Brexit’s effect on the UK & EU cocoa sector

The cocoa and chocolate sector in the United Kingdom (UK) has felt the impact of Brexit. Trade relations with the European Union (EU) have weakened, and increased regulation, tariffs and documentation have affected both sides. The weakening of trading ties with the EU provides an opportunity for cocoa suppliers. Now, many UK companies are looking to source directly from producing countries.

Trade barriers between the UK and EU

Brexit has had a severe impact on trade between the UK and the EU. New UK customs regulations, procedures and inspections have slowed down commercial relationships. Chocolate makers in the UK are among the most affected by Brexit. The extra bureaucratic steps and tariffs impact their imports and exports of finished products.

In 2020, chocolate products were the UK’s second-largest export in the food and drink category. About 70% of sales were for the European market. In the first two quarters of 2021, exports to the EU of chocolate products produced in the UK declined by nearly 19% compared to the same period in 2019. While UK chocolate exports to the EU declined, exports to non-EU countries like China and Australia increased. Still, increased sales to non-EU countries did not make up for the losses in exports to the EU.

Brexit has also affected the chocolate industry in EU countries. For example, the German confectionery industry reported a decrease of almost 12% in chocolate exports to the UK during the first quarter of 2021.

The future of the UK cocoa sector

In general, we expect the size of the UK chocolate industry to decline in the next 5 years. Besides the drop in UK exports to the EU, growing consumer awareness is resulting in a move from chocolate to healthier snacks. Still, the outlook for sustainable and ethically produced cocoa products in the UK is good. The market for chocolates with higher cocoa content, organic or fair trade certified with single-origin claims is forecasted to grow. This is due to UK consumers looking for healthier, more ethical and sustainable alternatives.

So, what does Brexit mean for cocoa exporters? UK imports are generally very concentrated. In 2020, UK imports of cocoa beans mainly came from Côte d'Ivoire and Ghana. Together, these countries accounted for over 65% of total UK imports. France, a non-cocoa-producing country, accounted for another 30% of UK imports. The UK also imported smaller quantities from Spain, Belgium and the Netherlands. The decline in chocolate manufacturing in the UK may reduce the demand for cocoa beans and other cocoa products. And imports from the EU will likely decline after the new border controls are in place from 2022.

New opportunities for cocoa exports from origin

EU-based exporters that would normally re-export cocoa products to the UK may change their strategy. And UK companies might look at buying directly from origin. This provides opportunities for direct and long-term relations with UK-based buyers. These opportunities will likely be for non-bulk products. Examples include cocoa with unique flavours, a good story and proven sustainability.

We do not expect Brexit to impact trade relations between the UK and the main cocoa-producing countries. The UK and several countries have already made new trade agreements. These agreements ensure the trade landscape is similar to what it was like before Brexit.

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Gustavo Ferro and Lisanne Groothuis from ProFound – Advisers In Development wrote this news article for CBI.