Skyrocketing cocoa prices are set to put strong pressure on chocolate producers around the globe, according to a new international report by Rabobank.
In Soaring Cocoa prices: The worst is yet to come, the bank says the main impact of the cocoa crisis still lies ahead, as companies hedge prices and supply contracts up to a year in advance.
“Significantly higher chocolate prices will likely hit shelves over the coming months and going into 2025, providing a major challenge for the chocolate sector, which is already battling a longer-term, structural decline in demand,” says the report.
The report from the bank’s RaboResearch arm, says the “cocoa crisis” is triggering the price increases.
In an unprecedented surge, the report says cocoa commodity prices have hit their highest levels in nearly 50 years.
“Since January 2023, cocoa futures have shattered the calm of their previous trading range, peaking at nearly USD 12,000 per metric ton in the first half of 2024,” said RaboResearch analyst Paul Joules.
“This dramatic increase, fuelled by a global cocoa shortage, is primarily due to a disappointing harvest in West Africa, the source of 70 per cent of the world’s cocoa.
“The International Cocoa Organisation (ICCO) reports a 14.2 per cent drop in global cocoa production for the 2023/24 season, leading to a shortage of approximately 462,000 metric tons and the lowest cocoa stocks in 22 years.”
Rising retail prices
Retail prices are on the rise, and a much bigger impact is set to come, the report says.
“Chocolate manufacturers are struggling with soaring cocoa costs, which are reflected in higher local retail prices for chocolate,” said Joules.
“This is illustrated in the most recent quarterly (June) Consumer Price Index data, from the Australian Bureau of Statistics, which showed year-on-year inflation in the Snacks and Confectionery category – of which chocolate is part – was running at 4.6 per cent.
“This followed a similar-sized year-on-year jump seen in the June 2023 quarter, so the cumulative increase in this category between June 2022 and June 2024 is 21.8 per cent.”
Joules said despite recent price increases, the full force of the cocoa crisis is likely yet to be felt on supermarket shelves globally.
“Due to the lag in the supply chain and existing contracts, the steepest price hikes are anticipated in the second half of 2024 and into 2025,” said Joules.
“This would inevitably lead to higher prices for consumers, particularly for dark chocolates with higher cocoa content.’
Consumer demand
The report says as retail prices rise, consumers are likely to alter their buying habits, switching between chocolate types and brands, and potentially moving toward private labels or alternative treats.
“The increased cost of chocolate is expected to lead to a significant drop in consumer demand. This market correction should balance the cocoa supply shortage and stabilise prices,” said Joules.