PLANTING COCOA CHALLENGES AND REALITY IN MALAYSIA

Lee, C. H.
Malaysian Cocoa Board, 5th-7th Flr.,Wisma SEDCO
Lorong Plaza Wawasan, Off Coastal Highway, Locked bag 211
88999 Kota Kinabalu, Sabah, Malaysia

ABSTRACT The planting of cocoa in Malaysia has gone through severe changes from about
7,000 ha in 1970s to over 400,000 ha in 1989 and hence forth has decline to about 20,000 ha
currently. Production has followed the same trend. Today, cocoa is more of a smallholders crop
and the challenges for it to be planted on a large scale remains to be seen, coupled with many
critical factors and constraints; the reality is that the smallholders will be in the domain.
Growing and Production, which is sustainable can be strengthened and reinforced with the
formation of associations and co-operatives thereby having social community strength for gains
and profits. However challenging factors that need to be looked into are traceability,
certification and sustainability from an overall perspective.

Key words: large scale, cocoa planting, challenges, smallholders, reality.

INTRODUCTION

Cocoa (Theobroma cacao L.), a member of the family-Sterculiaceae is indigeneous to the

tropical regions of Central and South America (Morris, 1882; Cuatrecasas, 1964; Burkill, 1966).
Cultivated since prehistoric times in Mexico and Central America; it has spread to the
Caribbean islands and parts of South America in the sixteenth century and then to other regions
of the tropics including the Philippines, Indonesia and Malaysia, Ceylon (now Sri Lanka) and
India, and the West African countries in the seventeenth, eighteenth and nineteenth century
respectively (Burkill, 1966; Wood, 1985). Cocoa introduced into Malaysia (then Malaya,
British North Borneo and Sarawak) for commercial cultivation in 1950s, grew to become the
third major commodity crop in Malaysia after oil palm and rubber (MPIC, 2007), has been
considered to be the crop for agricultural diversification after the 3rd Malaysian Plan in 1975.

Serious cocoa growing began with a small plot at the Agricultural Research Station, Serdang
in Peninsular Malaysia in 1934 (Faulkner and Milsum, 1938). The cocoa trees in Serdang,
which were of the Trinitario types, came into bearing in 1937 and seeds from the high yielding
trees were used for the establishment of a number of experimental plots at Kuala Lipis and
Temerloh in Pahang and Cheras in Selangor in 1937. These stocks of cocoa trees in Serdang
and Temerloh became the main sources of seeds for subsequent trial planting in Peninsular
Malaysia in the late 1940s. In 1947, Professor E.E. Cheesman assessed the prospect for the
growing of cocoa in Peninsular Malaya, Sarawak and Sabah and concluded that there was
sufficient suitable land area to support a respectable amount of cocoa cultivation in these
regions; which was an annual production of 100,000 tonnes dried cocoa beans to be well
within possibility if the crop once become established. He noted that there was a shortage of
cocoa planting materials as there were about 500 bearing cocoa trees in the whole of Malaya,
and probably less than a hundred in Borneo (Sabah and Sarawak), largely made up of the
Criollo and Trinitario types. The immediate action for development was to combine

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experimentation and bulking-up of planting materials in addition to the introduction of new
cocoa genetic materials.
The revival of interest in cocoa growing and the implementation of the Cheesman report, led
to many more importations of cocoa planting materials. The first commercial planting of cocoa
was at Jerangau in Terengganu with Trinitario types and subsequently in 1953, Amelonado
cocoa was also planted. In between 1951 and 1962, Amelonado cocoa plots were established in
Tawau and Trinitarios were planted in Tenom. Subsequent establishment was in BAL
Plantations and Quoin Hill, Tawau in 1958 (DOA North Borneo, 1957, 1958, 1959). At Quoin
Hill, Tawau, Sabah in 1957, the Department of Agriculture set programmes on varietal
improvement and agronomic practices and developed high yielding Trinitario/Upper Amazon
and Inter-Upper Amazon hybrids known as Sabah mixed hybrids, which are more vigorous
and more tolerant to diseases than the Amelonado (Phua, 1982; Chong and Lee, 1982).

Challenges of the 1980s

The availability of superior planting materials, planting technology and the implementation
of the government policy to encourage the growing of cocoa as an intercrop with coconuts
coupled with the high favourable prices led to the rapid expansion of the cocoa planting
industry in Malaysia (Table 1 and Fig. 1). The area planted with cocoa grew to 123,855 ha, with
a production of 36,500 tons of dried cocoa beans in 1980 and expanded further to a record of
414,236 ha in 1989 and a peak production of 247,000 tons dried cocoa beans in 1990 (Tables 1
and 2; Figs. 1 and 2). The high cocoa cultivation growth rate in the 1980s was attributed to the
unprecedented high cocoa bean prices in the 1970s and 1980s (ICCO, 2008).

Although prices were high in the 1970s, field cocoa productivity was low (<500kg/ha) due to
the public keen interest in planting had use unselected cocoa materials to expand planting that
led to the sudden increase in area. Sabah was the largest cocoa growing state in Malaysia. At its
peak, Sabah contributed 205,260 ha (49.6% of the national total) in 1989 and 145,000 tons of
dried cocoa beans (58.7% of the national total) in 1990. This was followed by Peninsular
Malaysia with 138,773 ha (33.5%) and 80,800 tons (32.9%), and Sarawak with 70,203 ha
(16.9%) and 21,200 tons (8.6%) respectively (Tables 1 and 2; Figs. 1 and 2).

