Darkened duty-free shops are fuelling worldwide chocolate glut
WASHINGTON D.C.: When commodity analyst Judy Ganes spent 36 hours flying home from a business trip to Asia, it was what she didn’t see that stuck with her.
In the four airports she passed through, Ganes found almost no food courts or dutyfree shops open for business. No snow globes. No T-shirts. No special liquor bottles. And perhaps most importantly, no Toblerone and other specialty chocolates that are ubiquitous in international terminals.
Ganes’ experience underscores the challenge facing sellers of not just candy but also spirits, with the airline industry still hampered by some travellers’ reluctance to fly and travel restrictions in some countries. The drop in duty-free sales has exacerbated the global economic downturn that’s thrown the Us$107bil chocolate market into disarray, helping turn a global deficit into a glut.
“There’s no question the virus has been a hit for the duty-free industry across the board and chocolate is caught in it,” said Michael Payne, president of the International Association of Airport Duty Free Stores. “If you don’t have international flights and you don’t expect them to come back as quickly as domestic flights, then this pain is going to continue.”
There were 471,421 airline passengers in the US on June 23, compared with 2.51 million on the same weekday a year earlier, according to the Transportation Security Administration.
On her journey from Palau, Micronesia – where she was grounded for two months after the nation imposed lockdowns to stem the spread of coronavirus – to Newark, New Jersey, Ganes saw few signs of life.
“In Honolulu, there was a gift shop open to buy chocolate-covered macadamia nuts, some kids books and games, smoked tuna jerky,” Ganes said. “In San Francisco all closed. In Newark, the only thing open was one grab and go place that had a rack with chips and gummies for 50% off.”
The International Monetary Fund lowered its outlook for the world economy, signalling a further hit to cocoa consumption, which tends to closely follow gross domestic product. The demand woes are inflicting another blow to processors of the cocoa beans, already facing rising costs in part because of sustainability initiatives in West Africa, which accounts for about two-thirds of world supplies.
Top producers Ivory Coast and Ghana announced that starting with the 2020/21 crop, they would add a US$400 a tonne premium on their beans in a bid to boost farmer income. That’s pressuring margins for the world’s top makers of bulk chocolate, as well as chocolatiers such as Lindt & Spruengli, at a time when consumption faces headwinds from several fronts.
Olam International Ltd, the third-largest processor, now expects global grindings to fall 1.5% this season, the first drop in four years. Some analysts are calling for bigger declines. — Bloomberg