In the exciting and quickly developing vape sector, Vuse is the latest stage in a journey British American Tobacco (BAT) began in 2013, with the launch of its first vapour product – the Vype e-cigarette. Since then, the company has invested more than £3.2 billion in its alternative nicotine products to become one of the world’s leading vapour companies.
That original Vype innovation is now changing its name and form as it becomes Vuse – but the change from Vype to Vuse is simple evolution, says BAT’s Head of UK Trade, the widely experienced Khurram Durrani, who has overseen BAT marketing operations in North Africa, Pakistan and Cambodia.
“It’s about serving the same amazing quality vaping, flavours and taste, not in a functional way but as a recognisable global brand which connects adult consumers and retailers wherever they are in the world,” he says of the evolution into Vuse. “It’s also about driving innovation and synergy, using what we’ve already learned from our research and a successful Vuse launch in the US market.”
What’s beautifully simple is that Vype and Vuse products are fully compatible with each other – Vype devices work hand-in-hand with Vuse refills and vice-versa, meaning adult consumers can continue to enjoy a smooth, hassle-free experience.
Innovation is on show in the devices too: the ePen and ePod2 devices are now sleeker and faster to charge. Then there’s the striking Vuse packaging – “It’s truly unique and a real knockout,” says Khurram. “We’re very proud to have won a prestigious Pentaward 2020 bronze award for the design and we think it’ll really stand out to adult consumers and retailers.”
The pod-mod market is becoming a bigger battlefield year-on-year and that growth is not expected to slow any time soon. BAT has invested significantly over many years to achieve its leading position with Vype, and Vuse is simply the next natural stage in that journey.
“It’s a fantastic opportunity for retailers to further grow next-generation sales, underpinned by the same cornerstone commitments,” says Khurram. “Vuse embodies our commitment and investment in innovation, quality, safety and sustainability, not only in vaping but in every one of our products.As an overall product package for retailers, we don’t believe Vuse can be beaten right now.”
Innovation motivation
Innovation – both in terms of devices and safety –remains at the core of every phase of BAT’s production. A team of more than 50 scientists at its global R&D facility in Southampton are dedicated to creating the most reliable products possible, says Khurram: “We test every product rigorously – a minimum of 1,000 times – before it’s cleared to go on sale.”
A similar level of dedication on its environmental footprint has seen BAT make significant environmental, social governance (ESG) commitments across its global operations.“Vuse will play its part here too,” says Khurram.
“We know adult consumers are increasingly passionate about the environment and want products that are more sustainable. Vuse sets a new bar for our vaping products in using as little plastic in its packaging as possible, including eliminating silicon caps in the ePod2 ePen and shrink-wrap from all our Vuse products.”
As the natural successor to Vype, Vuse offers significant sales opportunities for independent retailers who want to put adult nicotine consumer satisfaction first. Taken together, the blend of innovation, sustainability and safety creates not only a first-class adult consumer vaping experience but assures retailers that they’re serving customers the very best choice of the market-leading vaping product range.
“Adult nicotine consumers have already voted with their feet to make Vype the leading closed-system product by far,” says Khurram, “and after strenuous testing and a successful launch of Vuse in the US market, we feel very confident of outstripping the success of Vype in the UK and beyond. It will take a winning combination of investment, credibility, high quality and adult consumer choice to new levels,” he adds. “Vuse is not a brand that will sit on the shelves for long. If retailers are serious about seizing the opportunity to grow next-generation category sales, then Vuse will deliver.”
Product knowledge – and the confidence to share it with adult nicotine consumers– is at a premium in the vape market. Knowledgeable staff who can explain vaping products and concepts are the key to converting and retaining adult ex-smokers and here, too,BAT takes its educational responsibility very seriously, says Khurram.
“Through our field force and our wider communication, we continue to educate retailers on the many benefits of Vuse, including the full compatibility between Vype and Vuse products, the importance of maintaining availability and our tremendous range of promotions.”