The 1990s until 2005

Post 1990s marked the decrease in cocoa planting area with decline in cocoa bean production.
This was due to poor world cocoa prices, labour constraints, competition for land use from oil
palm cultivation and the severe spread and infestation of the Cocoa Pod Borer. With an area of
393,465 ha cultivated in 1990, it decreased to 190,127 ha in 1995 (Table 1 and Fig. 1), a
severity of more than half the reduction. Reduction in area cultivated continued severely until
33,398 ha in 2005. CPB infestation initially noted in an estate in Tawau, Sabah in 1980 spread
rapidly to Peninsular Malaysia by 1985 and hence forth throughout the country. The spread was
attributed to not being able to correctly identify the problem when it first appeared and the
continued dispersion of planting materials from Sabah to Peninsular in the late 1980s.
Subsequently, there was continuous effort to contain (restriction of material movement across
areas) and control (chemical spraying, bagging and others) the pest in infested cocoa areas.
Despite the efforts, there was limited success. Coupled to the toll of severe pest infestation, the
lower than expected productivity and decline efficiency in crop management especially in
estates, were other key contributing factors to the decline.

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From 2006 onwards

Fluctuations with small decline in cocoa areas planted were noted from 2005 (33,398 ha) till
2010 (19,417 ha.), about 2000 ha loss annually over the period (Table 1 and Fig. 1). Throughout
this duration there were immense governmental efforts to support cocoa planting especially in
the rural and outlying areas of the country, noting that cocoa was a smallholders crop and
would improve the livelihood and elevate income with reduction in poverty of the growers.
With governmental intervention, the area cultivated improved by 2011 to 20,544 ha, however
the production of dry cocoa beans had slipped to less than 5,000 metric tons. In 2012, the effort
would be to increase new area cultivation of 1,567 ha in addition to the rehabilitation of low and
unproductive areas. Under the National Commodity Policy annually new areas of 2000 ha will
be cultivated with cocoa to establish a targeted area of about 40,000 ha to be planted with cocoa
and an annual production of dry cocoa beans of > 60,000 tons. by the year 2020. This could be
supported by the firmer price of cocoa beans that is expected in view of the world supply that is
expected to be tight and will be in deficit due to higher world demand as there is increase in
consumption and better markets from new and emerging economies such as that of Chin, India
and Brazil. There is an apparent uptrend of the cocoa dried bean price throughout the three
regions in Malaysia as that of world cocoa prices (Fig. 3).

Structural changes in the cocoa planting industry in Malaysia over these years were noted
whereby in the beginning of cocoa planting, a large majority of the cocoa cultivated was under
the plantation sector particularly in the state of Sabah and Peninsular Malaysia, while, the
smallholder was noted to be the dominant sector in Sarawak (MCB, 2001a, 2008a). Following
the plantation sector shifting from cocoa to oil palm cultivation, the smallholder sector soon
became the major player in cocoa cultivation from 1988. In 2007, the cocoa planting area under
smallholder sector was 24,762 hectares (85% of national total) as compared to 4,469 hectares
(15%) under the plantation sector (Table 3). By 2011, the total cocoa area under smallholders
was 19,464 ha (95% of total cultivation) and only 1,080 ha (5%) under estates. The continuous
expansion with incentives provided by the government and the need to upgrade and improve the
livelihood of the outlying and rural areas of the country; it is inevitably, the smallholders will be
the dominant cocoa bean producer. The continuous labour constraint factor that remains to be
the main issue with estates will suppress, hamper and also a deterrent to any efforts for estate
planting of cocoa.

By 2005 although the area cultivated had declined to 33,398 ha, the production of dry cocoa
beans was 27,964 tons; supporting a far better productivity as to when cocoa planting area
began to increase in the 1970s (Table 1 and Fig.1). The governments efforts to increase
productivity through introduction of selected cocoa planting materials that ensures high yield
from the onset of cocoa planting programs is very apparent. One can note that subsequent to the
decline in cocoa area cultivated in 1990s, cocoa productivity continued to increase from 628
kg/ha in 1990 to 692 kg/ha in 1995, 927 kg/ha in 2000 and then to between 803 kg/ha and 1,203
kg/ha in the period between 2001 and 2007 (Table 4). Prior to the year 2000, the plantation
sector had better productivity than the smallholder sector. However, from 2000 onwards, the
smallholder sector had averaged annual cocoa productivity of between 898 kg/ha in 2004 and
1,339 kg/ha in 2007, which were higher than those of the Plantation sector by a factor of 49.6%
and 298% in the respectively years. From 2006-2010, the productivity of estates had dropped to
between 300-400 kg/ha whereas the smallholders were able to achieve between 1,200-2,000
kg/ha; a reflection of apparent non-attended fields of estate in contrast to intensive and optimum
management of fields by the smallholders.

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Table 1. Cocoa cultivated area by region in Malaysia.

