Asia is the world’s fastest-growing market for chocolate products. Declining cocoa bean supply from ASEAN’s top producers have prompted processors to look elsewhere to meet the demand.
Indonesia and Malaysia have been Asia’s top cocoa bean producers for many years. Indonesia once stood as the third largest cocoa bean exporter in the world after Ghana and the Ivory Coast.
In 2009, Indonesia produced 850,000 tons of cocoa beans. But that number has been steadily decreasing since. Now the country is a net importer of cocoa. Last year, Indonesia imported about 240,000 metric tons of cocoa and is expected to buy more this year.
Malaysia, another big player in the region, is seeing the same trend. Cocoa bean output has significantly decreased from 100,000 tons annually to 1,000 over the last two decades. Imports also rose by 10% to 345,000 tons last year.
Despite declining cocoa yields, cocoa consumption in Asia is increasing. The Asian market for chocolate confectionery has grown at an annual rate of 5%. According to the Cocoa Association of Asia, “curious, and increasingly wealthy people are consuming more chocolate confectionary, bakery items, and drinks.”
To meet this demand, cocoa bean processing has increased, increasing by more than 25% over the last four years. But without a strong supply of local cocoa beans, processors are having to look further afield to find the quantity to meet local market demands.
What went wrong?
Several factors contributed to the decline in quality and quantity of cocoa beans in the region. Firstly, most cocoa plantations are owned by smallholders which lack the necessary financial means to maximise production and develop new plantations. In Indonesia, local farmers own more than 95% of the country’s cocoa plantations.
Farmers have to contend with ageing cocoa trees, many of which were first planted in the twentieth century, as well as the spread of diseases which have negatively affected yields.
Also, due to the low income from producing cocoa bean, many local farmers have switched to more profitable crops like palm oil. According to one farmer, a yield of 700kg of cacao per year fetches around Rp. 17.5 million (US$1,220). The same amount of oil palm can sell for Rp. 31.5 million (US$2,200).
ASEAN should continue to play a major role in the cocoa industry
One of the primary drivers for the industry’s growth is ASEAN’s expanding middle class and the new and innovative uses of cocoa in the national food industries. Given these opportunities, ASEAN’s involvement in the industry’s value chain could have a substantial impact on the economic development of the region.
However, the low output of cocoa beans is undermining ASEAN’s potential. Cocoa processors are already looking elsewhere for a reliable source of beans. Asia’s biggest grinder, Guan Chong Bhd, is planning to move its plants closer to growers in Africa and South America.
According to Indonesia’s Cocoa Industry Association (AIKI) chairman, Piter Jasman, “if the government does not push the national production then production from cocoa plantations will continue to decline and eventually subside over the next few years.”
Guan Chong BhD’s chief executive, Brandon Tay, echoed these comments and urged the Malaysian government to support cocoa farming and manufacturing in the country.
Local industry players are trying to revive the cocoa farming industry
Home-grown chocolate makers are also interested in supporting the development of the local cocoa industry. Bean to bar chocolate makers, like Malaysia’s Chocolate Concierge, Singapore’s Fossa and Lemuel, and Bali’s Pod, are popping up across the region.
“We’re making chocolate where it’s grown, creating local products that rival better known European chocolates,” said Toby Garrit, the founder of Pod Bali.
Leading global players are also investing in the region. Olam Cocoa, Asia’s largest cocoa exporter has spent around US$20 million in programs to train local farmers on sustainable growing practices and techniques and maximise their profits.
Governments are introducing new programs to tackle the problem
By 2020, Asia will be the world’s largest chocolate market. Meeting such a large market demand requires the participation of all stakeholders from farmers to private companies to the government.
Brandon Tay urged the Indonesian government to allocate more resources for research and development in the manufacturing of cocoa products. Most cocoa exports are currently in raw forms, while chocolate exports remain low. ASEAN countries are losing out on added value revenues.
In Indonesia, the government is launching a national program to boost cocoa bean production to 600,000 tons by 2024. According to the Indonesian Cocoa Association, such a huge number would be enough to meet local demand and exports. It has planned programs to help farmers revitalise crops with special fertilizers and superior seeds, said Piter Jasman, founder of the country’s top grinder, BT Cocoa.
The Philippines has also shown interest in the market. A 2017 report, outlined the government’s intent to establish a sustainable and competitive cacao industry that would see the country joining the global supply chain.
ASEAN nations need to work closely with all players to develop a comprehensive and sustainable plan that would bring them to the top of the cocoa supply chain once again. Without this, future cocoa revenues will slip through their fingers as a competitive and prosperous industry emigrates to other parts of the world.