London, 1 August - Global cocoa and chocolate consumption shows signs of waning due to the economic downturn, high prices and health worries, but a little luxury from premium products and dark chocolate seems to be "recession proof".
The latest cocoa grindings data, a measure of demand for the key chocolate ingredient, has been disappointing in the U.S. and Europe. Second-quarter U.S. grindings fell 15.89 percent from a year ago, and Europe's grind was up 1.7 percent.
The subdued grindings have coincided with a slowdown in global economic growth and a surge in U.S. cocoa futures by 40 percent so far this year, spurred by a heightened investment fund appetite for the commodity, and tight physical supplies.
Grinding of cocoa beans creates products such as liquor and butter, which are used in the making of chocolate, while cocoa futures are an indicator of physical prices of the commodity.
Frans Remmers, senior cocoa products trader at Dutch trade house Theo Broma, said global cocoa demand was likely flat.
"It's difficult to estimate whether chocolate consumption really is down or whether it is just stagnating a bit, and I think the latter is the case," he said.
The mix of high cocoa prices and the slowing U.S. economy, could cause falling demand for cocoa and chocolate products, said Judy Ganes-Chase of J Ganes Consulting in New York.
"Drops in usage come from manufacturers fiddling with bar sizes and (industrial) recipes reducing the amount of chocolate used, which in turn causes consumption to drop," she said.
The fall in global economic growth and the increase in the price of cocoa beans were expected to have a negative impact on consumer demand for chocolate products, said Laurent Pipitone, senior statistician with the International Cocoa Organization.
"Consumption of chocolate products seems to be slowing down in volume in the U.S.," London-based Pipitone added.
Fortis Commodity Derivatives said the latest U.S. grindings data sent a grim signal about consumption.
"Cocoa is unlikely to be exempt from a slowing demand for all kinds of discretionary purchases, as consumers find their former spending powers are curtailed by higher inflation," Fortis said in its latest cocoa market report.
U.S. chocolate confectionery demand eased to 1.63 million tonnes in 2006 from 1.65 million in 2005, say the International Confectionery Association and the European confectionery association, CAOBISCO. 2007 data was not available. The U.S. is the world's biggest market for chocolate confectionery.
"The U.S. industry in general, may have made some wrong decisions in the marketing of their chocolate products and therefore was not well-positioned to capture the movement towards premium chocolate -- dark chocolate, organic and single origin chocolate," said Pipitone.
Chicago-based Marcia Mogelonsky, senior research analyst with Mintel International, a market research company, said in her view the U.S. chocolate market was growing, but slowly.
"The major driving force has been the premium market (defined as chocolate costing $16/lb or more). The rest of the category has seen varied fortunes, depending on product type."
EMERGING ECONOMIES DRIVE DEMAND
Emerging economies, such as China and Russia, are driving demand for cocoa and chocolate products, analysts say.
"The demand for chocolate is strong -- and increasing -- in areas in which a developed "chocolate culture" is not well established (e.g. China), or where there is an established chocolate culture that is getting more sophisticated (e.g. Russia, Turkey)," said Mogelonsky.
Guo Wei Ping, manager of the cocoa division of the China Tea trading firm, a unit of COFCO Co, said chocolate demand in China could have risen by over 15 percent year-on-year since 2002-03.
Mogelonsky was upbeat about prospects for premium chocolate.
"Self-gifting and self-rewarding are habits Americans got into, especially during the more exuberant economic times that seem to be on the way out," she said. "And self-rewarding with a piece of premium chocolate is still 'do-able'."
In developed markets, consumption of cocoa and chocolate is linked to concern over health.
According to Mintel senior market analyst Mathilde Dudouit, UK consumers are increasingly looking for healthier snacks, such as cereal bars at the expense of chocolate.
Analysts see a shift in tastes towards dark chocolate around the world, as it is perceived to be healthy.
Studies have shown foods rich in cocoa like dark chocolate offer heart benefits, but researchers say the added sugar, fat and calories could cancel out any good the chocolate might do.
And in the final analysis, how many people can really resist a chocolate?