Cocoa cultivated area (hectares)

Year
Peninsular Sabah Sarawak Malaysia
Malaysia
1955 265 31 - 296
1960 577 1,170 - 1,747
1965 761 2,374 - 3,135
1970 3,362 4,019 - 7,381
1975 17,587 9,823 2,870 30,280
1980 57,345 57,984 8,526 123,855
1985 106,932 172,713 24,252 303,897
1989 138,773 205,260 70,203 414,236
1990 137,931 179,648 75,886 393,465
1995 47,704 113,691 28,732 190,127
2000 15,142 51,810 8,814 75,766
2005 8,894 21,591 2,913 33,398
2006 9,085 18,545 3,752 31,382
2007 6,724 17,890 4,617 29,231
2008 6,196 8,876 5,630 20,702
2009 3,662 6,260 7,415 17,338
2010 3,920 6,809 8,688 19,417
2011 4,051 6,935 9,557 20,544

Sources : DOA Malaya (1956) ; DOA North Borneo (1959, 1961) ; DOA Sabah (1966, 1971, 1976)
DOS Malaysia (1988); MCB (1992, 2001a, 2008a, 2012).

Figure 1. The cocoa cultivated area by region in Malaysia.

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Table 2. Dried cocoa bean production by region in Malaysia.

Dried cocoa bean production (tonnes)

Year

Peninsular
Malaysia Sabah Sarawak Malaysia

1970 2,000* 2,000*

1975 13,000* 13,000*
1980 22,678 12,358 1,464 36,500
1985 32,616 65,395 9,989 108,000
1989 80,000 143,000 20,000 243,000
1990 80,800 145,000 21,200 247,000
1995 34,073 91,953 5,449 131,475
2000 22,536 44,546 3,180 70,262
2005 11,121 14,570 2,273 27,964
2006 15,259 14,818 1,860 31,937
2007 21,871 11,474 1,835 35,180
2008 21,067 5,475 1,413 27,955
2009 13,213 3,688 1,251 18,152
2010 10,654 3,673 1,327 15,654
2011 2,040 1,754 811 4,605
Sources : DOS Malaysia (1988)* ; MCB (1992, 2001a, 2008a, 2012).

Figure 2. Dried cocoa bean production by region in Malaysia.

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Figure 3. Dried cocoa bean prices by region in Malaysia.

Table 3. Malaysian cocoa cultivated area by region and sector in 1988, 2007 and 2011.

Cocoa cultivated area (hectares)

1988 2007 2011

Region
Smallholder Plantation Total Smallholder Plantation Total Smallholder Plantation Total

Peninsular 90,441 51,309 5,948 776 6,724 3,827 224

141,750 4,051
Malaysia (64%)* (36%) (88%) (12%) (95%) (5%)

58,712 2,932 4,617 0 9,557

Sarawak 61,644 4,617 0 9,557
(95%) (5%) (100%) (0%) (100%)

57,393 147,073 14,197 3,693 6,079 856

Sabah 204,466 17,890 6,935
(28%) (72%) (79%) (21%) (88%) (12%)

206,546 201,314 24,762 4,469 19,464 1,080

Malaysia 407,860 29,231 20,544
(51%) (49%) (85%) (15%) (95%) (5%)
Source: MCB (2008a, 2012).
* Figure in parenthesis denotes percentage of cocoa cultivated area by sector.

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Table 4. Average productivity of cocoa cultivated by sector in Malaysia.

Average productivity (kg/ha)

Year
Plantation 1 Smallholder *
Malaysia 2

1990 - - 628
1995 - - 692
1996 761 689 716
1997 805 759 756
1998 864 747 770
1999 864 838 835
2000 815 1,000 939
2001 921 1,087 1,013
2002 734 1,156 999
2003 527 962 809
2004 600 881 807
2005 534 946 841
2006 429 1,205 1,068
2007 438 1,544 1,396
2008 316 2,033 1,721
2009 329 1,914 1,668
2010 340 1,440 1,330
Source: 1. MCB (1997, 1998, 1999, 2000, 2001b, 2002, 2003, 2004a, 2005, 2006, 2007, 2008c).
2. MCB (2001a, 2008a).
* Estimated from the relevant data in MCB (1997, 1998, 1999, 2000, 2001b, 2002, 2003, 2004a, 2005, 2006, 2007, 2008c).

Malaysia has dropped from being once the fourth largest cocoa producer in the world in
1989/1990 to the twelfth largest in 2006/2007 (Table 5). In 2007, 17,890 hectares or 61.2% of
the national total cocoa cultivated area were in the state of Sabah, contributing a production of
11,474 tons (32.6%) dried cocoa beans. It was followed by Peninsular Malaysia with 6,724
hectares (23.0 %) and 21,871 tons (62.2%) and Sarawak with 4,617 hectares (15.8%) and 1,835
tons (5.2%) respectively (Tables 1 and 2). The poor management input from the estate sector
due to labour constraints continued to have a toll on production and area cultivated despite the
governments effort to prop up production to meet the industrys grinding needs of around
300,000 tons over the last few years.

COCOA DOWNSTREAM INDUSTRY

The cocoa downstream industry in Malaysia consists of players involved in cocoa grindings,
chocolate and chocolate confectionery and hand-made chocolate with cocoa grindings being the
dominant activity. The chocolate confectionery is relatively small but growing and the hand-
made chocolate industry is emerging.

