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Colombia: Is Cocoa The New Cocaine?

38,000 Colombian families will now work together as a new company called María del Campo, which will operate under a similar business model of that of coffee growers.

A now peaceful country is reshaping its economy

The long-term project will be based out of Bogotá and is expected to foster a 5% increase in the grain’s production in the year-to-year calculation following 2016’s record of 56,785 tons produced and exported.

Larger legal crops in Colombia imply that a greater percentage of the nation will improve its public order, access to public services, and illness control. The initiative presents great potential for investors, as current production motivated the restoration of 10,000 productive hectares, 12.5% of the total Colombian productive capacity for cocoa.

A $6 million dollar investment from the Colombian Agriculture Ministry allows as much as 110,000 nationals to improve their living conditions; although further investments from the public and private sectors is needed, perspectives remain optimistic. The long-term scenario for Colombian cocoa production would total 380 tons per year, a 633% surge from actual figures.

The Chocolate Market

Big chocolate operates in the same way crude does. The largest worldwide cocoa producers  are Mondelez, responsible for Cadbury, Mars, Nestlé, and The Hershey’s Company. Together these companies produce 360,000 tons of cocoa per year.

Net sales for the top 10 chocolate manufacturers worldwide are $83.5 billion dollars. Those gross margins are obtained through the Fair Trade for cocoa and chocolate, which sets a ton of cocoa at $1,750 dollars, including premiums. The current Colombian price for a ton of the South American grain nears $2,000 dollars, which poses a long term treat as farmer’s expectations has been consistent around $3,000 dollars.

Colombian farmers are focusing their efforts into the maximum production a single square meter of land can produce, even though the strategy is sound and consistent for the middle term it won’t suffice the long term pressures. Ivory Coast is the largest worldwide cocoa producer , it’s production is 30x Colombia’s and is seeing a rapid increase as the local government is shifting into a cooperative mindset.

The only way to survive a growing market for chocolate is through effective differentiation. Colombia’s relatively small and family-owned cocoa crops; the nation could generate higher revenues if they focus on providing a high quality grain, which could command a $100 – $300 dollar increase on a single tone under the free trade condition, a responsible benchmark for the future price of the grain.

The worldwide retail consumption of chocolate  has increased an average of 4.3% over the last three year period, a surge that responds to Bain & Company’s projections for a 2-4% expansion of the luxury market worldwide. There is room for a new player in the chocolate industry without competing with the long-established titans.

Latin American Post | David Eduardo Rodríguez Acevedo

Article originally appeared on Today Colombia and is republished here with permission.