If you like chocolate and many people do, however most of us really do not know about the raw material, we are only concerned with the finished product. The raw material of chocolate is grown on cocoa trees and in the world of commodity exchanges there is a price for cocoa. If you compare consumption in the growing country to that of Europe, you might wonder why is the number so low? could it change and why?

In an article by Geoffrey York of the Globe and Mail, the cocoa trees in the Ivory Coast country in Africa provide 40% of the global supply of cocoa beans to Europe and the US. However, in the Ivory Coast the consumption of the finished product in a chocolate bar is about 5 ounces versus 19 pounds in Europe.

To change the marketplace in the Ivory Coast. a chocolate manufacturer owned by Cemoi of France is making chocolate bars for the country beginning with the most basic bar which sells for 10 cents. The manager of the factory Lona Ouali, estimates cocoa producing countries are retaining about 6% of the $140 billion revenue that is generated by the global chocolate industries.

The country of Ivory Coast and Mr. Ouali would like to see more value added manufacturing in the country because similar to all crops around the country, farmers and those that pick the crops do not make the bulk of the money selling the harvest to consumers. However, much of the system and transportation networks are designed for the farmers to grow the crops sell to the manufacturers who change the cocoa bean to cocoa butter or cocoa cake and export it to Europe and the US.

Mr. Ouali says it is difficult to make chocolate bars because the sugar is more expensive than in Europe, milk has to be imported from France and factory exports are hampered by customs corruption or logistical nightmares. For example, it can take 2 months to ship to the next country over which is Gabon because there are no direct roads and shipping routes. The biggest African country is Nigeria however it has protection measures for cross border production.

Linking to dividend paying stocks, ideally you want to invest in a company further up the value chain because the transportation system is designed to move the goods from one place to another for processing. When the good is processed it can be shipped back at higher margins and earn the company profits which can pay dividends. It is good to understand the raw material, but examine the finished material companies.

There are more questions than answers, till the next time – to raising questions.