Only adults
Public Health England (PHE) has consistently cited the relative lower risk of vaping compared to smoking, but also warned they must be sold responsibly to adults only. “BAT’s Verify programme is another big step forward here too,” adds Khurram.
“Verify is a comprehensive programme designed to raise awareness of youth access prevention among our independent retailers. We want to ensure none of our products are sold to people under the age of 18 – it’s fundamental to our strategy.
“Our communication includes educational material on our new B2B platform, in store and on our websites to remind them of the programme and the importance of the messaging on preventing access to minors.”
He stresses that as the global pandemic recedes and adult customers continue to prize their local stores, Vuse promises to make it easy for independent retailers to serve customers what they want.
“Vape adult consumers continue to tilt towards independent retailers,” says Khurram. “Lockdown has seen so many people change their shopping habits and increasingly turn towards the convenience channel as they don’t want to travel further away than they need to or to visit the bigger crowded stores,” he says.“Then there’s the closure of vape shops during lockdown, which has only increased the trend towards convenience shops.”
It is this transfer of custom to independent stores that Vuse can help to make permanent.
A farewell to smoke
Vuse is emblematic of BAT’s recent move away from the declining combustible tobacco market to lead the drive for “adult consumer satisfaction” from next generation products including pod-mods, backed by an investment of around £1.7 billion over the past four years.
Khurram says: “At BAT we’re building a better tomorrow by reducing the health impact of our business through offering a greater choice of enjoyable and less risky products for our adult consumers. While vaping is not risk free, according to nearly all major public health bodies in the UK, including Public Health England, vaping is around 95 percent less harmful than smoking.”
And with just one twentieth of the health dangers, the expectations of adult consumers are increasing alongside fantastic sales in the fast-growing pod mod market.“Vuse is well-positioned to meet them,” says Khurram.
“First, our pricing is very competitive for the product and choice we’re offering. Vuse is also a high-quality product backed by strenuous safety testing. Its size in the market already means it is proven with adult consumers and has great credibility. We fully expect Vuse to continue to grow strongly.”
BAT is serious about making Vuse a big deal in the UK market – and supporting retailers to grow sales in next-generation products.“That means a route-to-market approach that includes giving adult nicotine consumers and retailers absolute clarity when it comes to understanding the evolution from Vype to Vuse,” says Khurram. “We’ve engaged with adult consumers first to deliver the right messages through key accounts, starting with Sainsbury’s stores in early April. It means there should be no surprises for adult consumers when they see Vuse in independent and vape stores.
“We’ve invested heavily to ensure the right messages and information is seen in-store, as well as having constant dialogue and discussion with retailers. All that activity is being reinforced by our field force representatives on their monthly visits to independent retailers.”
He says that BAT is better equipped than ever to stay close to retailers to help them seize the initiative with Vuse. A new B2B programme, My BAT Rewards, was upgraded to a new website and Android app from May. Members get exclusive discounts and offers as well as product training to help expand and support their customer base. On top of that, there’s exciting incentives and the chance of rewards such as premium city breaks and top tech – including TVs and Apple watches –in prize draws each month.
The My BAT Rewards platform allows members toeasily trackthe value of their annual contracts and see any monthly compliance or performance payments earned for the variety and volume of their BAT products.Any retailers interested in signing up to My BAT Rewards are encouraged to email supportmybatrewards@bat.com or contact their local BAT representative.
A bright future
The Vuse market drive in the UK is bolstered by a more strategic field force that has recently doubled in size. Around 110 sales representatives visit retailers regularly, but now offer the option to purchase BAT’s combustible, vapour, and oral category products directly “from the van”. They are supported by 55 new territory managers who provide follow-up support including education, PSM andhelp with the My BAT Rewards scheme.
“Our significant investment in key areas means we now have one of the most flexible sales systems in the industry, including a state-of-the-art B2B programme,” explainsKhurram. “It’s giving retailers new levels of choice and technology with their route to market and making it simpler and faster too.”
