Chocolate at the Crossroads

The future's so bright, I gotta wear shades
I gotta wear shades

— Timbuk 3, 1986

Some of you may remember that song by Timbuk 3, a one-hit wonder band from the 1980s. In doing a bit of research for today’s column about the lyrics, I discovered that singer/songwriter Pat McDonald’s lyrics actually reflected a tongue-in-cheek view about the pending nuclear holocaust, and not a college graduate’s lucrative career.

And here I thought it was just one of those “feel good” songs you play loudly on an unusually warm spring day in March here in Chicago. Funny how things can be misinterpreted.

When Hans Vriens, the chief innovation officer for Barry Callebaut AG give his presentation on “Chocolate of the Future,” at the National Confectioners Association’s State of the Industry conference several weeks ago, complete with 10 predictions, I concluded that his talk also easily could be misinterpreted.

The headline, “Increased Cocoa Cost” on one of his first Powerpoint slides certainly didn’t encourage anyone to reach for their sunglasses. Three points justified the forecast: Increased demand, about 1 million tons more beans by 2020; a stable supply “at best”; and more income for farmers to encourage yields and quality.

Right on the heels of looming price increases came the slide screaming “Increased Margin Pressure.” Again, Vriens rattled off several reasons for the prediction: Overcapacity; increased competitive pressure, increased retailer power and influence; and private label expansion.

Had enough yet? Come on, don’t be so faint-hearted. Okay, but I warn you, I hope you’re sitting down.

“Compounds will double during the next five years,” Vriens announced. I searched the conference meeting room to catch a glimpse of artisanal chocolatiers falling out of their chairs.

So, is it time to pack in our tempering machines and consider another career?

If you recall, I said Vriens had 10 predictions. And the remaining six do bring the sun back out.

In dealing with supply pressures, Vriens cited the need to establish proprietary, model-farm co-operations as a means of making chocolate more competitive. Several of the leading cocoa and chocolate processing companies, such as Barry Callebaut, ADM, Cargill, Blommer and the like already are involved in a host of efforts designed to improve yields and quality.

This “backward migration,” as Vriens dubbed it, will go a long way to addressing farmer income issues as well as farmer succession.

With regards to increased cocoa costs, fillings address not only the prospect of using less cocoa, thus saving on recipe costs, but also margin pressures, as they add indulgence, he said. Specialty nut filings in particular have grown by 26% in 2011 from 2010.

In that same vein, he singled out inclusions and decorations as two other trends that can help chocolatiers deal with margin and competitive pressures. As examples, Vriens touted such decorations “plus” concepts as cocoa meringue granules covered in dark chocolate, crushed butter biscuits, shiny mini chocolate pearls and chocolate-covered biscuit kernels. Printing, be it flavors or holiday messages, also will loom large in the decorations plus sector.

Are you seeing more sun now?

Vrien’s last two forecasts involved competitive indulgence and regulatory pressure. I’m not going to dwell on regulatory pressure, that’s a given. However, I was intrigued by Vrien’s take on competitive indulgence, which centered on touting one’s superiority in blind taste tests with consumers, maintaining “own-able” taste profiles, getting outside quality guarantees and exploiting quality characteristics, be it in bean origin, liquor or chocolate. In other words, “You have to strut your stuff.”

 So what’s my interpretation on Vrien’s future of chocolate. No doubt in my mind, I’m bullish on what’s to come for chocolate. Besides, last time I checked, the doomsday clock hadn’t reached the midnight hour. Now, where are those sunglasses?