INTERNATIONAL  COCOA  ORGANIZATION

Market concentration and

Dr. Michele Nardella
vertical integration
Senior Econometrician
International Cocoa
Organization London, 22 September 2015
 Outlines
1. Value added by the global cocoa chain

2. Level of market concentration in the cocoa sector

3. Degree of asymmetry in the transmission of prices 
along the UK and US chains

4. Concluding remarks
 Value Added 
by the global cocoa chain
 $120

$US Billion, const 2013/14 $100

$80

$60

$40

$20

$0
2001/2002

2002/2003

2003/2004

2004/2005

2005/2006

2006/2007

2007/2008

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014
World Retail Value Chocolate Confectionery, 2013/14

World Cocoa Production Value at uiv, 2013/14

Source: Euromonitor, Global Trade Information Services, ICCO

 $8,000

$7,000
Price in Cocoa Bean Equivalent ($US/tonne, 2014)

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

cocoa beans cocoa liquor chocolate confectionery products

Source: Euromonitor, Global Trade Information Services, ICCO

Level of market concentration in the 
cocoa sector
 Retailers

Brand-name Chocolate Manufacturers

Chocolate Manufacturing
who control in‐house product definition and  
innovation as well as the related marketing 
function

Cocoa Grindings Merchant Contractors

who manufacture semi‐finished and 
finished cocoa products in accordance with 
Cocoa Trading the specifications of the brand‐name firms

Cocoa Farming
Market Concentration   Economic Inefficiencies

A consolidated industry might price its products & services to 
a level lower than otherwise would been the case

A vertical integrated enterprises are expected to lower their 
overall mark‐up because of its double marginalization 

The structure of the global cocoa chain raises concerns
 Retailers

Chocolate Manufacturing High Barrier to Entries

Cocoa Grindings
High Barrier to Entries

Cocoa Trading

Potential for the exercise of oligopolistic or 
monopolistic power in cocoa purchasing

Cocoa Farming
 Do cocoa stakeholders share the same 
bargaining power?

If cocoa stakeholders share the same bargaining power,  then we will 
observe a symmetric transmission of price changes in the supply chain
 Testing the hypothesis of symmetric price 
transmission 

1. Model the price change in the upstream process ∆ as a function of 
the positive and negative price variations occurring in the downstream process, 
∆ and  ∆ , respectively

∆ ∆ ∆

2. If the estimated coefficients are statically equal,  , then we are in presence 
of a symmetric transmission. 
UK Cocoa Supply Chain
UK Cocoa Supply Chain

CPI Sugar, Jam, Honey, Syrup, Chocolate & Confectionery,

monthly, UK Office National Statistics

PPI 1082220000: Chocolate & Food Preparations containing

Cocoa (except sweetened), monthly, UK Office National Statistics

ICCO nominal price (£/tonne), monthly, ICCO,

deflated by CPI All Item Index, UK Office National Statistics
 PPI Index 2005=100

60
70
80
90
100
110
120
130
140
150
160

2008 DEC
2009 MAR
2009 JUN
2009 SEP
2009 DEC
2010 MAR
2010 JUN
2010 SEP
2010 DEC
2011 MAR
2011 JUN
2011 SEP
2011 DEC
2012 MAR
2012 JUN
2012 SEP
2012 DEC
^

2013 MAR
2013 JUN
2013 SEP
2013 DEC
2014 MAR
2014 JUN
CPI Confectionery 

2014 SEP
2014 DEC
ICCO Price (£/tonne, const)

2015 MAR
PPI Chocolate & Chocolate confectionery 

2015 JUN
£1,000
£1,500
£2,000
£2,500
£3,000
£3,500
£4,000
£4,500
£5,000
£5,500
£6,000

Real Cocoa Price
 ∆

Retailers ∆ 0.330 ∆ 0.051 ∆

0.173 ∗ 0.147

Chocolate Manufacturing
∆

∆ 0.046 ∆ 0.006 ∆
0.069 0.062

∆
Cocoa Farming
US Cocoa Supply Chain
US Cocoa Supply Chain

PPI NDU3113303113301: Confectionery manufacturing from

purchased chocolate, monthly, US Bureau Labour Statistics

PPI WPU02550301: Chocolate and chocolate-type confectionery,

monthly, US Bureau Labour Statistics

ICCO nominal price (US/tonne), monthly, ICCO

CPI All Item Index, US Federal Reserve Bank of St Louis
 Producer price Index

100
120
140
160
180
200
220
240
260

Jan‐01
Jul‐01
Jan‐02
Jul‐02
Jan‐03
Jul‐03
Jan‐04
from coverture

Jul‐04
Jan‐05
Jul‐05
PPI Chocolate confectionery 

Jan‐06
^

Jul‐06
Jan‐07
Jul‐07
Jan‐08
Jul‐08
Jan‐09
Jul‐09
Jan‐10
^

Jul‐10
Jan‐11
Jul‐11
Jan‐12
PPI Chocolate & Chocolate confectionery 

Jul‐12
Jan‐13
Jul‐13
Jan‐14
Jul‐14
Jan‐15
ICCO Price ($US/tonne, const)

Jul‐15
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000

Real cocoa price
 Chocolate confectionery 
from coverture

Chocolate Manufacturing
∆

∆ 0.060 ∆ 0.004 ∆
0.022 ∗∗∗ 0.223

∆
Cocoa Farming
 Chocolate and 
Chocolate‐Type Confectionery

Chocolate Manufacturing
∆

∆ 0.059 ∆ 0.0005 ∆
0.026 ∗∗ 0.025

∆
Cocoa Farming
Concluding Remarks
1. There is an asymmetric distribution of bargaining 
power in the global cocoa chain 

2. There is no definite legal framework to multinational 
mergers (i.e. ongoing discussion at WTO)

3. Provide countervailing power to primary producers 
Retailers’ Market Shares in UK 2015

Tesco, 28.5
Others, 
27.7

Morrisons, 
10.9 Sainsbury, 
16.4
Asda, 16.5
Retailers’ Market Shares in US 2008

Wal‐Mart 
Source: Retaileconomics
Stores Inc, 
22.80

Kroger Co, 7.10

Others, 63.30 Safeway Inc, 
3.80
Royal Ahold 
NV, 3.00

Source: Euromonitor International

Estimated World Retail Shares of Chocolate Manufacturers in 2015
Mars Inc, 
14.50

Mondelez 
International 
Inc, 14.30
All others, 
50.60

Nestlé SA, 
12.40

Ferrero Group, 
8.20

Source: Euromonitor International, 2015

Estimated Grindings Capacity in West and Central Africa

Barry 
Callebaut, 
24.9

Others, 40.8

Cargill, 15.9

OLAM, 7.4 ADM, 11.0

Source: CCC, COCOBOD, CICC, CAN

Cocoa Trade in West and Central Africa in 2012

Cargill, 13.9

ADM, 10.7

Others, 59.7 Olam, 8.4

Barry 
Callebaut, 7.3

Source: ECOBANK, 2012

 Cocoa trading and Processing in West And Central Africa

Others 29.9 20.4 50.3

4.2 3.7 7.9

OLAM

ADM 5.4 5.5 10.9

7.0 8.0 15.0

Cargill

Barry 3.7 12.5 15.9

Callebaut
0.0 10.0 20.0 30.0 40.0 50.0 60.0

Cocoa Trade Grindings

Source: CCC, COCOBOD, CICC, CAN, ECOBANK