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What is the 'combined cocoa ratio'?


Category: Strategy and financials

The “combined cocoa ratio” is the combined sales price for cocoa butter and cocoa powder relative to the cocoa bean price. The formula is:

    price of cocoa butter
  price of cocoa powder
combined cocoa ratio  =
    price of cocoa beans   price of cocoa beans

For cocoa processors, profitability depends on the ratio between input costs (price of cocoa beans) and output prices (price of cocoa butter and powder).

A simple example shows the interaction between the different variables: The price for cocoa beans goes up (driven by higher demand (while supply level remains constant), speculation and/or bad harvests), but the price of cocoa powder goes up less as a result of economic recession - as a consequence, the combined ratio will fall.