Vevey, Switzerland: Nestle SA, one of the world’s biggest buyers of cocoa beans, said on Thursday it would help cocoa farmers produce more beans to confront a sharp climb in global market prices.
The Swiss maker of Smarties, Raisinets, Kitkat bars and Nesquik chocolate milk said a fourth consecutive year of global cocoa bean shortages had driven up costs, as it announced third quarter results that were helped by good sales.
“This is unheard of for us and it is even predicted for next year, going into a fifth year,” Nestle executive vice-president Petraea Heynike said of the shortages a day after US cocoa futures hit a nearly 30-year high in New York.
Social responsibility: Nestle SA headquarters in Vevey, Switzerland. The firm plans to spend 110 million Swiss francs for the cocoa sector. Christophe Bosset /Bloomberg
Chocolate consumption has doubled in the past two decades, and over the past five years alone global consumption has risen by 14%.
But most cocoa farmers in key producing countries, mainly in West Africa, are seeing their yields fall because of ageing trees that are vulnerable to blights and small, unproductive plots, Heynike said.
“Production and grinding of the cocoa beans is not meeting the consumption, and that is leading to the very high prices that we have seen,” she said at a press conference.
The company—whose other top-selling chocolate bars include Butterfinger and Aero—said it would spend 110 million Swiss francs ($109 million) on “sustainability initiatives” for the cocoa sector in the next decade.
Those include providing millions of disease-resistant plantlets to cocoa producers which Nestle said can yield 50- 200% more than the trees in use on many farms.
It also plans to train producers in “modern best practices which could lead to significant improvements in the quality of the cocoa they produce”, said the firm, which is forecasting 2% inflation for its main raw materials which also include sugar and milk in 2009 and 2010.
The cocoa ventures are in addition to the 350 million Swiss francs ($346 million) the Nescafe and Nespresso maker has pledged to spend on sustainable coffee in the coming decade. Nestle invested a smaller amount to help farmer output—60 million Swiss francs ($59 million) for cocoa and 200 million Swiss francs ($198 million) for coffee—in the past 15 years.
“We want to up the ante in what we are doing in this area,” Heynike explained. “We want to increase productivity and sustainability.”
Nestle’s chocolate and confectionary sales rose 4% in the first nine months of 2009, outperforming the company’s overall 3.6% sales gain.
The company wants to make inroads into emerging markets including India, where it is selling new bars including Munch Guru, while also targeting high-end consumers who are turning to dark chocolates including those with the Nespresso brand.