Then there’s the fact that Vuse will be impossible to miss, he adds: “I really believe that the packaging is one of a kind; no competitor comes close to the quality and appeal of Vuse on the shelves.”
If Vuse is good for the consumers, it’s great for retailers.
“There are also tremendous incentives for our retailers to join us on our successful Vuse journey, from discounts and our new B2B platform to loyalty-based packages and more,” says Khurram. “On top of all that, retailers will undoubtedly benefit from riding the wave of a category that is expected to see 30 per cent growth inside the next five years.”
The market trend away from combustible tobacco looks irreversible. Closed-system vaping products are fast becoming the driving force within the fast-maturing vaping market. Vuse has a 44 per cent slice of that market already – and BAT is hopeful of making that 50 per cent in the coming year.
Khurram says: “Combustibles is still a massive market but it’s declining quite sharply – at around 6-7 per cent a year over the next five years.The vape market is growing fast and will continue to do so, fuelled by rigorous research that tells us vape products are also safer. It’s essential that we help independent and convenience retailers understand this fast-moving market as fully as possible.”
BAT’s commitment to sustainability across all its product development has a knock-on benefit for retailers too, he says. “With Vuse retailers know they are selling something more responsible for adult customers, both from a sustainability and risk perspective.
“That’s where the My BAT Rewards programme will really help way beyond just purchasing. Retailers will be incentivised to develop their staff and sales approach in the right way and for the maximum benefit going forward.”
So 2021 promises acceleration, innovation and more in the vaping market. BAT expects to be very busy but is nothing but confident it will remain at the forefront of this fast-evolving category.
“Vaping technology gets faster, more efficient, and the devices get smaller and more powerful. We will not stand still with our innovation in devices, products and flavours and will continue to develop world class, quality devices for our consumers,” Khurram concludes.
“Vuse is taking Vype to new levels of performance and style. For independent retailers, it’s a fantastic opportunity to grow sales and win a bigger share of the vaping community. In short, it’s a very interesting and exciting time to join us on our journey.”
Ashton Primary School in Preston has teamed up with SPAR during the season of goodwill to donate delicious food to the city’s Foxton Centre.
The school’s Year 3 class enjoyed a cookery session baking pear and chocolate crumbles to take down to the Foxton Homeless Day Centre as a pre-Christmas treat for people who access its services.
Ingredients for the crumbles were supplied by James Hall & Co. Ltd and the children also received SPAR recipe cards to recreate the recipe at home with nutritional guidance from the University of Central Lancashire’s Dietetics department.
It is the second time that Ashton Primary School and SPAR through James Hall & Co. Ltd have collaborated on a project after a Pumpkin and Carrot Soup cookery session in October.
Norman Payne, Year 3 teacher and Deputy Headteacher at Ashton Primary School, said: “This has been a heartwarming project to be part of during the festive season. Learning how to cook is a valuable life skill and I know the children enjoyed the sessions.
“We are thankful to SPAR for their support with supplying the ingredients and the recipe cards, and it was lovely to be able to visit the centre which does a wonderful job of supporting homeless people in the city.”
Wilf Whittle, Trading Controller at James Hall & Co. Ltd, said: “After the Halloween collaboration with Ashton Primary School, it was a lovely idea to do something a bit more indulgent around Christmas while still utilising fresh and seasonal products with the pears.
“SPAR is a community retailer and we are very happy to support initiatives like this that give something back, particularly when there is an educational element woven into the project.”
James Hall & Co. Ltd is a fifth-generation family business which serves a network of independent SPAR retailers and company-owned SPAR stores across Northern England six days a week from its base at Bowland View in Preston.
Cadbury’s has not been granted a royal warrant for the first time in 170 years after it got dropped from King Charles’s list of warrants.
Queen Victoria first awarded Cadbury with the title in 1854 which was then repeated by the late Queen Elizabeth II in 1955 who was a huge lover of the chocolate.
