Perspectives in the Chocolate Industry

BelgianChocolateStore

Current chocolate trends

Foodchannel recently posted new chocolate trends for 2012 which will be focused on more in 2013. To sum it up tastes move from traditional ones like milk chocolate with nuts to very individual tastes like “strawberry cheesecake” or “brownies”. Chocolate more and more tastes like a daily meal or a desert, or has the shape of the high heel that I wore yesterday. Also chocolate companies nowadays try to satisfy people who take care of health and would only eat something that fits into their diet. Chocolate with around 500 calories per bar seen as part of a healthy lifestyle? But the common excuse is that dark chocolate has less calories. It is known to lower both blood pressure and cholesterol, and has nearly 8 times the number of antioxidants as found in strawberries. Uff, in this way I propably don’t gain too much weight. Or is this maybe only a strategy to sell more of dark chocolate?

Companies more and more feel the pressure of meeting all modern needs also depending on seasons. During Christmas e.g. firms like Lindt offered special Christmas chocolate. But the rest which could not be sold can be find for half the price now in many supermarkets. Maybe there are just too many companies who offer nearly the same type of chocolate?

However, it’s not too late:

Chocolate industry analysis for 2013

Matt Sena, an expert of the industry, analyzed the chocolate industry for 2013.

The chocolate industry offers a wide variety of opportunities for the small business owner, weathers economic recession well and is growing despite increased health-consciousness and calorie counting. (Sena)

Fortunately people still buy chocolate, probably because even the deepest crisis does not stop people from loving chocolate. A recent study in Great Britain showed that 91% of females and 87% of males consume chocolate products. According to Sena the industry will even expand more. Being creative and innovative seems to be the challenge especially during the economic crisis.

Growth will be driven by population growth as well as expansion into new markets, product innovation and rising disposable income levels leading to greater purchasing of premium offerings. (Sena)

The focus goes more towards smaller businesses since they often offer better quality and a more unique chocolate than big companies which produce in huge factories. A small shop also offers special services like gift-wrapping for an individual requirement like a birthday or a business party.  Since in a time of globalization we now try to emphasize more on individuality. “I am the first person who tries this new fabulous taste” seems to be better than “I bought a chocolate bar that is sold 1000 times a day.” People spend less on very expensive issues like a costly journey but don’t want to give up the little ” affordable luxury” of the daily life. As already mentioned in my last post, the fair trade sector in chocolate business also increases since more people demand good labor conditions combined with premium chocolate and are willing to pay more but in this way supporting local farmers.

Also overseas countries increasingly take part of the chocolate hype which leads to greater export of special chocolates from Europe e.g. to China or India. This creates new E-Business possibilities to efficiently export abroad.

Future problems

Nevertheless, with 2013 also more problems will come along causing problems for the expanding chocolate industry:

Cocoa prices can be exceedingly variable as it is largely grown in developing nations with often unstable political situations. (Sena)

Cocoa farmers will not be able to meet coming chocolate demands. Scarcity of cocoa will rise chocolate prices for consumption in the next years. The question is: How much is still ok for my “affordably luxury”? How much is too much which lets my dream of buying premium chocolate recede into the distance? A recent post on investors.com states that there are already researchers developing genetically engineered cocoa trees to produce higher yields. Will this satisfy people who especially take care of good quality and fair production of chocolate?

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A bitter sweet chance – chocolate industry uses ethical business models (Introduction)

“Anything is good if it’s made of chocolate.” Jo Brand

Chocolate

After focusing and taking a critical view on social problems in Latin America I want to come back to the “other America” and talk about its economic potential and business possibilities that come along with this. Passing by the store “Rausch-Plantagenschokolade” I decided to write about the great world of chocolate. I also worked in a cafe which sells expensive chocolate from all over the world. First I did not understand why I should pay five euros for a chocolate bar when I can also have it for 50ct. But after my boss explained me that cheap chocolate has so much chemicals in it – e.g. Milka would use chemicals which make the chocolate melt in your mouth – and that it is produced without caring about quality standards and actually exploiting farmers I finally realized that it is worth it paying a bit more.

