The Rising Price of Cocoa Poses Challenges for Chocolate Makers and Consumers
Story Highlights
Cocoa futures have skyrocketed, doubling in the past year.
Rising cocoa prices aren’t the only concern for customers this Valentine’s Day.
Cocoa production is tied to changes in climate, constraining supply.
Hershey Co. Faces Challenges amid Soaring Cocoa Prices
Cocoa prices are surging so high that even the biggest chocolate makers are struggling to stay profitable. That doesn’t portend well for your wallet this Valentine’s Day.
Last Thursday, Hershey Co. said it would cut 5% of its workforce after historic cocoa prices and inflation-weary consumers dampened fourth quarter earnings.
Climate issues in West Africa – home to more than 60% of global cocoa production – are damaging crop yields, constraining cocoa supply and causing prices to soar.
Cocoa futures have skyrocketed, doubling in the past year and surging 40% since January; sugar, labor and other factors have also gotten pricier. That means higher prices down the line for consumers, who will shell out more to fill up on their chocolate treats.
“Cocoa is expected to limit earnings growth this year,” Hershey’s CEO Michele Buck said on a call with analysts Thursday. Hershey’s product prices rose 6.5% in the fourth quarter; prices for their confectionery chocolate and other candy products in North America rose 9% in 2023.
Effects on Chocolatiers and Consumers
Other companies are feeling the pinch as well. Li-Lac Chocolates, which calls itself the oldest chocolate shop in Manhattan, told CNN that their raw chocolate prices are up 13% this February compared to a year ago.
But Li-Lac has kept the price of one key set of chocolate products flat: “We haven’t raised prices on Valentine’s Day products for our customers since 2022,” the company said in an email.
Billy Roberts, senior food and beverage economist at CoBank, said in a report earlier this month that retail chocolate prices are up about 17% over two years and will continue to rise.
“Cocoa prices are hitting chocolate candy manufacturers really hard,” Roberts told CNN. “And it looks like it’s not necessarily going to subside anytime soon.”
Roughly 92% of Americans say they plan to share chocolate and candy for Valentine’s Day this year, according to the National Confectioners Association. In 2023, Valentine’s Day chocolate and candy sales exceeded $4 billion, the NCA says.
Impact on Farmers in Cocoa-Producing Regions
Growing up in Ghana, Issifu Issaka’s parents earned money by cocoa farming. Now 31 and married with one child, Issaka has operated an eight-hectare cocoa farm in the Western North Region of Ghana since 2013. He said that cocoa production in Ghana depends on the climate.
“Currently because of the climate change conditions, my farm is not producing good,” Issaka said. “I’m not seeing good yield from the farm.”
Cote d’Ivoire and Ghana produce more than 60 percent of the world’s cocoa supply, and climate change concerns there pose risks for cocoa. “This past year, drought in West Africa has led to a compression in the volume of cocoa output, and that has significantly increased prices,” said Will Kletter, vice president of operations and strategy at Silicon Valley startup ClimateAi.
According to data from ClimateAi shared with CNN, shifts in climate patterns could result in a loss of about $529 million in the West African cocoa bean value chain.
Ghana and Cote d’Ivoire could see up to a 30% loss in output, said Sabi Ibarra Guerrero, ClimateAi’s agronomist. These losses are expected to be primarily driven by higher temperatures and intense rain early in the growing season, which increases the likelihood of black pod diseases.
The International Cocoa Organization’s December 2023 market report similarly cited black pod disease and swollen shoot virus as damaging the supply of cocoa crops. “This severe rainfall brings fungi,” Issaka said of his own farm. “And this fungi causes the cocoa pod to be black and you need to spray with fungicide.”
Concerns for Cocoa Farmers
The low supply has driven prices up. But farmers are unlikely to reap the benefits of higher cocoa prices on the international market. In Ghana, the government sets the farm gate price, and often differing interests between manufacturers and the government prevent farmers from maximizing their earnings.
Issaka said that while high demand and low supply raise prices, cocoa farmers are getting squeezed.
“The price for cocoa is no good for we the farmers, particularly at the producing country level,” Issaka said.
Joke Aerts, the director of credible scaling for Tony’s Open Chain, an initiative by the Dutch chocolate maker Tony’s Chocoloney, explained that it can take a “year or two” for profits from cocoa sales “to trickle down to farmers.”
“The price that cocoa farmers receive in Ghana and Cote d’Ivoire should be a price that enables a living income, and currently the farm gate price for cocoa is way below the level that it needs to be,” Aerts said.
As sales continue, Issaka said he hopes the cocoa farmers can see impactful results from their work.
“The government should make sure that this rising price will get an impact on the pocket of the cocoa farmer,” Issaka said.
The Outlook for the Chocolate Industry
Companies are still banking on Americans’ taste for chocolate abiding, especially around major holidays such as Valentine’s Day, Halloween, and Easter.
“The demand for chocolate is always so strong,” said Marnie Ives, the CEO at Krön Chocolatier. “People just are not going to give it up.”
