The chocolate industry may face challenges as cocoa prices have been going up in the past years to the new record high, pushed by the harsh weather, swarm infestation, and supply tightness in West Africa, a region that produces ¾ global supply cocoa.
Furthermore, there is also the rise of retail price inflation around the world that drives the costs for consumers and slighting the demand for chocolate.
According to the survey of Which?, a U.K. consumer group, the average annual inflation rate of chocolate products in 2024 is 11%, highest among products in grocery stores. The U.S. also found the price of its famous products, like Hershey’s Kisses, went up this year by about 12% YoY.
Adalbert Lechner, head of Lindt & Sprüngli, stated in April that the cocoa prices are unlikely to fall to the level it used to be. The price of cocoa futures was trading above $7,850 per metric ton, a significant increase from about $2,370 three years ago. Still, the current level was lower than $8,177 recorded in January this year.
However, Tracey Allen, expert from J.P. Morgan, pointed out that the drop of chocolate price would not come anytime soon as the soaring price in 2024’s fourth quarter continues to impact the industry, with businesses trying to pass on the cost to consumers while dealing with shortage of supply. Still, Allen forecasted a possible development by next April.
Based on J.P. Morgan analysis, manufacturers’ demand is dropping while supply condition is improving. Furthermore, there is a report of favorable weather conditions, the new planting in Ecuador, and the ripening in Brazil. The investment bank estimated that the cocoa prices would remain around $6,000 per metric ton for a long period of time.
Hamad Hussain, an expert from Capital Economics, stated that although the weather conditions in West Africa may improve in a few months. Ivory Coast and Ghana, two largest cocoa producers in the world, are still facing several challenges that affect their productions. Therefore, the cocoa global supply and price will likely remain tight and significantly high.
In addition, Hamand also noticed two factors that keep costs at a high level. In the U.K. there is a rise of minimum wage and employee contributions that affect the price of food products, while in the U.S., there is still the import tariff policy that affects the various markets, including chocolate.
