Manufacturers have options in process and inputs to manage costs
Jason Schmid
in Connect on LinkedIn
Confectionery manufacturers might be experiencing high blood sugar levels — and high blood pressure — as they have watched the cost of a ton of cocoa beans soar past $10,000, up from $4,400 at the beginning of 2024. Jason Schmid, a project manager at Burns & McDonnell, brings two decades of experience in the food industry to bear on the challenges facing manufacturers and options to optimize their operations.
Q: What has caused the price of cocoa beans to more than double over the last three months? Is this a more significant trend or a single-season issue?
A: Most cocoa beans are harvested in West Africa, with Ivory Coast and Ghana being the leading producers. Those countries have recently experienced supply deficits and unfavorable weather conditions, contributing to decreased cocoa production. Arrivals at Ivoirian ports were estimated to decrease 34% year-on-year. In Ghana, graded and sealed cocoa purchases were down year-on-year by 35%, according to the International Cocoa Organization (ICCO). The impact of those declines will be felt over multiple seasons.
The cocoa sector's challenges are compounded by climate change, disrupting the global cocoa value chain. Regions in major cocoa-producing countries are becoming less suitable for cocoa cultivation as weather patterns change, impacting crop yields.
Q: When you are battling supply chain issues, what are some ways for manufacturers to manage costs across their business?
A: Process optimization is critical. Reviewing the production process can identify bottlenecks or inefficiencies that, once addressed, can significantly reduce costs and improve output. This could involve upgrading machinery, optimizing chocolate tempering processes or streamlining the flow of materials through the production line.
Some gains can be achieved through a focus on energy efficiency. The chocolate manufacturing process can be energy-intensive, especially in roasting, grinding, conching, depositing and cooling. Deploying energy-efficient technologies and practices like heat recovery systems can significantly reduce energy consumption and costs.
Implementing practices to reduce waste at every production stage can yield noticeable savings as well. Some examples of this include minimizing raw material waste and improving packaging efficiency.
Q: What are the first steps manufacturers should take when considering alternatives to reduce overall costs?
A: Pre-capital consulting plays an invaluable role when companies are considering significant changes to their manufacturing processes, such as introducing new technologies, shifting to alternative ingredients or optimizing operations for efficiency.
This type of consulting provides manufacturers with a holistic view of the potential impacts of investments in process optimization, energy efficiency, waste reduction and water conservation. It brings fresh eyes to familiar processes, increasing the odds of recognizing something that might otherwise have been overlooked. That knowledge can help business owners make informed decisions as they evaluate the technical feasibility, financial viability, environmental benefits, and alignment with business strategy and stakeholder expectations.
This strategic approach drives investments that improve operational efficiency and sustainability and contribute to long-term business success.
Q: Given the multiyear nature of the supply chain challenges, what alternatives should manufacturers consider?
A: Compound confectionery coatings are made from a combination of cocoa, sweeteners and vegetable fats other than cocoa butter. They are designed to mimic the taste and texture of chocolate while being more easily manufactured and cost-effective.
Cocoa butter is a significant cost component of chocolate. Its unique melting profile contributes to chocolate's smooth texture and melt-in-the-mouth quality. But in light of supply challenges, manufacturers can consider substituting alternative fats in place of cocoa butter in some products.
When substituting for cocoa butter, manufacturers must carefully consider controlling the commingling of products. Sometimes the fat systems are incompatible, and labeling requirements could also add complexity. Designing systems that consider these factors can add flexibility and set the operations team up for success.
For products in which the unique characteristics of chocolate are not the primary appeal, these alternatives can offer viable options to manage costs. However, it is important to remember that for premium chocolates, natural cocoa and cocoa butter are essential to brand identity and consumer satisfaction.
In addition to inflationary pressures, confectionery manufacturers must contend with labor market challenges. Emerging technologies can be used to help control costs.
