India to be Cocoa Exporter?

I have mentioned before that the Westernization of the tastes of the Indian middle classes is part of the great hope of the chocolate industry. Much of the sustainability talk that is making the rounds these days is driven by the desire to produce enough cocoa at reasonable prices to capture that market. But a recent report makes me wonder how much there will be to capture.

Despite its opening to global markets in recent decades, the Indian state still manages its links to the global economy more carefully than many other countries in the Global South. Take cocoa, for example. According to a report by Reuters, the country only produces about 50 percent (approx. 10,000 tons) of its annual cocoa consumption. But the current import duty on cocoa is set at 30 percent.

Such incentive structures are reminiscent of the import substitution policies pursued during the first wave of industrialization after independence. But this time the emphasis is on increasing cocoa production.

Anand Kripalu, managing director of Cadbury India and Cadbury’s president of the Asia region, predicts that India can reach self-sufficiency in cocoa production by 2015 and begin exporting cocoa thereafter. All that’s necessary is a production increase to 150,000 tons. Much of that increase will be based in the southern state of Kerala and three of its neighbors. So rather than calling for an elimination of the import tariff, Cadbury India is calling for more local production. If you think that this sounds odd for a transnational corporation read on.

Cadbury currently controls about 70 percent of the chocolate market in India and has seen its profits rise by 30 percent a year in recent years. The company expects continued growth since chocolate consumption in Indis is still very low. To achieve the goal of self-sufficiency, Cadbury India is supporting Indian agronomists  and farmers in their efforts to improve plant stock and yield. In short, Cadbury hopes to maintain its lock on the Indian market through the strategic use of the import tariff on cocoa.

Historically, that’s nothing new. Cadbury’s presence in India originated from such state created incentive structures. Before 1914, all of Cadbury’s products were made in the UK. Export sales, however, constituted a growing part of its business. Between 1911 and 1914, ten percent of its exports went to India. With the coming of WWI and the global depression in its wake, tariffs and other trade barriers drove Cadbury and other British chocolate makers to establish production facilities throughout the British Empire. More on the expansion of the British chocolate industry can be found in Geoffrey Jones’ book on the growth and expansion of British multinationals.