The Hindu Business Line : Recession pulls down cocoa products sale

The worst hit is the chocolate products of the Mangalore-based Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd (Campco), which estimated to have faced a decline in sales of 30 per cent, according to the company sources.

Rural markets

"Seventy per cent of our products are sold in the rural markets while 30 per cent in the urban.

The weakening purchasing power of the consumers, of late, coupled with the surging prices of food items is compelling them to avoid buying the luxury or rather avoidable chocolate products", they told Business Line on Wednesday.

Fall in the prices of cash crops such as rubber, pepper etc have also brought down the purchasing power of the rural population, they said.

Campco's main consumers are middle and lower middle income group, they said.

Campco, which came into existence to intervene in the market to support the growers of arecanut and cocoa in July 1973, was established as a multi state co-operative - a joint venture of the states of Karnataka and Kerala.

It resorted to procurement of cocoa following a sudden withdrawal by the buyers of cocoa from the procurement operations due to crash in the international market.

With the setting up of the chocolate manufacturing factory at Puttur, near Mangalore, in 1986, the co-operative has been able to increase the local consumption of cocoa based products and to export value-added semi-finished products.

Now, on an average, Campco procures around 4,000 tonnes of cocoa bean every year, they said.

Drying techniques

According to them the quality of beans dried by the farmers used to be inferior due to lack of knowledge and facilities, they said.

The fermentation process is decisive in the production of high quality raw cocoa. The technique varies depending on the growing region.

Drying after fermentation, the raw cocoa still contains about 60 per cent water.

Most of these have to be removed, they said.

Campco, which has a 25 per cent of the market share of cocoa's end-products, procures wet beans, at present, at Rs 30-35 from plains and at Rs 35-35.50 a kg from high land growers.

Dried beans are bought at Rs 110 a kg, Campco procurement sources said.

Indian confectionery

The total Indian confectionery market is valued at Rs 4,100 crore with a volume turnover of about 2,23,500 tonnes an annum, according to Cadbury India sources.

Their products are largely consumed in urban areas with a 73 per cent skew to urban markets and a 27 per cent to rural markets.

Propaganda about the health benefits and medicinal values of cocoa has pushed up its consumption.

As a result, there has been a significant growth in demand, they said.

Global demand

According to overseas cocoa industry sources "China, India and Thailand would be obvious examples of markets which have been new, coming into cocoa. To a certain extent, they have put pressure on cocoa supply. That phenomenon will still be around."

In the last 3-to-5 years, global cocoa demand growth had been running at an annualised rate of around 4 per cent.

India output

India has also increased its production from 5,198 tonnes from an area of 12,402 hectares in 1998-99 to 10,560 tonnes from 31,885 hectares in 2007-08 as against an estimated demand of around 20,000 tonnes which is growing at around 15 per cent annually, official sources pointed out.

Consumption growth

The global economic recession is reported to have forced the International Cocoa Organisation (ICCO) to trim its growth estimate of global consumption in 2007-08 to 1.6 per cent from 2.9 per cent. According to them, the demand is likely to decline in 2008-09 and 2009-10 with the potential for a revival in demand in 2010-11.

In December, the ICCO daily price averaged $2,457 a tonne, up by $389 compared to the average price recorded in the previous month ($2,068), and ranged between $2,171 and 2,678.

At the end of 2008, the New York market recorded a 29 per cent increase over the year before while the London market rose by 66 per cent. The tightening availability of cocoa beans was reflected by the results of a survey conducted by the ICCO Secretariat which showed that cocoa bean physical stocks located in European warehouses declined by 19 per cent to 9,43,831 tonnes and by 36 per cent to 1,46,000 tonnes in the US at the end of the 2007-08 season compared to the position a year ago.

Although demand for cocoa is suffering from an adverse global economic environment, the prospect for a third consecutive supply deficit in the current 2008/09 season has been growing over the past few months, ICCO sources said.

The total Indian confectionery market is valued at Rs 4,100 crore with a volume turnover of about 2,23,500 tonnes an annum, according to Cadbury India sources.

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