Cocoa farming produces some of the highest returns on investment in the agriculture industry. Alongside the fast growing chocolate market, which was worth US$83.2 billion in 2010 and is projected to grow to US$98.3 billion in 2016, this field poses a unique business opportunity.
Cocoa is an attractive commodity as its shelf life can last a few years (sales can be postponed to take advantage of price peaks), long maturation periods allow producers to benefit from tight supplies and growing demand (coffee and cocoa trees take three years to bear their first crop) and as cocoa prices have been less prone to price fluctuations than large scale grains According to [Standard & Poor’s Goldman Sachs Commodities Index], cocoa was listed as the strongest performing commodity for 2015.
This opportunity will enable the company to take part in the initial commercial development phase in order to increase productivity and improve integration in this constantly growing market, while providing above-market returns to investors.
The demand for cocoa products is on the rise worldwide: growing demands of chocolate consumption in emerging countries like India and China, combined with anticipated economic recovery in high-income countries, have led to an industry forecasts of a 30% growth in demand by 2020.
Meanwhile, cocoa production in Ghana and Ivory Coast (the largest producers of cocoa beans in the world with more with than 60% of the global production) is estimated to decrease by 50% by 2050, due to ageing orchards, lack of government support and large mediation margin gaps. In 2011, demand started to outpace supply, with 750,000 metric tons more chocolate consumed that what was produced in that year. It is estimated that by 2020, chocolate demand will outstrip production by over 1 million tons.
Barry Callebaut, which operates 52 chocolate factories across the world including one in Banbury, Oxfordshire, has warned for some time that consumers are facing a chocolate crisis unless production can be increased to meet growing demand. (The Guardian, Nov 2014)
According to John Mason of the Ghana-based Nature Conservation Research Council, “in 20 years, chocolate will be like caviar…It will become so rare and expensive that the average Joe just won’t be able to afford it”. The Telegraph stated in May, 2015 that cocoa prices have steadily risen over the past 15 years. The El Nino forecast has even been cited by manufactures as a significant factor in recent price increases along with the concerns over the Ebola outbreak in Africa and market speculation by opportunistic traders.
On May 29, 2015 the International Cocoa Organization (ICCO) downgraded its forecast for global cocoa output for the 2014 crop year by 64,000 MT to a total of 4.17 million MT. In addition, the ICCO slashed its estimate of cocoa output from Ghana by 114,000 MT to 696,000 MT. This is a significant drop of 22% from last year’s production of 897,000 MT (This forecast was followed by a downgrade of 100,000 MT by the government of Ghana, confirming what the ICCO had reported).
In 2014, the world consumed 70,000MT of cocoa above what was produced, in 2015 the world consumed more than 100,000MT above production. This trend is likely to last until 2018, according to Bloomberg. Predictions are that the deficit will be as high as 2 Million MT by 2030.
Our portfolio is expected to comprise approximately 40,000 hectares of cocoa plantations in different locations worldwide, including 6,000 hectares of existing plantations, and 34,000 hectares of greenfield plantations, within 6 years of operations. The company leverages its expertise to select the most attractive and profitable cocoa projects available in its pipeline.
Bean & Co’s expert team has more than three decades of global agricultural development and management experience. The team’s experience includes hundreds of millions of dollars’ worth of successfully realized projects, strong networks and relationships on the ground, and industry-leading expertise in tropical agronomy. Our in-house specialists possess deep technical knowledge in the following fields: planting and cropping, irrigation and fertilization, phyto-sanitary protection, harvest and post-harvest, processing, and marketing & distribution.
Bean & Co has created a portfolio which focuses on investment diversification between continents, thus allowing the company to mitigate the risk of diseases, weather and supply constraints. If one continent is effected by a major disease or weather condition, a global cocoa shortage may occur and the cocoa prices may significantly increase. As a direct result of such diversification; however, Bean & Co will still see an increase in profit from its operations in those un-effected continents.
Diversifying risk across different countries along the tropical belt will also assist in coping with geographic, economic and political threats and benefit from various tax holidays and local subsidies.
We work closely with major industry off-takers, including leading confectionery companies, throughout the value chain. Bean & Co will produce optimal cocoa beans in alignment with market demands. Off-take may include domestic / regional transactions and / or export, depending on the project’s location and market dynamics.
Our main competitors are those companies who by implementing modern farming techniques and advanced agro technology, produce cocoa on a large scale across the tropical belt. The vast majority of Cocoa farming is in the hands of smallholders however, according to the ICCO (International Cocoa Organization) Commercial Cocoa Plantations will increase their share in overall world cocoa production from 5% to 10% in the years to come.