The European Union is among the fastest-growing cocoa-importing regions in the world, with France, Switzerland, Germany, and the Netherlands leading the market. Europeans alone consume around 40% of the world's cocoa per year, and 16 of the top 20 consuming countries are in Europe. To meet its domestic consumption demand, the EU imports roughly 85% of its cocoa from West African countries like Cote d'Ivoire, Ghana, Nigeria, and Cameroon. In recent times, ethical buying practices have become important in the European cocoa and chocolate market. The need for sustainability and ethical trade has gained ground through increased awareness of unfair and unsustainable trading practices, both for consumers and industry players. This has tightened the import regulations and restrictions ,as traders become more choosy about the source and quality of cocoa they are importing.
Europe’s Cocoa Import Value
Source: Trend Economy
Furthermore, the EU is in a race to reduce its greenhouse gas (GHG) emissions, which cause global climate change. The region is focusing on fighting against deforestation to control these emissions, which further narrows down the options for souring raw cocoa. The European Commission and the European Parliament is expected to approve related policies in December 2022, one of which would force cocoa producers to certify that their production did not contribute to deforestation. The farmers and companies that export cocoa and coffee to the European Union must provide geolocation and indicate where the product was grown, identify the source for the European market, and demonstrate that its production did not contribute to deforestation on that land after December 2020.
The EU will have trouble importing cocoa as new regulations will limit its sourcing options, and there could be a shortage in the market. A recent report by ICCO shows that the cocoa grindings of the European Cocoa Association (ECA) have already declined by 1.53% on a YoY basis. Apart from limited raw material, it is likely that the cocoa market will remain weak due to the current global macroeconomic narrative of high inflation, low interest rates, and slow growth. Countries that are looking to export cocoa to the region should focus on getting certifications like Rainforest Alliance and UTZ, as they are increasingly being used in this market as an entry requirement because of the stricter sustainability protocols of manufacturers and retailers.