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Insight & Analysis - February 22, 2022

Will China Take Over the Cocoa Export Market?

For so long, African countries have dominated the cocoa export business. According to a research firm, Statista, Ivory Coast, Ghana, Nigeria, and Cameroon account for 70 percent of the world’s cocoa consumption and exports, with Ivory Coast and Ghana accounting for more than 50 percent.

However, all that may soon change with the entrance of a major superpower onto the scene. To put the impact into perspective, the global cocoa market as of 2019 generated $12.8 billion and is projected to reach $15.5 billion by 2027, translating to a Compound Annual Growth Rate (CAGR) of 4.3% from 2021 to 2027 according to Allied Market Research.

China Enters The Cocoa Export Market

According to China Daily, South China’s island province of Hainan recently exported cocoa beans to Belgium (the third biggest importer of cocoa beans) sometime in October 2020 for the first time.

According to the news platform, the first batch of 500 kg of cocoa beans, worth 3,044 euros (about $3,600) was produced in Xinglong, a township in Hainan that has a tropical climate, a requirement for the cultivation of the crop.

The quantity, although paltry, is significant and possibly signals China’s preparedness to dominate the market in a short while from now.

Giving a hint as to the inspiring thought behind the country’s effort to grow cocoa, Hhao Zhaoyun, a researcher with the Chinese Academy of Tropical Agricultural Sciences (CATAS), said:

“Cocoa is a raw material for making chocolate. With the increasing demand for chocolates, Hainan has been expanding its cocoa planting area and making breakthroughs in technological development, ”

On the choice of Belgium as the export country, he explained thus:

“As Belgium is dubbed ‘kingdom of chocolates,’ exports to the country indicate that our cocoa production standards have been recognised by the international community.”

Why Cocoa Export Is A Big Deal

Cocoa export today is a big deal, mostly because it is a vital ingredient used by major daily consumable manufacturers. Cocoa beans are known to be rich and can be used to make products such as chocolate bars, cake mixes, beverages, and ice cream.

A report has it that while Sub Saharan Africa today contributes 86% of the total global output of cocoa beans, with Brazil and Trinidad and Tobago adding 12% and 2% respectively, African cocoa exporters make up just a small part of the $130bn chocolate industry, a major derivative.

Africa, in fact, earns only 5.35% of the value for supplying 86% of the world’s cocoa needs.

The Challenge for African Countries

Although African countries have been the largest primary producers of cocoa, one major challenge has been the continent’s inability to process the same into finished products.

What Does All of This Mean for Africa?

The handwriting on the wall certainly doesn’t look good for African countries. Ghana is already seeing this, and Ghana’s COCOBOD, the agency responsible for handling issues related to cocoa farming and export in Ghana, is already feeling jittery.

Although it appears concerned, it maintained that the quantity of the Chinese cocoa export is too small to affect Ghana as the second-largest cocoa producer in the world. The question is, “isn’t this just a matter of time?”

According to the General Secretary of the General Agricultural Workers Union of Ghana (GAWU), Edward Kareweh, the government must transform the cultivation of cocoa, as well as its harvesting and processing capacity, to generate more revenue from cocoa production.

“We have to immediately change how we produce cocoa in this country. For more than 100 years, we have been using cutlasses and hoes on our cocoa farms.

If we look at how we even harvest and store the cocoa beans, it is also not the best. We must sit up looking at the capacity of China and what they can do when they enter a particular industry,” he said.

It is quite unfortunate that decades later, all Africa does is simply grow and export raw materials. Meanwhile, the road to the raw material becoming a finished product is a long one as there are several other stages along the value chain that need to be invested in.

Primary production, storage, processing, and distribution are all stages the raw materials go through before coming out as a finished product with added value that earns more. African countries have only focused on primary production, even when it is obvious that there are more gains tied to other areas.

China has seen the loophole in the lack of foresight and progressive thinking by Africans and is going all out to capitalise on it. With the East Asian country’s well-known character of domination, it will most likely be adopting either of two approaches: growing enough to sell to Europe and reducing its balance of trade in the importation of products it needs, or better still, build its own industries to manufacture chocolate bars and other derivatives.

The question, as it stands, is not if China will take over the cocoa export market, but when, so long as Africa continues to play second fiddle.

READ ALSO: 5 Platforms in Nigeria You Can Invest in Agriculture in 2022

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