Talking about Rausch

Rausch-Plantagen-Schokolade-Puerto-Cabello-43---Kakao_z1Rausch imports chocolate with 43% cocoa from the plantation Puerto Cabello in Venezuela. On their webpage it is said that they cooperate with the ministry of agriculture and local farmers in order to support them and help them to sell their products for a fair price. Other chocolate products from Latin America are Amacado, dark chocolate from Peru with 60% cocoa content and El Cuador, dark chocolate from Ecuador with 70% cocoa content.

“Rausch has not only propelled his company on one of the fastest growth tracks in Europe, he’s re-introduced the concept of truly premium chocolate bars to consumers in Europe and abroad.” Bernie Pacyniak from Nationaldriller

Pacyniak continues that Rausch could more than double its revenues over the last years from 45 million Euros to 100 million Euros and currently has around 550 employees and producing chocolate in other developing countries in Latin America, Asia and Africa.

Why does that happen? Why are people willing to buy chocolate from Rausch?

Since international competition and the effort to lower prices has led to a low-quality production of chocolate, Rausch actually noticed that this was a great opportunity to produce premium chocolate bar with good quality and a “distinct experience to consumers”.

“We would use only fine-flavored cacaos, but opt for regular sugar and lecithin as opposed to cane sugar and no lecithin for our Plantagenschokolade line,” Jürgen Rausch, founder and CEO of Rausch

How does the business model of Rausch support local farmers?

Rausch works together with local governments, brokers, cooperatives and individual farmers in order to find ways how to develop growing regions further and how to support local farmers as well. The philosophy of Rausch is that farmers should be rewarded with a good salary if they work hard. Therefore they try to eliminate the “middleman” which means that there aren’t too many people involved to trade chocolate. In this way the income of local farmers can be higher than it would be in other chocolate companies.

“We also want to help the farmer have a better life by earning enough money so that he can enjoy and provide a future for himself and his family.” Rausch

Rising problems

“High quality raw materials, such as fine-flavored cocoa, are becoming very scarce,” Rausch said. “That’s why we have to do something for the future.” Rausch

Rausch is currently developing more processes of how to produce high quality chocolate more efficiently in the world and they are building new logistic centres to answer to rising demand of good chocolate. The future will be interesting …

Making billions of $ in the drug business of Mexico

the-excess-of-profits-made-from-the-illegal-drug-trade-is-more-than-enough-to-buy-influence-and-corrupt-public-officials

“Brazil is portrayed as the poster child for Latin American potential, while Mexico is the symbol for what’s gone wrong.” Rodrigo Lara Serrano from AMERICA ECONOMIA Worldcrunch

Mexico’s population currently living below poverty  exceeds 51 % CIA worldfactbook whereas its “big brothers” (Canada and USA as members of NAFTA) only note a level below 10 %.

Around half a million Mexicans enter the USA a year to find a better life there, many of them illegaly. (guardian)

What attracts people to be involved in the drug business?

Patrick Radden Keefe, a journalist of the New York Times wrote an interesing article about how a cartel makes its money. Did you know that a kilo of cocaine produced in Colombia and worth $2000 increases its value to around $10000 when it enters Mexico? Incredibly.

But did you also know that it will be worth more than $30.000 when it crosses the border of the United States and then even $100.000 if you sell it in gramms?! Not only one kilo is smuggled every year. Imagine there are tons of kilos. Cartels earn revenues estimated somewhere in the billions of $ dollar.

Mexico’s drug war

After becoming president in 2006 Felipe Calderon started the drug war against the cartels and many of their members were killed or arrested.

