Thursday, June 26, 2014

Types of Chocolate Firms

The first thing that you learn when you start looking into chocolate makers is just how many there are in this $100 Billion market (depending on who you talk to.  CNN reports $110B in 2014, IBIS estimates $120B, Markets and Markets estimate $98.3 B by 2016). I have found over 1000 companies involved in chocolate production by consolidating lists across several sources, and I am sure that there are many that are missing.  These firms are either manufacturers or chocolatiers.  The manufacturing firms are those that take beans from the market and produce chocolate for their own end products or for wholesale.  The chocolatiers use the premade chocolate as a base for their products such as truffles and flavored bars.  The following describes each in more detail.

Manufacturing firms take beans from the market (usually wholesalers and commodity markets, sometimes from actual farmers) and create various levels of chocolate for their own end products or wholesale to smaller chocolatiers. 

Although chocolate manufacturers start with the same raw ingredient - cacao- there is a wide spectrum of how this is done.  For a majority of the chocolate on the market, cacao beans are purchased on the commodity market through dealers.  The largest supplier of cacao is the Cote d'Ivorie.  There has been a movement recently where chocolate manufacturers (mostly smaller start-ups) are sourcing beans directly from farms.  These firms are referred to as "bean-to-bar".   Firms go directly to farms for a variety of reasons such as reducing likelihood of unethical practices such as human rights violations (child labor), obtaining better quality beans, and supporting sustainability practices.  (Please note that some just do it for the marketing rights.) 

Big incumbents and old faithfuls –
You know who they are. They are the prize of every child's Halloween basket, the makers of Easter bunnies, and the permanent fixture at the check-out of grocery stores.  They give you a break, melt in your mouth, and satisfy.  These firms are the mass market producers and dominate the market.  In fact, Mars, Mondelez (Kraft), and Nestle have 40% of the market with Hershey, Ferrero, and Meiji making up another 27% (;

Subsidiaries –  
Over the last 50 years, there has been a huge consolidation in the chocolate manufacturing industry.  Some of the most contentious fights included the Kraft purchase of Cadbury in 2010 and Hershey's take-over of Scharffen Berger in 2005. 

Start-ups –
Since about 2009, the start-up chocolate scene has flourished.     Some describe this as the New American Chocolate Movement since there has been such a flood of companies entering the market.  But the increase has not been confined to the United States.  Check out the company list to see the new chocolate makers around the world.

This may be surprising, but most companies outside of mass manufacturers and bean to bar firms don't make their own chocolate.  These firms are referred to as "Chocolatiers" who use chocolate made by other companies as a base, but innovate with flavors, textures, fillings, and combinations.  For example, the majority of chocolatiers in the Bay Area that I talked with source their chocolate from Guittard in Burlingame, CA. Some of the best known figures in the chocolate world are actually chocolatiers such as See’s, Russell Stover, Lulu’s and Whittman’s.

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