Cocoa Prices Soaring: Impact on Chocolate Makers and Consumers
Valentine’s Day is just around the corner, and chocolate lovers may be in for a bitter surprise. Cocoa prices have reached unprecedented heights, leaving even the largest chocolate manufacturers struggling to maintain profitability. The surge in prices is expected to have a direct impact on consumers, who will likely have to shell out more for their favorite chocolate treats.
The main culprit behind the soaring cocoa prices is the climate crisis in West Africa, which is home to over 60% of global cocoa production. Climate issues have led to damaged crop yields, resulting in a constrained cocoa supply and skyrocketing prices. In the past year alone, cocoa futures have doubled, and since January, they have surged by 40%. Additionally, factors such as sugar and labor costs have also contributed to the overall increase in chocolate production expenses.
Hershey Co., one of the leading chocolate manufacturers, recently announced that it would be cutting 5% of its workforce due to historic cocoa prices and inflation-weary consumers. Hershey’s CEO, Michele Buck, acknowledged that cocoa prices are expected to limit earnings growth this year. The company has already raised its product prices by 6.5% in the fourth quarter, and prices for confectionery chocolate and other candy products in North America rose by 9% in 2023.
Smaller chocolate businesses are also feeling the pinch. Li-Lac Chocolates, known as the oldest chocolate shop in Manhattan, revealed that their raw chocolate prices have increased by 13% compared to last year. However, they have made an effort to keep prices stable for their Valentine’s Day products since 2022.
The impact of rising cocoa prices extends beyond just the cost of cocoa itself. Marnie Ives, the chief executive at Krön Chocolatier in Great Neck, NY, explained that while cocoa prices eventually affect them when purchasing bulk chocolate, there are other factors that contribute to the rising costs of chocolate and confections. These include sugar prices, cocoa butter, packaging, and labor costs. As a result, the prices of their handmade 4-ounce chocolate bars have increased from $4 in 2020 to $5 now.
Karl Schneider, the general manager at Holsten’s Candy Store and Diner in Bloomfield, NJ, acknowledged that prices never go down and that customers have come to expect price increases across various products. However, he assured customers that they would do their best to make it as cost-effective as possible for everyone.
The impact of rising cocoa prices is not limited to the United States. Ghanaian cocoa farmer Issifu Issaka shared his concerns about the climate change conditions affecting his cocoa farm. He explained that his farm’s yield has been significantly impacted, leading to a decline in production. Ghana and Cote d’Ivoire, which produce more than 60% of the world’s cocoa supply, are also facing climate change risks. Droughts and intense rain early in the growing season have resulted in a compression of cocoa output and an increase in prices.
Unfortunately, farmers like Issaka are unlikely to benefit from the higher cocoa prices on the international market. Uwe Gneiting, a senior researcher at Oxfam America, explained that futures prices do not directly translate into the farm gate price paid to cocoa farmers. The government sets the farm gate price in Ghana, and conflicting interests between manufacturers and the government often prevent farmers from maximizing their earnings.
Joke Aerts, the director of credible scaling for Tony’s Open Chain, emphasized the importance of paying cocoa farmers a living income. Tony’s Chocoloney, a Dutch chocolate maker, has developed the Living Income Reference Price (LIRP) in collaboration with Fairtrade. Currently, cocoa farmers in Ghana and Cote d’Ivoire earn about $1.42 and $1.23 per person per day, respectively. However, the LIRP suggests that these wages should be $1.96 in Ghana and $2.45 in Cote d’Ivoire to provide a livable income for farmers.
Despite the challenges faced by cocoa farmers and chocolate manufacturers, the demand for chocolate remains strong. Major holidays like Valentine’s Day, Halloween, and Easter continue to drive sales. Consumers’ love for chocolate is unwavering, and they are unlikely to give it up anytime soon.
As Valentine’s Day approaches, chocolate lovers may need to prepare themselves for higher prices. The impact of soaring cocoa prices is being felt by both chocolate makers and consumers alike. While manufacturers struggle to maintain profitability, consumers will have to pay more for their beloved chocolate treats. The future of cocoa production remains uncertain, with climate change posing significant risks to the industry. However, one thing is for sure – the love for chocolate is here to stay.