit. And the fallout seems worse in Asia than elsewhere.

FlexNews reports that 10,000 tons of cocoa butter have piled up in Malaysia and that cocoa processors in that country have stopped buying beans. The real problem is that processors cannot make any money selling just the cocoa powder, given the current prices for cocoa beans. But one grinder reported that he hadn’t sold any cocoa butter since November. The storage cost alone must be enormous. According to Reuters, only two of sixteen processors in Indonesia, Asia’s largest producer, are still operating.

That stoppage quickly filters down the line to the growers. The chairman of Indonesia’s Cocoa Association indicated that grinding in March would be 40 percent lower than in the previous year. It is only a question of time before that translates into lower prices for Indonesian cocoa growers. The only saving grace for the moment seems to be the general downturn in Indonesian cocoa production due to aging trees and diseases.

At the core of the decline lies the different cultural context of chocolate in Asia. As a recent addition to the palette of tastes, it does not have the same cultural meaning as it does in Europe or North America. Europeans think of chocolate as a treat they can still afford in difficult times. Indians and Chinese, on the other hand, are more likely to consider chocolate an expense they can do without when times are tough. “It’s not ingrained in their culture in the same way,” says analyst Judy Ganes-Chase according to a report in the UK’s Guardian.

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