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Table 5. Major cocoa producing countries in 1989/1990, 2006/2007 and 2010/2011.

1989/1990 2010/2011
2006/2007

Production Production Production

Country
(000 tons) Country (000 tons) Country (000 tons)

Cote dIvoire Cote dIvoire 1,229 Cote dIvoire 1511

714
Brazil Ghana 615 Ghana 1025
348
Ghana Indonesia 520 Indonesia 440
295
Malaysia Nigeria 190 Nigeria 240
243
Nigeria Cameroon 160 Cameroon 229
160
Cameroon Brazil 126 Brazil 200
126
Indonesia Ecuador 115 Ecuador 161
115
Ecuador Papua New 50 Dominican 54
95
Dominican Guinea Republic
58
Republic Dominican 44 Peru 54
Columbia Republic 36 Papua New 47
50
Mexico Mexico Guinea
43
Papua New Columbia 35 Colombia 35
41
Guinea Malaysia 33 Mexico 20
Source : ICCO (1991, 2008, 2012)

Cocoa Grindings Industry

The expansion of the cocoa planting industry in Malaysia led to the establishment of the cocoa
grindings industry in 1973. The Malaysian cocoa grindings industry grew by leaps and bounds,
a consequence of the expansion of cultivation, an annual grindings of 6,000 tons of cocoa beans
in 1980, reaching 70,000 tons in 1990, 139,443 tons in 2000 and 310,001 tons in 2007 and has
been around 300,000 tons (Table 6) although the capacity is 360,000 tons. Malaysia today is the
fifth largest cocoa grinder in the world after Netherland, USA, Cote dVoire and Germany, the
second largest among the origin grinders after Cote dIvoire and the largest grinder in Asia
(Table 7).

In 2008, there were nine cocoa grindings factories in Malaysia (Table 8) with a potential
annual grindings capacity ranging between 5,000 tons and 100,000 tons per factory (MCB,
2008b ; Ng, 2007). The development of Malaysia as a regional cocoa processing and trading
centre in Asia can be achieved by virtue of the fact that if Switzerland and Belgium could be
reknown chocolate producers in the world despite not producing a single cocoa bean; Malaysia
could aim to be one by having in place the right environment and incentives. Today we are the
leading Asian Centre and needs to nurture further the objectives strategically.

The robust growth of the cocoa grindings industry in Malaysia was attributed to a number of
favorable factors. These factors include increase of world cocoa consumption at between 2% -
3% per annum with an annual growth rate of between 5% - 15% in the emerging markets of
Asia and South East Asia (ICCO, 2008), political and economic stability in Malaysia, near
sources of raw materials, installed grinding capacity, strong foundation for quality assurance
and R&D and organized promotional activities through public sector assistance (Ng, 2007).

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Table 6. Grindings of cocoa beans in Malaysia.

Year
Grindings (tonnes) Year Grindings (tonnes)

1980 6,000 1993 105,000

1981 7,000 1994 105,497
1982 9,000 1998 100,100
1983 15,000 1999 110,440
1984 26,000 2000 139,443
1985 27,000 2003 167,595
1986 31,000 2004 229,649
1987 37,000 2005 258,647
1988 44,000 2006 270,261
1989 51,000 2007 310,001
1990 70,000 2008 323,653
1991 95,000 2011 299,271
1992 100,000
Sources : MCB (1992, 2001a, 2008a, 2012).

Table 7. Major cocoa grindings countries in 1989/1990, 2006/2007 and 2010/2011.

1989/1990 2006/2007 2010/2011

Grindings Grindings Grindings
Country (000 (000 (000
Country Country
tonnes) tonnes) tonnes)
Netherlands Netherlands 537
United States 273 470
United States Germany 439
Germany 273 418
Cote dIvoire Cote dIvoire 361
Netherlands 241 360
Germany USA 401
Brazil 236 357
Malaysia Malaysia 305
United Kingdom 120 301
Brazil Brazil 239
Cote dIvoire 112 224
France Ghana 230
Malaysia 70 162
United Indonesia 190
Singapore 65 132
Kingdom France 150
France 59 130
Indonesia Spain 86
Italy 51 212
Ghana UK 87
Belgium/Luxembourg 47 85
Singapore Singapore 83
Columbia 45 83
Spain
Sources : ICCO (1991, 2008, 2012)

Table 8. Cocoa grinding companies in Malaysia, 2007.

Company name Location

Barry Callebaut Malaysia Port Klang, Selangor
Cocohouse Industries Sdn Bhd Port Klang, Selangor
Delfi Cocoa (M) Sdn Bhd Pasir Gudang, Johor
Guan Chong Cocoa Manufacturer Sdn Bhd Pasir Gudang, Johor
JB Cocoa Sdn Bhd Gelang Patah, Johor
K.L. Kris Food Industries Sdn Bhd Kajang, Selangor
Kokobudi Sdn bhd Pasir Gudang, Johor
Majulah Koko Tawau Sdn Bhd Tawau, Sabah
Malaysia Cocoa Manufacturing Sdn Bhd Seremban, Negeri Sembilan
Source : MCB (2008b).