Following the decision, the look of Cadbury products is expected to be undergoing a significant change
Cadbury told The Sun, "Yes, practically this means that we will remove the Royal Arms from all of our packaging.
"However to be clear, there will be no change to the iconic Cadbury purple which is not by Royal appointment. Cadbury purple has been used for Cadbury chocolate products for more than a century and is synonymous with the brand, this won’t change."
The reason for sudden the removal of the royal title is not known but Cadbury is not the only company to lose such an endorsement.
Another big brand missing from the list is Unilever, which manufactures goods including Marmite, Magnum ice-cream bars and Pot Noodles.
Apart from Cadbury's and Unilever, 100 other companies had their title removed by the Monarch. Luxury chocolate maker Charbonnel et Walker Ltd has also been bumped from the list since the last under Queen Elizabeth II’s name in April 2023.
Those who have lost their warrants were told of the decision by letter, but not informed of the reason.
They have 12 months to remove any royal warrant-associated branding from their items.
The King released the list of the 400 companies that received his royal warrant this year, including includes 386 companies previously holding warrants bestowed by his mother, Queen Elizabeth II.
These range from the official 'suppliers of Martini Vermouth', Bacardi-Martini, to Command Pest Control Ltd, Dunelm for soft furnishings, Foodspeed for milk, Kellogg's for cereals, florist Lottie Longman, and McIlhenny as the official supplier of Tabasco hot sauce.
Each warrant is granted for up to five years at a time. The king first issued warrants in 1980, when he was Prince of Wales.
Some firms gained warrants for the first time, including those connected with Queen Camilla. They include hairdresser Jo Hansford and Wartski jewellers. The latter made the king and queen’s wedding rings when they got married in April 2005.
Plans to convert a vacant South Shields pub into a convenience store have been given the green light, despite objections from CAMRA beer campaigners.
South Tyneside Council’s planning department has approved an application for The Jolly Steward site in the borough’s Harton ward.
Plans from One Stop Stores Limited, a major retail convenience business, were submitted earlier this year in a bid to change part of the site at Fulwell Avenue into a retail use.
A planning application submitted to council officials described the site as a “vacant former public house” and noted the new development would create jobs, including three full-time employees and 10 part-time roles.
The development aimed to convert the pub into a retail shop with ancillary staff residential accommodation to the first floor, alterations to the building’s elevations, new ramp structures at entrances and a new air conditioning and refrigeration plant to the rear.
Proposed external alterations to the building included new windows, doors, ramps and signage, as well as “infilling” some windows and doors.
A total of 14 car parking spaces were also proposed, including three resident car parking spaces, two staff parking spaces and nine customer car parking spaces (including two disabled parking bays), along with four cycle spaces.
During a council consultation exercise on the plan, a single objection was submitted from CAMRA (Campaign for Real Ale) about the loss of the pub as a ‘community asset’ and campaigners said there was “no justification” from developers on this issue.
The CAMRA representation, included in a council report, added: “If running the Jolly Stewart as a public house is currently ‘unviable’ for the current owner, could it be viable for another operator?
“Change of use should only be considered once meaningful attempts to market this community facility as a going concern have been made, at a realistic market price, for a suitable length of time and following suitable consultation with the local community.”
A petition with seven signatories was also submitted to the council in support of the shop conversion proposal, describing the development as a “welcome addition to the wider community”.
The petition said that the proposal would “not result in a significant increase in traffic to the area due to the close walking proximity the shop’s location will provide”.
After considering the planning application and assessing it against planning policies, South Tyneside Council’s planning department approved it on 13 December.
Council planners, in a council decision report, said The Jolly Steward pub had “stopped trading and the land is no longer being used”.
Council planners noted the proposed shop would “serve a primarily local catchment” and that the gross floorspace proposed was “modest in size and reflective of the size of unit likely to be suited to a small convenience store serving a local catchment”.
The council decision report added: “It is considered that the sequential test is satisfied in this instance and that there would be no significant harm to the vitality and viability of the borough’s defined centres subject to a condition restricting the range of goods that can be sold from the premises to primarily convenience goods only.
