Ahead of Valentine’s Day, major chocolate producers are grappling with the high costs of cocoa, and consumers are feeling the impact.
According to a CoBank report last week, cocoa prices are at a 46-year high, roughly 65% higher than they were just a year ago. And prices are expected to stay high until a new growth period from the main cocoa-growing region, West Africa, begins later this year.
Matt Spooner, a thought leader with management company Kinaxis — which works with cocoa producers on securing their supply chains — said in an interview the problems with the cocoa industry are only compounding after three years of rising prices.
But consumers may not have to worry about high prices in the short term. Chocolates for the Easter season are likely already manufactured and waiting in warehouses or on store shelves, and the real test of pricing will come later this year with products that are not yet produced, according to Spooner.
“I think that we will see an increase in the price of chocolate toward the latter end of the year by Thanksgiving and Christmas, when the manufacturers are going to have to start to pass on some of those additional costs,” Spooner said.
As producers deal with the cocoa conundrum, Spooner believes they may experiment with new product formulations, product sizes or ingredients to get around raising their prices too high.
“Maybe by reducing the actual size of the bars of chocolate, what the consumer sees is mitigated a bit, so you’re not seeing that the price of cocoa for the producer is up fifty-percent,” Spooner said.
Major chocolate producers are dealing with the cocoa supply issue by making strategic decisions about their operations. Last week, Hershey announced it plans to cut jobs, but did not disclose when or how many employees would be impacted. Hershey CEO Michele Buck said cocoa inflation will weigh on the company’s earnings this year, and told investors the company wouldn’t rule out future price hikes.
The Conseil du Café-Cacao, an industry trade group in Ivory Coast, halted cocoa export contracts for the 2024-2025 growing season in December, citing lower output than expected during the cocoa harvest last year, Reuters reported.
Spooner said the contracts chocolate companies that have with growers could be in danger, because of uncertainty surrounding the upcoming growing season.
According to Spooner, an array of factors play into the high cocoa prices. Farmers have been dealing with diseases impacting cocoa harvests over the last three years. The 2023 El Niño climate conditions brought more rainfall to the growing region than there had been in thirty years. And geopolitical concerns continue to impact production — namely securing fertilizer, which cocoa producers rely on, from Ukraine amid Russia’s ongoing invasion.
