European dominance in cocoa challenged Europe has been the centre of the global chocolate industry since the 16th century, when Spanish conquistador Hernán Cortés brought cocoa pods home from Mexico. But recent data suggest its position is slipping as emerging market consumers" appetite for chocolate grows. In the third quarter, European cocoa processing - a proxy for chocolate demand - tumbled 16 per cent from a year earlier, according to the European Cocoa Association. This was its second quarterly double-digit decline in a row. The numbers were "shocking," says Jonathan Parkman, co-head of agriculture at brokers Marex Spectron. While some of the drop can be explained by processors running down inventories, the data highlight an underlying trend, analysts say: while Europe is still the capital of chocolate, its position as the dominant centre of chocolate production and consumption is increasingly under threat. The shift is making the cocoa market more difficult to trade, as analysts who could once rely on European and North American processing - or "grinding" - data as the last word on cocoa demand, must now scour data from Ivory Coast, Ghana or Malaysia. Europe's processing numbers are "not as important on their own as they were 10 years ago," says Paul Davis, a trader with Holland Capital, a soft commodities fund manager. The European grindings data unsettled the market. Benchmark cocoa futures prices fell sharply in July on the day of the second-quarter releases, while traders sold heavily ahead of the third-quarter figures. However, compared with the dramatic price moves in previous years, prices have remained in a relatively narrow band of about £1,400 to £1,700 a tonne. The shift away from Europe is being driven by two factors. First, European chocolate consumption has been hit by the state of the economy. The recession across the eurozone, which has reduced consumers" incomes, leaving them with less money to spend on chocolate. As consumers in Asia and Latin America become relatively wealthier, they are eating a greater proportion of the world's chocolate, analysts say. Brazil, Russia, India and China accounted for 55 per cent of global confectionery retail growth in 2011, according to KPMG. At the same time, another trend is behind the dramatic fall in European cocoa processing. Rather than processing beans in the traditional European centres of the Netherlands and Germany before being sent to the chocolate factories of Switzerland and Belgium, cocoa companies are increasingly choosing to process their beans in Africa, where they are grown, or in Asia, where demand is growing most rapidly. "The economy is slowing and confectionery retail growth is slowing - but not enough to warrant such a double-digit drop in grindings," says Kona Haque, soft commodities analyst at Macquarie. While European cocoa processing has declined sharply and North American grindings have fallen, in Asia - based on data from Malaysia, Singapore and Indonesia - grindings for the first three quarters of the year were up 4 per cent from a year ago, according to the Asian Cocoa Association. Most of the world's top cocoa traders and processors are investing in new capacity in producer countries. In Ivory Coast, the world's largest producer of cocoa, Olam of Singapore and Cemoi of France are both planning to boost their grinding capacity. Barry Callebaut, the world's largest chocolate maker, plans to build a new plant in Indonesia. Over the past five years, African grindings have risen by an average of 6.5 per cent a year, compared with 2.3 per cent for Asia and just 0.8 per cent in Europe, according to Rabobank. Analysts say exporters who opt to grind cocoa where it is grown are benefiting from lower costs, as well as tax breaks from local governments. At the same time, more and more companies are deciding it is futile to transport beans to Europe or the US, only to then export the chocolate to emerging consumer hotspots in Asia and Latin America. "Companies are thinking, "Why not just shift grinding capacity to those spots?"" says Keith Flury, analyst at Rabobank in London. But chocolate lovers need not stockpile Swiss truffles or Belgian pralines just yet. Analysts agree that despite the economic crisis, Europe is likely to remain close to the heart of the chocolate industry for some time. In order to manage risk, producers will continue to ship cocoa to Europe, says Mr Parkman. On the consumption front, European chocoholics still account for 40 per cent of global cocoa demand and some markets will see a lift. In Spain, for example, Euromonitor expects sales of boxes of chocolate to rise 2 per cent this year. According to the consultancy, hard-pressed workers are eating them as a treat to reward themselves for spending longer hours in the office.