“Furthermore, the proposal would result in the re-use of a currently vacant building and would provide social and economic benefits (such as additional jobs) to the immediate vicinity and wider borough.”
Council planners also said the plans would be acceptable in terms of design, highway safety and deliveries and that there would be no “unacceptable impacts on the amenities or privacy of the occupiers of any neighbouring properties.”
Under planning conditions, the development must be brought forward within three years.
Proposed opening hours for the shop at the site will be 7am-10pm, seven days a week.
(Local Democracy Reporting Service)
Keep ReadingShow less
Vino Convenience Store on Metheringham High Street
A shop in a village near Lincoln has had its premises licence revoked after police discovered an illegal worker being paid below the minimum wage.
Lincolnshire Police officers urged North Kesteven District Council’s alcohol and entertainment licensing sub-committee to revoke the licence for Vino Convenience Store on Metheringham High Street during a review on Tuesday (17 December).
The committee heard that management had been “operating in such a manner that amounts to criminal activity”.
Officers first carried out a compliance check on 21 March, where they found no evidence of a written policy to prevent alcohol sales to under-18s or staff training related to that policy.
Although management claimed in an email sent on 4 April, that outstanding issues had been resolved, a follow-up visit on 10 October, revealed otherwise.
Upon entering the store, officers questioned the Designated Premises Supervisor (DPS), who stated she had never seen a policy or received any training and was, in fact, looking after the store “as a favour”.
Police then returned to the store a few hours later that day to find a male worker and inquired about his right-to-work status.
It then transpired that he was not allowed to work in that role and that he was paid around £600 a month with no payslip for working approximately 20 hours a week.
“Our inquiries found that he arrived in the UK under a skilled working visa in health and social care and had worked for a period of time in this field. But at the time of this encounter, he no longer worked for the sponsor and had no right to work in the shop,” a representative from the force said.
Mr Sureshkanth Arumugam took over the licence for the property in October 2023 alongside Thanusha Kaliyaperumal. Mr Arumugam is also listed as the license holder for two other businesses in the North Kesteven area – Ashgrove Convenience Store in Dorrington and Crescent Store in Leasingham.
In April 2023, officers visited the store in Dorrington, where they encountered a male behind the counter whose English was poor. Following this, checks were made with the Home Office Immigration Compliance and Enforcement team, which confirmed he was an illegal worker who could have been arrested.
This demonstrated how the illegal worker found at Vino Convenience Store was “not a one-off”.
Other issues found with the store in Metheringham included non-compliant age verification signage and alcohol seen on shelves with no price markings. Officers also insisted that “recent intelligence” has found the store is selling vapes to a 14-year-old.
Ian Holland, who attended the review in support of Mr Arumugam, stated: “I’ve known Suresh for about six years now and he’s always been an excellent man.”
He claimed that he has witnessed staff in the Leasingham store checking ID for restricted items and also highlighted how the licence holder was paying for the illegal worker’s rent and food, explaining why he was only being paid £600 a month.
Mr Arumugam claimed he believed the man had the right to work there but later admitted he had “made a mistake.” He also insisted he was “verbally training” staff in selling age-restricted items.
(Local Democracy Reporting Service)
Keep ReadingShow less
Cocoa beans are pictured next to a warehouse at the village of Atroni, near Sunyani, Ghana April 11, 2019
Behind a record surge in cocoa prices this year, a corner of financial markets that drives the cost of chocolate underwent a seismic shift: the hedge funds that oiled its workings headed for the exit.
Confectionery prices, from candy bars to hot chocolate, are heavily influenced by futures contracts for cocoa beans. These financial instruments, traded in London and New York, allow cocoa buyers and sellers to determine a price for the commodity, forming a benchmark for sales across the world.
In the middle of last year, hedge funds - a class of investors that use privately pooled money to make speculative bets - started pulling back from trading cocoa futures because price swings in the market were raising their cost of trading and making it harder to make profits.