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Chocolate Confectionery Industry

In 2007, the chocolate and chocolate confectionery industry in Malaysia consists of > 40
companies (MCB, 2008b) operating at varying capacity with an estimated annual production of
about 30,000 tons. Over 90% of the annual chocolate and chocolate confectionery productions
were exported (MCB, 2008a). The domestic consumption of chocolate confectionery in
Malaysia increased with a growth rate of around 5% in both value and volume terms, with
count-lines being the most dynamic (Euromonitor International, 2008a). The sale volume and
value of chocolate confectionery increased from 8,100 tons with a value of RM285.6 million in
2002 to 9,200 tons and RM346.4 million in 2006 respectively and the performance of the
respective sub-sectors of chocolate and chocolate confectionery products had continuous
increase until 2011 (Table 9). The multinational companies remained the dominant players in
the chocolate confectionery in Malaysia with Cadbury, Nestl and Mars South Asia being the
leaders capturing 23.3%, 22.3%, and 11.9% of retail value respectively in 2006 (Table 10).

Table 9. Sale volume and value of chocolate confectionery by sub-sectors

in Malaysia in 2002, 2007 and 2011.

2002 2007 2011

Sub-sector
Sale volume Sale value Sale volume Sale value Sale volume Sale value
(000 tonnes) (RM million) (000 tonnes) (RM million) (000 tonnes) (RM million)

Countlines 4.3 (52%) 143.7 (50%) 5.0 (54%) 178.2 (51%) 5.7 (53%) 207.8 (50%)

Tablets 2.2 (28%) 65.6 (23%) 2.3 (25%) 76.1 (22%) 3.0 (28%) 102.7 (25%)

Bagged selflines / soflines 1.2 (15%) 44.6 (16%) 1.4 (15%) 54.3 (16%) 1.5 (14%) 62.0 (15%)

Boxed assortments 0.5 (6%) 31.5 (11%) 0.6 (6%) 37.8 (11%) 0.6 (5%) 44.0 (10%)

Total 8.1 (100%) 285.6 (100%) 9.2 (100%) 346.4 (100%) 10.8 (100%) 416.5 (100%)
Source : Euromonitor International (2008a, 2012).

Hand-made Chocolate Entrepreneurs

The growth of the cocoa grindings industry led to the emergence of hand-made chocolate
entrepreneurs in Malaysia. In 2008, the number of registered hand-made chocolate companies
had increased to twenty seven of which eleven were in Selangor, five in Sabah, three each in
Kuala Lumpur and Perak and one each in Johor, Kedah, Labuan, Putrajaya and Sarawak (Table
11). Over the years from 2008 2011, the number of entrepreneurs had increased to >100
covering from beginners to those having business volume of almost RM1 mil. per year.

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Table 10. Share of leading chocolate confectionery companies in retail value in Malaysia for
the year 2006.

Shares in retail
Company name
value (%)
Cadbury Confectionery (M) Sdn Bhd 23.3
Nestl (M) Bhd 22.3
Mars South Asia 11.9
Network Foods (M) Sdn Bhd 8.1
Ferrero SpA 5.6
Maestro Swiss Chocolate Sdn Bhd 5.6
URC Snack Foods (M) Sdn Bhd 4.9
Apollo Food Industries Sdn Bhd 2.3
Chocoladefabriken Lindt & Sprngli AG 1.5
Khee San Food Industries Sdn Bhd 0.9
Kraft Foods (M) Sdn Bhd 0.8
Hershey Co, The 0.8
StorcKG, August 0.6
Beryl Confectionery & Chocolate Sdn Bhd 0.2
Others 11.4
Source : Euromonitor International (2008a).

Table 11. List of hand-made chocolate entrepreneurs in Malaysia, 2008.

Company name Location

Afila Receta Sdn Bhd Shah Alam, Selangor
Aniza Enterprise Seri Kembangan, Selangor
AOM Food Industries Gombak, Kuala Lumpur
Borneo Chocolate Product Kuching, Sarawak
Dazzle Food Enterprise Hulu Langat, Selangor
Dazzling Chocolate dan Rakan-Rakan Labuan
Desire Enterprise Putrajaya
Extreme Success Enterprise Balakong, Selangor
Fay-TTrading Ranau, Sabah
Forestero Foods & Beverages Seri Kembangan, Selangor
Hazz Chocolate Sandakan, Sabah
Ibu Siti Enterprise Kuala Lumpur
Iced Cool Enterprise Ranau, Sabah
Impress Products Sdn Bhd Dengkil, Selangor
Innovative Chocoprint Enterprise Kota Tinggi, Johor
Izla Resources Enterprise Bandar Baru Bangi, Selangor
JSV Food & Beverages Sdn Bhd Serendah, Selangor
Langkapura Food Industres Langkawi, Kedah
Mariani Hee dan Rakan Kongsi Tenom, Sabah
Mutiara Rica Sdn Bhd Sg. Buloh, Selangor
Pelangi Mellanium Enterprise Bandar Baru Bangi, Selangor
Rab Nine Enterprise/Hezlique Kuala Lumpur
Simply Chocolate Sdn Bhd Kota Kinabalu, Sabah
Sri Ayu Enterprise Hutan Melintang, Perak
Sri Indera Enterprise Teluk Intan, Perak
Tasneem Enterprise Tronoh, Perak
World Palace Enterprise Bandar Baru, Bangi, Selangor
Source : MCB (2008b).

