CHOCOLATE MARKET WEAKENS DUE TO LOCKDOWN

Last Updated on May 22, 2020 by kristina

Cocoa grindings have beat expectations this year, but prices have started slowing down because of the lack of chocolate demand.

European and Asian grindings, where beans are turned into products used in chocolate bars, recently indicated that demand might have proved relatively strong to the coronavirus crisis. According to some analysts and traders, resilience was fueled more by processors building up output ahead of potential supply-chain disruptions rather than real consumption.

There are already signs that demand is falling as lockdowns shutter some retail outlets and prompt fewer impulse purchases. Chocolate companies like Nestle SA and Mondelez International Inc. have reported easing sales or warned about confectionery demand, and some worries appeared about rising unemployment, and lower incomes will curb spending on treats.

In Europe, the biggest chocolate-consuming region, chocolatiers offered high discounts last month to entice buyers. Chocolate companies have so far remained quiet about demand prospects, but Lindt & Spruengli AG and Hershey have withdrawn their 2020 outlook. Lindt’s first-half sales will likely drop by 14%, according to Bank Vontobel AG.

According to Eric Bergman, vice president at JSG Commodities in Norwalk, Connecticut, the effects from the pandemic will be reflected in second-quarter grindings and earnings from chocolate companies. But Paul Hutchinson, a chief trading officer for Olam, also stated that cocoa-chocolate demand in western Europe and North America is closely linked to GDP.

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