They accelerated their retreat in the first half of this year as cocoa prices hit a record in April, driven by supply issues in West Africa, according to Reuters calculations based on data from the US Commodity Trading Futures Commission (CFTC), which oversees the New York market, and ICE Futures Europe, an exchange that compiles figures for trading in London.
"This market became increasingly volatile," said Razvan Remsing, director of investment solutions at Aspect Capital, a $9.3 billion London-based fund that uses coding and algorithms to find trades. "Our system's response was to trim our positions."
Aspect slashed the exposure to cocoa in its Diversified Fund from nearly 5 per cent of its net asset value in January to less than one percent after April, according to a presentation reviewed by Reuters.
REUTERS
The departure of hedge funds and other speculators caused liquidity in the market to slump, making it harder to buy and sell, stoking volatility to record highs and fueling the price spike still further.
Reuters spoke to a dozen fund executives, cocoa market brokers and traders who said the retreat has left lasting strains on the market. That has resulted in greater gaps between the price at which cocoa can be bought and sold, and has prompted some industry players to seek alternative instruments, leaving a lasting impact on the sector.
This month, the number of futures contracts held globally at the end of a given trading day - a key indicator of market health known as "open interest" - hit its lowest since at least 2014, the global figures show, a sign the futures market overall has shrunk significantly. Data prior to 2014 was not available.
On Wednesday, New York cocoa futures prices topped their April peak.
The futures market is a crucial cog in the cocoa industry, allowing producers and chocolate companies to hedge their exposure to swings in the price of beans.
Futures dictate income for the farmers and low-income nations that produce the world's cocoa - the majority of which comes from Ghana and Ivory Coast in West Africa.
Hedge funds and speculators have become bigger players in commodity markets over the past two decades as the value of their overall assets has grown. But, as purely financial investors, they have no need to remain in the market at times of stress.
The impact of hedge funds' exit illustrates how reliant trading has become on these lightly regulated funds that increasingly shape financial markets. Reuters has reported this year on how hedge funds are piling into the euro zone's $10 trillion government bond market, drawing regulatory scrutiny, and on their growing sway in European stock trading.
Contacted by Reuters, the CFTC declined to comment. A representative for Britain's regulator, the Financial Conduct Authority, said that, in line with its market supervision practice, "we have been working with trading venues and participants to monitor the orderliness of the market."
Bernhard Tröster, an economist at the Austrian Foundation for Development Research (ÖFSE) in Vienna, who last year co-authored a paper on the growing role of financial actors in commodities derivatives markets, said the withdrawal of hedge funds had helped fuel the crisis in cocoa markets.
"When markets became so volatile this year, it was clear how hedge funds and other financial actors have become so important," he said.
Supply issues hit prices
Hedge funds and other speculators' share of the market peaked at 36 per cent in May 2023, the highest in at least a decade, after which their retreat began, the global data calculated by Reuters show.
Then, at the start of this year, global cocoa prices soared after top producer Ivory Coast was hit by adverse weather and disease. Number two producer Ghana fared even worse, with smuggling, illegal gold mining on cocoa farms and sector mismanagement added to the mix.
In early February, cocoa prices surpassed a previous record high set in 1977. Executives at five hedge funds told Reuters they began to withdraw as volatility grew and the cost of trading increased.
When markets become too hot, exchanges require speculators to increase the amount of collateral they put down per futures contract, raising their costs. Lawrence Abrams, president of Absolute Return Capital Management in Chicago, said the cost of trading a single cocoa futures contract soared from $1,980 in January to $25,971 by June.
High prices and volatility, combined with falling liquidity, began to affect "our system's trading and risk management decisions," Abrams said, whose fund sold out before prices peaked in April. He declined to detail how much his fund managed, citing regulatory reasons.
Ripe cocoa pods grow on a tree at a farm in Assin Foso, Ghana, November 20, 2024REUTERS/Francis Kokoroko/File Photo
Many hedge funds promise investors they will not exceed a certain amount of risk, meaning that if a certain market becomes too volatile they have to reduce their exposure.