“Since December 2006, nearly 48,000 people have been killed in drug-related violence in Mexico” CNN

According to CNN Calderon and Bush had made an agreement to fight against drug business. The Merida Initiative (named after the Mexican city where the two met) had included a U.S. pledge of $1.5 billion between 2008 and 2010. Current President Obama had requested to expand this program in 2011 with investing more millions to enable the provision of aircrafts, inspection tools and other sophisticated drug-detecting technology to the Mexicans.

Obama-and-Calderon

The normal worker’s life

An unskilled worker earns between $300 and $500 net income a month according to worldsalaries.org. Many families in Mexico are very big with many relatives. Imagine $300 for 5 people a month. Is that enough for a living?

If you had the choice between working around 12 hours a day and earning that little that it is hard to feed your family and on the other hand you can earn millions within the drug business and probably buy something special for your little daughter or your mother. What would you choose?

“it has never been the objective…of the public-security strategy to end something that it is impossible to end, namely the consumption of drugs or their trafficking…” former Mexican president Calderon 2012

The bloddy reality: Boom vs. poverty in Latinamerica

Who profits from the boom? Who does not?

Last week I already talked about a project to prevent the use of drugs in the northern countries of South America. This week I will focus more on social issues within these countries. There are always two sides of a boom, the ones who profit from it and the others who cannot jump on the train and therefore suffer. Although I already posted about the booming economy in my first post and how many people profit from this I will focus on the opposite of this boom in this blog: I will talk about poverty.

Poverty at its lowest level

“Poverty in Latin America is at its lowest level for 20 years” UN’s regional economic body, Eclac (Economic Commission for Latin America and the Caribbean)

According to an article of BBC household incomes had risen a lot over the last decades. The level of poverty had declined from 48.4% to 31.4%, between 1990 and 2010.

Check out this video to get to know more details about this topic:

The report about a declining poverty, published by the UN in November 2011, mentions other reasons for the positive changes: rising public spending levels due to an overall increase in incomes as well as an increase of government expenditure especially on social issues.

“Poverty and inequality continue to decline in the region, which is good news, particularly in the midst of an international economic crisis,” ECLAC’s Executive Secretary Alicia Bárcena.

Sounds perfect right? Everybody is happy so we can go home…But:

How is the reality?

The report continues that the progress of a declining poverty was threatened by the “yawning gaps in the productive structure in the region and by the labour markets which generate employment in low-productivity sectors.” You can read more about poverty in Eclac’s report Social Panorama of Latin America 2011

Colombia for example, although one of the countries with the highest decline in poverty, is still facing 37.2% (2010 est.) of its total population living below the poverty line (CIA world factbook) which I would consider as very high.  Although the number of people living in poverty has declined there are still many people who earn like 200 Euros a month. The question we have to ask: How much is enough for a living? How much is enough to feed your family? 200 Euros are definitely not enough because you cannot even pay your rent.

Following Jo Tuckman from the Guardian there still exists a very huge inequality in Latin America. There is another report which more emphasizes on the inequality than on the declining poverty rate. This report can be found here.

Isn’t it incredible what those experts found out?

“Latin America is the most inequitable region in the world, presenting lower results than regions with more dramatic poverty levels such as Africa and parts of Asia.” Poverty and Inequality Report Latin America 2011

That is really confusing. What can we actually believe? I think that we should not just believe in one report that we find because although there might be a positive change this does not necessarily mean that everything is perfect. This point brings me to the …

Future challenges

The future outlook of the UN report states that the poverty line will continue to drop into the next years. But still there are many challenges Latin America will have to face. It has to put more effort in social issues to make a permanent change and expand the social security system so that there is more equality for workers.

But compared to Germany I noticed that people e.g. in Colombia did not complain that much about their situation. People always came across me with a big smile and they were always helpful. I think that this depends on the attitude you have towards your expectations in your life. People there might be satisfied with less than people in Europe who are used to the consuming society and being spoiled many times.

