Swiss chocolatiers left with bitter taste following Ghanaian cocoa bean announcement
- Source to Pay
For the majority of people, when we think of chocolate the first word that springs to mind is Switzerland. The country is renowned around the world for creating the finest milk chocolate thanks to a 200-year pedigree of making the famous confectionary.
The Swiss chocolate industry was worth over US$3 billion in 2019*, with exports accounting for approximately US$1 billion. Demand was led by Canada, the United States, China, the Middle East, and Singapore. The industry currently employs over 4,500 people, further underscoring the importance of chocolate to the Swiss economy.
With such buoyant market demand, what is it that has got Swiss chocolatiers worrying about where their next square of chocolate is coming from?
The main ingredients for producing chocolate are milk, which creates the creamy taste and texture, and of course cocoa beans to create the chocolate flavor we are all familiar with. Switzerland produces approximately just 1% of the world’s cocoa harvest and therefore depends heavily on imports from other countries. Ghana and Ivory Coast, which account for almost two-thirds of the world’s cocoa production, have historically been Switzerland’s go-to supplier, but that could be all about to change.
Last year, Ghana’s President Nana Akufo-Addo became the first African leader to be invited on a state visit to Switzerland in 60 years, during which he unexpectedly announced that Ghana would soon end the process of selling raw materials to trade partners for onward value addition – ultimately suggesting Ghana would use its own beans to make its own chocolate.
President Akufo-Addo told the federal Council of Switzerland the following:
“Ghana is currently Switzerland’s largest trading partner in sub-Saharan Africa, largely from the export of gold and cocoa to Switzerland and the import of chemical and pharmaceutical products. Ghana no longer wants to be dependent on the production and export of raw materials, including cocoa beans. We intend to process more and more of our cocoa in our country with aim of producing more chocolate ourselves.”
So, how will Switzerland continue to produce chocolate against a backdrop of uncertainty surrounding its cocoa supply chain?
Supplier diversification is of the utmost importance and as such growing a supplier diversity program is key. Research has shown us that 93% of procurement organizations say their interest in supplier diversity programs has grown, and this is how you do it.
The first step is to establish a business case and garner executive support, in the Swiss chocolate instance this is fairly obvious, however, support will be crucial moving forward. The identification of diverse suppliers and the utilization of technology to achieve this is critical – investing in personnel and the correct technology to lead the supplier diversity program even more so.
The next step is to establish goals and best practices, benchmark and reassess continually. Monitoring performance is the final step, this includes a variety of factors such as the number of new suppliers onboarded, savings, internal customer satisfaction, impact on the economy and impact on local communities.
The Ghanaian cocoa bean situation has underscored the importance of strong supplier relationships, a diverse supply program and visibility across the supply chain to identify potential disruptions. The reality of today’s global and interconnected marketplace is that procurement faces constant threats that may have serious impacts on performance.
In order to stay ahead of risk and uncertainty there are a number of measures that can be implemented, the first is to proactively manage suppliers and identify risk with real-time, actionable supply chain insights. Expand, or localize supplier networks to reduce geographic and supplier-centric risk. It is also important to improve transparency across the entire supply chain to identify potential risk before they hit, as well as managing suppliers and contracts to ensure key performance metrics are fulfilled.
Identifying the appropriate procurement technology to achieve this is also a major step in the correct direction. This will help prevent or minimize the risk.
It remains to be seen if the chocolate industry will face a ‘rocky road’ however producers of chocolate and exporters of cocoa beans will all be looking to strike a sweet deal.
In the second part of this blog post we will take a look at what the chocolate market will look like as Ghana begins to put the processes in place in order to start producing its own chocolate, what risks they face and the potential positive impacts on the Ghanaian economy.
*Data from swissinfo.ch