Sweet Escape to Alternatives

The B2B food and ingredients industry is undergoing a fundamental shift as skyrocketing commodity prices, climate change, and sustainability concerns drive the search for alternative ingredients. Nowhere is this transformation more evident than in the chocolate and confectionery sectors, where traditional cocoa supply chains face unprecedented challenges. With cocoa prices hitting record highs and regulatory pressures mounting, companies are investing in innovative solutions, from cell-based cocoa to synthetic sweeteners, to secure their supply chains and meet evolving consumer expectations.

A Catalyst for Change

Cocoa prices have surged to historic levels, with New York cocoa futures exceeding $10,000 per tonne and briefly surpassing $12,000 per tonne in April last year. This sharp increase stems from supply constraints in West Africa, which accounts for over two-thirds of global cocoa production. Climate change-induced adverse weather and crop diseases have significantly reduced yields, creating a global shortage that threatens the long-term availability of chocolate.

In response, companies are looking for alternative sources of cocoa and investing in food technology startups that can provide sustainable solutions. One notable example is Mondelez International, the maker of Oreo, which participated in a $4.5 million seed funding round for Israeli startup Celleste Bio. This company is pioneering cell-based cocoa, a technology that could reduce dependence on traditional farming while ensuring a stable and sustainable cocoa supply.

A Game Changer for the Industry?

Celleste Bio and other startups using cell culture technology aim to create cocoa without relying on natural farming. By growing cocoa cells in a lab, these companies hope to mitigate the risks associated with climate change and regulatory hurdles, such as the EU's new deforestation regulations. These rules require companies to prove their cocoa was not grown on deforested land, further pressuring supply chains.

“If we don’t change how we source cocoa, we won’t have chocolate in two decades,” warns Michal Beressi Golomb, CEO of Celleste Bio. The company aims to reach cost parity with pre-2024 cocoa prices by 2027, making lab-grown cocoa a viable alternative. However, challenges remain, particularly around regulatory approval and consumer acceptance. The EU's stringent "novel food" approval process may slow the adoption of cell-based cocoa compared to the US market, where regulatory pathways for alternative food products tend to be more streamlined.

Rethinking Chocolate and Sweeteners

While cell-based cocoa presents a long-term solution, companies are also exploring other ingredient substitutions that are already market-ready. Finnish confectioner Fazer has developed a cocoa-free chocolate alternative using local malted rye and coconut oil.

Meanwhile, Cargill, the world’s largest agricultural commodities trader, has partnered with Voyage Foods to produce chocolate and nut spreads without traditional ingredients like cocoa, peanuts, and hazelnuts. By using grape seeds, sunflower protein flour, and natural flavours, these innovations offer a more sustainable approach to confectionery manufacturing.

Consumer demand is a key driver of these shifts. Adam Maxwell, CEO of Voyage Foods, notes that the conversation around cocoa prices and sustainability has changed dramatically. “Cocoa prices weren’t in the news when we started. Most people in the US or the UK couldn’t point to where cocoa was grown. Now, with prices up, it’s a lot easier to see why this is necessary.”

A Push for Healthier, Sustainable Options

Beyond cocoa, the sweetener industry is also undergoing a transformation. Tate & Lyle, once a sugar producer, has transitioned into a leader in sugar reduction technologies. The company has partnered with BioHarvest Sciences to develop synthetic plant-derived sweeteners that maintain sweetness while reducing bitterness. This investment aligns with growing consumer demand for healthier, naturally sourced alternatives to traditional sugar.

BioHarvest Sciences has spent $100 million over 17 years developing technology that extracts and amplifies plant compounds responsible for sweetness. Tate & Lyle aims to use this innovation to move away from ultra-processed ingredients, a category facing increasing scrutiny from consumers and investors alike.

According to Abigail Storms, senior vice president at Tate & Lyle, cost-effectiveness is crucial. “Our customers and their consumers want something that is cost-effective and naturally sourced,” she explains. “It’s all about democratising those benefits.”

Regulatory Hurdles and Consumer Perception

Despite the promise of these alternative ingredients, regulatory and consumer acceptance challenges remain. For example, Fazer’s cocoa-free chocolate cannot legally be labelled as "chocolate" in the EU and must instead be marketed as a "candy tablet." This highlights the regulatory hurdles that companies must navigate when introducing novel food products.

Similarly, gaining regulatory approval for cell-based cocoa in the EU will be a complex process. While consumer sentiment is slowly shifting in favour of sustainable alternatives, transparency and taste remain critical factors. Fazer’s research indicates that while some consumers are open to cell-based cocoa, they expect the taste and texture to match traditional chocolate.

Implications for the B2B Food and Ingredients Industry

The developments in alternative cocoa and sweeteners signal a significant shift for the B2B food and ingredients industry. Companies that source ingredients for chocolate and confectionery products must prepare for:

• Supply Chain Adaptation: With cocoa shortages likely to persist, businesses must explore alternative sourcing strategies, whether through lab-grown cocoa, cocoa-free substitutes, or diversified ingredient portfolios.

• Regulatory Navigation: Companies will need to stay ahead of evolving food regulations, particularly in the EU and US, to ensure compliance and market access for new ingredients.

• Consumer Education: As novel ingredients become more prevalent, businesses must invest in marketing and consumer education to build trust and acceptance for these alternatives.

• Sustainability Commitment: With increasing pressure to reduce deforestation, carbon emissions, and environmental impact, companies will need to demonstrate a clear sustainability strategy to maintain consumer and investor confidence.

Final Thoughts...

The rapid rise in cocoa prices and the push for sustainability are reshaping the B2B food and ingredients industry. As major players invest in alternative solutions, from cell-based cocoa to synthetic plant-derived sweeteners, the future of chocolate and confectionery is being rewritten. While challenges remain, particularly around regulation and consumer perception, the industry is on the cusp of a transformation that could redefine how sweet treats are produced and consumed worldwide.

For businesses operating in this space, staying ahead of these trends is crucial. By embracing innovation, adapting to regulatory changes, and prioritising sustainability, companies can not only navigate the current challenges but also seize new opportunities in an evolving market.