Fighting against the drug industry in Latin America

Pradican – a project against the drug industry in Latin America

“Drugs are more available than ever and more powerful than ever”. Misha Glenny (Global Commission on drugs)

What is it about?

Pradican which stands for “Proyecto Antidrogas Ilícitas de la Comunidad Andina” is a project against the use of drugs in the member states of CAN (Comunidad Andina de Naciones). One member, Colombia, is probably the most famous country for the production and sale of drugs, but also the other member states, Peru, Bolivia and Ecuador are facing these problems. Therefore their governments now try to fight against this problem with foreseen good results in 2019.

How does it work?

The newspaper Hoy found out that e.g. in Colombia around 15 % of students have already taken drugs like cocaine, ecstasy or synthetic drugs. Until 2019 the members of CAN want to reduce the consumption of drugs substantially. Therefore they plan to inform teenagers about the risk of consuming drugs because especially young people tend to take various drugs without being clear on the consequences. With young people experts now want to discuss about this issue and explain them the risks and problems of consuming drugs. This will be undertaken by showing clarifying and shocking videos. They also want to support families better and help them to talk about drugs with their kids and improve their daily situation in order to prevent young people from taking drugs, especially the new and modern synthetic drugs which are very dangerous.

How will it be financed?

It might be surprising, but this project will actually partially be financed by the European Union which is very interested in stopping the high consumption of drugs in those countries. The European Union is also interested in finding out what all types of drugs contain in order to know better how to fight against them. Therefore this project will also include a lot of research. To check out more about the project visit the homepage of CAN at http://www.comunidadandina.org/pradican.htm

How are the chances that it will work well?

Still it cannot be said that this program will be particularly successful because it was only adopted a month ago. I have been in Colombia and seen with my own eyes how difficult it actually is to fight against the drug problem because it is not easy to control it in every part of the country. The strength and power of the Guerilla in Colombia and the other illegal organizations in the other countries cannot be ignored. But Colombia itself has e.g. already introduced some considerable changes in the most recent years and I could already see the effects of this. To be honest I noticed the smell of drugs in the streets of Bogota less than here in Berlin. It will remain interesting to see what happens.

“Any situation that has clearly come to an impart where there is a clear failure needs experimentation and trials with models around the world.” Julian Assange, Wikileaks

Rising economy of Latin America

Latin America – The new land for doing global business?

Even one of the global leaders in economy, China, is getting “hungry” for Latin American products. Experts note a change in global economy towards the improvement of the economy in countries which we still consider as unknown in global importance. In accordance with the Global Competitiveness for 2012-2013 three countries of Latin America are ranked in the middle of 144 countries worldwide.

Why is that happening?Buenos Aires

Due to international trade agreements and more governmental investments in the own economy the Latin American market gets more open to the global market. The booming economy and its growing potential also attracts many companies from abroad to settle down in Latin America e.g. Siemens or Henkel. This process establishes more employment in the bigger cities and creates a higher amount of money available for the Latin American economy. The motivation of people to work hard for the improvement of their economy really fascinated me and gives me the impression that the goals Latin America is setting for their future – becoming more of significance in global economy – can really be achieved in the next decades.

Of course, there are still many challenges that Latin America has to master like the existing corruption in governmental positions, the high poverty and social problems. What we see on TV about governmental plans is still a dream world. Although the living standard is improving a lot I could still see many social problems and people working hard every day to earn a few dollars in the end.

“After sitting on the couch for a decade, getting fat on Chinese largesse, it may be time to lose a few pounds, starting with some self-imposed fiscal austerity.” John Price, managing director of Americas Market Intelligence

But with the support of foreign investments Latin America can make a change for the better and become more important in the global market. People are working for their dreams and I am sure that there will change a lot in Latin America in the next decades.

I have experienced Colombia by myself and I also saw the enormous economic potential there and how German companies were establishing their market there. It is interesting to see how such countries are more and more taking part of the global economy. So why not try something new and invest in Latin America instead of common China or Europe?

Video of the economy