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COCOA TRADE

Export

Export of cocoa beans from Malaysia increased from 30,640 tons at a value of RM162 million
in 1980 to 189,387 tons with a value of RM708 million in 1988 (Table 12). However, it began
to decline since 1989 to 17,927 tons at a value of RM111 million in 2007. The decline in the
export of cocoa beans from Malaysia was the consequence of the progressive reduction in the
national cocoa planting area and the production of cocoa beans (Tables 1 and 2).

Export of cocoa products, which include cocoa butter, cocoa powder, cocoa paste, chocolate and
cocoa shells and husks, show a general upward trend both in volume and value over the years
(Table 12). In 2007, Malaysia exported 103,635 tons of cocoa butter at a value of RM1,556.7
million, 116,881 tons of cocoa powder at RM476.1 million, 29,360 tons of cocoa paste at
RM215.5 million, 24,254 tons of chocolate at RM220.9 million and 8,517 tons of cocoa shells
and husks at RM2.1 million. The total revenue from the export of Malaysian cocoa beans and
cocoa products increased from 202 million in 1980 to 756 million in 1990 and then decreased to
RM595 million in 2000 and it was followed by a recovery since then to RM2,587.6 million in
2007 (Table 12). The increase in total export revenue was attributed largely to the increase in
export of cocoa products. In 1980, 80% of the total cocoa export revenue was from the export
of cocoa beans and only 20% from cocoa products. Whereas in 2007, 95.6% of the cocoa
export earning was from the export of cocoa products and the remaining 4.5% was from cocoa
beans.

Import

Tables 13 shows that import of cocoa beans decreased from 1,347 tons at a value of RM7.6
million in 1980 to 50 tons at RM240,000 in 1985 which was largely attributed to the increase in
local production of cocoa beans to meet the local grindings demand. There has been a surge in
import of cocoa beans since then increasing to 106,701 tons at a value of RM292.4 million in
2000 and then to 438,956 tons valued at 2,704.4 million in 2007, and by many folds to almost
295,000 tons in 2011 where local production was <5,000 tons. The increase in volume and
value of import of cocoa products which include cocoa butter, cocoa paste, cocoa powder,
chocolate and cocoa shells and husks was expected to be significant (Table 13) in view of the
declining production. The total value for the import of cocoa products increased from RM7.8
million in 1980 to RM19.7 million in 1990, RM87 million in 2000 and RM259 million in 2007.
The total value for import of cocoa beans and cocoa products increased from RM15.4 million in
1980 to RM20 million in 1990, RM380 million in 2000 and RM2,963.4 million in 2007 (Table
13). In 1980, 49.3% of the total import value was from the import of cocoa beans and 50.7% of
import value from cocoa products. In 2007, 91.3% of the total import value was for the import
of cocoa beans and only 8.7% for the import of cocoa products. This is apparent due to the
lack of locally produced cocoa beans to meet the demand for local grindings coupled with the
rapid expanding local cocoa grindings activity in contrast to the declining local production of
cocoa beans (Tables 2 and 6). The imbalanced growth of local production and grindings of
cocoa beans turned Malaysia from previously a net exporter of cocoa beans to become a net
importer of cocoa beans as of 1997 (Tables 12 and 13) and an exporter of cocoa products.

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 Table 12. Malaysian export of cocoa beans and cocoa products.

year Cocoa beans Cocoa shells and Cocoa paste Cocoa butter Cocoa powder Chocolate
husks Total
Value
Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value (RM
(tonnes) (RM000) (tonnes) (RM000) (tonnes) (RM000) (tonnes) (RM000) (tonnes) (RM000) (tonnes) 000)
(RM000)
1960 58 116 - - - - - - - - - - 116
1965 425 971 - - - - - - - - - - 971
1970 2,406 5,435 - - - - 0.06 0.3 5.7 14.2 0.1 33 5,483
1975 11,760 35,321 - - 0.3 0.6 85 1,184 5.3 271 44 398 37,175
1980 30,640 161,860 - - 21 41 2,691 34,735 1,214 3,416 347 2,520 202,572
1985 81,465 409,459 - - 2,637 4,854 9,231 117,328 4,424 10,975 374 3,049 545,665
1988 189,387 708,275 - - 2,259 4,594 15,578 151,428 9,786 27,909 2,106 14,885 907,191
1990 162,618 448,452 - - 9,664 16,338 29,097 241,307 10,347 24,406 4,322 25,331 755,834
15