The difference between prices offered and sought for futures, the so-called "bid-ask spread", soared following the hedge funds' withdrawal. That has made trading harder: lower liquidity and wider spreads mean traders struggle to execute large trades without moving overall prices.
"You need speculators," said Vladimir Zientek, a trading associate at brokerage firm StoneX, referring to hedge funds, which are not among his clients. "Without speculators in the market, you lose a lot of liquidity, which allows for these very wide and erratic market swings."
By mid-April, New York contracts CCc1 hit a then-record above $12,000, up three-fold from January, prompting hedge funds to sell down their positions.
"Trends don't last forever," said Remsing at Aspect Capital. "Stay too long in size and you stand to give back all your gains."
Hedge funds' share of the cocoa futures market dropped to 7 per cent in late May, its lowest in at least a decade, the global data show.
One European broker, who requested anonymity to discuss clients' trades, said that panic in the market increased in March and April as liquidity drained away.
Volatility in cocoa futures hit an all-time high in May, up five-fold from a year earlier, according to data from the London Stock Exchange Group (LSEG).
Daily average price swings that month neared $800, some 15 times the levels of a year earlier, according to a Reuters analysis of figures from market data provider PortaraCQG.
Riskier markets
For major trading houses that buy and sell cocoa beans - a group that includes Singapore's Olam, Switzerland’s Barry Callebaut, and US-based Cargill - the liquidity drain and associated price surge exacerbated the more than-$1 billion dollar hit they took on their futures positions.
The losses came earlier this year after Ghana, following a disastrous harvest in the October 2023 to September 2024 season, delayed delivery on nearly half the beans the nation had pledged to sell, upsetting cocoa traders' futures market strategies.
These traders typically use futures to lock in prices achieved for cocoa beans, or to hedge against the risk of falling prices.
But that strategy unraveled as Ghana delayed its deliveries. Traders were forced to liquidate, at steep losses, short positions for the month of expected delivery, and take new short positions.
REUTERS
The market turmoil has prompted some trading houses and producers to seek alternatives to futures.
Australian investment bank Macquarie, a big player in commodity markets, told Reuters it sold over-the-counter products to trading houses, processors and chocolate makers when cocoa volatility hit record levels this year, and demand remains high.
One major agri-commodities trader is now using such bespoke contracts, according to a source who requested anonymity citing sensitive commercial relationships. They declined to comment on the magnitude of the business.
Such products typically protect buyers against narrower price swings than is possible with futures, limiting their use, a European broker said, declining to be identified to freely discuss clients' activity.
'Cocoa tourists'
Some hedge funds have returned to the market. Along with other speculators that trade using investors' cash, they accounted for 22 per cent of futures trading this month, according to the global data. But buying and selling in the cocoa market's altered landscape has become harder.
Zientek, the trading associate at StoneX, said bid-ask spreads can now top 20 "ticks" - $200 per contract - compared to about 2-4 ticks before cocoa's rally to record highs.
"This makes larger orders tougher to execute without seeing an immediate distortion in the market," he said.
Daniel Mackenzie, managing director of Cocoa Hub, a UK-based company that sources and sells cocoa beans to artisan chocolate makers, said higher and more volatile prices were forcing small and medium-sized makers to decide between passing costs to clients or reducing product sizes.
One chocolate maker he worked with has been shuttered and another sold, he said, without providing further details.
As hedge funds exited, short-term investors such as day-traders – which buy and sell assets within a single trading day – have stayed in the market, the European broker and the broker at the agri-commodities bank said.
The cohort that includes day-traders this month accounted for 5 per cent of the market, about the same as the start of the year, the global data show.
Day-traders cannot fulfill the liquidity-provision role traditionally played by hedge funds, the two brokers said.
"I like to call them 'cocoa tourists' - they move in, hold a position for a day or two, then move out," the European broker said.