How Will Chocolate-Makers Respond to Rising Cocoa Prices?

Cocoa prices have doubled in the past year, and commodity prices surpassed the $10,000/ton mark in the latter part of March 2024, as compared to the $2,000 to $3,000 range of the past 15 years.

Chocolate makers and others in the food industry must look for solutions, and customers will see changes in pricing and product design as a result.

Video Spotlight:  

This post is based on the CBC article, Rise in global cocoa prices a bitter reality for local chocolatiers this Easter, by Carmen Groleau, March 22, 2024; the NY Post article, Chocolate prices likely to soar as African cocoa processing plants can’t afford to buy beans by Reuters, March 13, 2024; and the YouTube videos in the Spotlight. Image source: William Ryall 2010

Discussion Questions:

1. What are some of the causes of the recent spikes in cocoa prices?

Guidance: There are a number of causes, generally related to issues in the West African countries of Ivory Coast and Ghana, which together supply about 60% of the world’s cocoa beans.  Some problems are climate related, with bad weather, droughts, and floods causing crops to fail or be less productive.

In Ghana, the government was unable to subsidize the purchase of much needed fertilizers for farmers this past year, so yields may have been reduced as a result.  This exacerbates the problem already facing farmers, since Europe has enacted sustainability  policies forbidding the purchase of cocoa farmed on recently deforested land.  Farming cocoa on existing land means that the soil needs to be enriched or crops will not grow as well.

The war in the Ukraine also affected the availability of fertilizer and drove up its costs.

2. Who are the various players in the cocoa supply chain, and how are they being affected by the shortage of cocoa beans and the ensuing price increases?

Guidance: The supply chain begins with approximately two million small farmers in West Africa.  Though one might think they are benefiting from the record high cocoa prices, they are not.  Unfortunately for the farmers, the prices that they receive are fixed by the government at the beginning of the season and have not increased in any significant way as compared to the prices being paid for the beans by processors.  In fact, they may be receiving even less than usual if their crops are not as productive as in the past.

Dealers, or co-ops, purchase beans from farmers and sell them to cocoa processors, who transform the beans into cocoa butter, liquor, and powder that are purchased and used by chocolate makers and others in the food industry.  Because prices that processors pay for beans are negotiated well in advance of the receipt of the beans, some of these contracts are not being fulfilled.  Rather, some farmers or dealers are smuggling beans out of the country in order to try to get more money for them.

Thus, reduced crop production as well as diversion of beans to other countries has often left processing plants in both Ivory Coast and Ghana idle.  For example, the state-owned processing plant in Ghana has been operating at only 20% capacity, and often they are processing from stockpiles of beans that are now at their lowest levels in decades.  Chocolate companies that rely on their cocoa products will continue to see prices escalate due to these shortages.

3. What adjustments in product design and pricing can consumers expect to see?

Guidance: Some candy makers may leave their recipes and product size the same and increase prices.  Some may opt to either reduce the size of their products (shrinkflation) or seek cheaper ingredients rather than using as much cocoa butter and cocoa powder.

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Jared Noonan
Jared Noonan
1 month ago

Recent spikes in cocoa prices are multifaceted, largely stemming from issues in key West African cocoa-producing countries like Ivory Coast and Ghana, which collectively supply about 60% of the world’s cocoa beans. Climate-related challenges such as adverse weather conditions including droughts and floods have led to crop failures and reduced productivity. In Ghana specifically, the government’s inability to subsidize the purchase of fertilizers for farmers has further compounded the problem, potentially lowering yields. Additionally, European sustainability policies, which prohibit the purchase of cocoa farmed on recently deforested land, necessitate enriching existing soil for cocoa farming, adding to production costs. The… Read more »

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