1995 52,533 171,981 5 2,668 12,644 24,228 40,292 330,511 23,308 42,174 5,150 56,678 628,240
1997 30,960 114,114 1,303 1,179 12,368 36,017 36,388 402,700 26,834 51,127 5,710 65,142 670,279
2000 11,408 32,838 3,676 1,505 20,144 66,367 41,496 318,640 31,800 97,589 6,872 79,710 596,649
2001 16,244 56,733 5,538 1,927 18,702 69,361 43,031 319,481 32,863 122,143 9,237 91,942 661,587
2002 21,109 110,239 6,329 3,474 16,203 119,404 36,067 356,084 33,343 206,891 11,050 110,543 906,635
2003 13,061 82,458 14,828 10,678 21,351 187,905 49,763 561,665 36,301 273,622 15,300 154,260 1,270,588
2004 9,377 52,276 19,111 75,837 20,830 167,650 72,706 798,209 66,554 425,248 14,953 169,220 1,688,440
2005 9,249 50,259 9,596 21,440 26,945 151,460 86,482 1,169,194 78,679 352,909 20,749 196,183 1,941,445
2006 13,512 75,992 4,124 1,509 28,241 159,856 95,344 1,303,699 95,996 325,690 27,787 211,354 2,078,100
2007 17,927 116,286 8,517 2,060 29,360 215,503 103,635 1,556,697 116,881 476,138 24,254 220,879 2,587,563
2008 7,634 60,176 24,984 8,814 33,806 257,984 103,847 2,095,972 140,886 657,770 25,771 266,672 3,347,388
2009 14,390 130,419 8,653 2,411 36,550 313,070 99,821 1,927,982 101,985 623,220 21,637 232,701 3,229,803
2010 23,708 273,441 7,997 3,699 41,205 481,747 105,952 1,977,058 112,454 1,180,650 22,928 272,872 4,189,465
2011 25,439 255,351 4,982 2,515 59,793 699,231 117,561 1,369,626 148,938 1,547,618 25,687 341,094 4,215,435

Sources : DOS Sabah (1966) ; DOS Malaysia (1988) ; MCB (1992,2001a, 2008a, 2012)

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 Table 13. Malaysian import of cocoa beans and cocoa products.

Year Cocoa beans Cocoa shells and Cocoa paste Cocoa butter Cocoa powder Chocolate
husks Total
Value
Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value (RM000)
(tonnes) (RM000) (tonnes) (RM000) (tonnes) (RM000) (tonnes) (RM000) (tonnes) (RM000) (tonnes) (RM000)
1970 1 2 - - 0.3 5.3 5.3 28.4 215 662 2.2 1,109 1,806
1975 27 90 - - 7.5 265 51 1,171 803 2,253 4.3 3,929 7,708
1980 1,347 7,603 - - 0.6 4.4 17 287 724 3,781 369 3,762 15,438
16

1985 50 240 - - 12 82 0.2 5 106 328 571 5,561 6,138

1990 101 123 - - 141 746 17 81 276 878 1,477 18,615 19,779
1995 39,704 123,737 0 183 141 142 117 1,084 731 1,973 3,229 36,827 164,550
1997 37,127 145,324 54 178 51 142 79 785 379 1,017 4,239 56,368 203,814
2000 106,701 292,410 6 9 34 201 2,118 18,941 538 2,373 4,735 65,741 379,675
2001 114,475 356,600 213 219 183 1,212 967 7,860 2,478 7,579 6,283 82,821 456,292
2002 99,192 545,424 9 18 349 2,399 52 468 2,611 14,040 9,087 97,636 659,986
2003 234,773 1,076,554 198 439 443 3,491 705 6,084 2,948 18,835 7,194 112,727 1,218,130
2004 244,216 1,292,229 291 1,212 256 2,788 365 4,937 1,830 13,976 6,520 125,373 1,440,515
2005 304,369 1,480,746 3,971 13,269 682 5,433 746 10,978 2,200 12,448 6,419 132,894 1,655,778
2006 403,911 2,145,281 10,319 18,299 866 7,695 173 2,315 1,982 9,767 7,626 153,696 2,337,053
2007 438,956 2,704,439 16,700 35,656 1,237 11,381 1,357 24,330 2,849 15,615 7,569 171,998 2,963,419
2008 523,926 3,926,528 14,624 42,816 1,793 14,933 1,766 31,017 4,357 22,629 13,068 240,382 4,278,305
2009 302,270 2,705,878 6,202 18,543 5,286 35,339 910 18,601 4,807 26,462 12,452 271,630 3,076,452
2010 319,441 3,121,439 4,538 9,048 11,366 131,560 1,187 16,500 10,905 104,123 14,953 297,018 3,679,687
2011 327,084 3,083,055 3,809 4,639 13,131 175,794 4,977 51,696 28,016 286,814 20,480 371,026 3,973,023
Sources :DOS Malaysia (1988) ; MCB (1992, 2001a, 2008a, 2012).

14
REALITIES AND THE FUTURE

Cocoa Planting Industry

The decline of the cocoa production area is apparently very drastic from the 1990s till
2005, though a further 6.8% decline in 2006 was noted, there was a slight recovery of
12.1% increase in cocoa bean production in 2007 over that in 2006 (Figs. 1 and 2). The
increase in production is attributable to the improvement in national productivity (Table
4), which has been the main focus and objectivity of the Malaysian Government. From
2007 onwards, with the labour constraint and the prevailing high palm oil prices, which
encourage oil palm cultivation, the decline in plantation cocoa planting area is apparently
arrested by 2010 and increase in area cultivation has been attained to 20,544 ha in 2011.
The increase in area cultivation targeted by the National Commodity Policy to attain
40,000 ha and a production of > 60,000 m tons by 2020 would be more than welcome by
the downstream industry players. This does confound the earlier onset of cocoa
development of the 19th century where Cheesman (1948) concluded that there was
sufficient suitable land area to support a respectable amount of cocoa cultivation in these
regions; which was an annual production of 100,000 tonnes dried cocoa beans to be well
within possibility if the crop becomes established.

The increasing disparity in the imbalanced growth between local cocoa bean production
and local cocoa grindings activity resulted in the need for increasing importation of
cocoa beans and the outflow of foreign exchange amounted to billions of Ringgit
Malaysia annually, hopefully can be greatly reduced following the Malaysian
governments policy to increase local production of cocoa beans especially through a
dual prong objective of increasing and enhancing rural and outlying areas planting cocoa.
This decision not only alleviate poverty and improve the livelihood of the countryside but
is also in line with the objectives of the national policies, i.e. National Agricultural Policy
(NAP) and the Industrial Master Plan (IMP), aiming at achieving a more balanced growth
between upstream and downstream activities for sustainable development of the cocoa
industries as a whole and to reduce the need for importation and outflow of foreign
exchange.

However, the prospect for Malaysia to increase local production of cocoa beans rests very
much on the efforts to be taken in restoring and strengthening the confidence of the
growers and farmers in realizing the true economic potential and removing the many
misconceptions as perceived in cocoa cultivation. Cocoa cultivation is very much an
economically viable and sustainable investment, for the scope for improvement in
productivity where materials with potential yield as high as 8 tons/ha has been developed,
efficiency in production with good management and quality through the adoption of good
agricultural practices. Technology development in agriculture has covered the scope of
precision farming and this pose a challenge for further improvement. The revival of
cocoa planting with increasing acreage is very much a reality and the scope and focus
would be on smallholders. The efforts on technology transfer for effective technology
delivery and adoption by farmers is vital. Indeed, the resilience of smallholders to
achieved and strengthened cocoa bean production could be enhanced by the formation of

15
Cocoa Growers Associations in the respective regions. This also facilitates the sharing of
knowledge and technical know-how among the farmers, thereby contribution to better
productivity within the holdings. Cohesively as co-operatives, they could be a business
entity and a force to reckon with bringing more benefits to the community itself. This
enables the government to have easy access to channel incentives and uplift the
livelihood of the rural community; thereby bridging/ reducing the wealth gap between the
towns and rural areas and also prevents social problems arising from rural to towns
emigration/exodus. Furthermore, technology development through R&D conducted by
the Malaysian Cocoa Board in addressing issues of traceability and certification, the
concept of from farm to table and good compliance to food safety and sustainability are
all challenges to be overcome by the farming community with assistance of the
R&D&Innovations of the research Organisations; which hold true for the Malaysian
Cocoa Board.

The increase in hectarage of cultivation as from 2011 onwards has the emphasis on
smallholders. The National Commodity Policy until the year 2020 with annual increase
of 2,000 ha thereby reaching about 40,000 ha and dry cocoa bean production of about
60,000 m tones, would meet the grinders needs of about 20% capacity with the balance
needs coming from imports. With the competition from palm oil and rubber, coupled
with labour constraints, it is unlikely for cocoa to be focus by estates; thus dominance is
by the smallholders. Achieved under such a scenario, is the reduction of poverty i.e.
increase in productivity and enhance income of the rural areas and thereby raising the
standard of living among the rural community bringing about transformation of the rural
sectors; bridging the gap and reducing the exodus of work force towards the cities. This is
a very important achievement from the social and economic framework of the country,
accelerating equal wealth creation and distribution across the country.

Cocoa Downstream Industry

The stabilization of cocoa grindings in Malaysia currently at around 300,000 tons, maybe
a temporary respite to the supply and demand of beans in addition to the upheavals of the
world economy. However the grindings is expected to continue and expand further in the
future to between 350,000 to 400,000 tons. The positive growth of the local grindings
industry is attributed to the availability of the installed grindings capacity, and the
expected increase in market share for Malaysian cocoa products in the traditional and
emerging markets through strengthening linkages and the promotional activities in the
domestic and international markets and the development of a new range of quality cocoa
products to meet market requirement. However, the future growth trend of the Malaysian
cocoa grindings industry will be determined very much by the capability in strengthening
its operating productivity, efficiency and quality and the level of market share that can be
captured and sustained through the efforts indicated above, and the position of the
regional and global economics and political development which could influence the
demand and supply of cocoa and cocoa products in one way or another.

16
Due to the lack of locally produced cocoa beans to meet local grindings requirement, the
cocoa grindings industry in Malaysia depends heavily on importation of cocoa beans to
sustain itself. The situation of over dependent on importation of cocoa beans may expose
Malaysian cocoa grindings industry to great risk at a time when there is a squeeze in
world supply of cocoa beans. In view of this, any effort to increase local production of
cocoa beans in balance with the growth of local grindings requirement will strengthen the
competitiveness and the sustainability of the cocoa grindings industry in Malaysia.

The Malaysian chocolate confectionery and hand-made chocolate industry, which are
relatively small as compared to the grindings industry, are expanding in the years to
come. Population growth and a better understanding on the health and nutritional
benefits of cocoa are the major driving forces for the positive growth. The level of
growth will depend on the efforts made in promotion and the innovation in quality
assurance and range of products innovated to meet market requirement.

17
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