Chocolate lovers might fear the adage: a moment on the lips, a lifetime on the hips. But there's more bad news. Their favourite treat is expected to cost more in the coming months as producers battle soaring cocoa prices.
Cocoa prices have more than tripled over the past year as disease and adverse weather in Ghana and Ivory Coast pushed the global market to a third successive deficit, Reuters reports. Ghana and Ivory Coast supply more than 60% of the world's beans.
Cocoa production in Ghana, the world's No 2 producer, has suffered multiple challenges over the past four years, with output expected to be almost 40% below target in the 2023/2024 season due to strong winds, scant rain, smuggling, and disease.
Cocoa swollen shoot virus, which causes yields to drop and kills cocoa trees, wiped out about 590,000ha of farmland between 2018 and February this year, according to Ghana’s cocoa marketing board Cocobod told Reuters.
Cocoa prices surged to a record high of $9,733 per ton in March, and recently topped $10,051.
Ivory Coast cocoa shipments for the past six months were down 28% year-on-year at 1.3Mt. That country's 2023/2024 cocoa production season, which ends in September, is forecast to contract by 22% year-on-year to an eight-year low of 1.75Mt, according to the trader Ecom Agroindustrial.
In Ghana, the 2023/2024 cocoa harvest will record a 22-year low of between 422,500t and 425,000t, largely due to disease outbreaks and unfavourable weather conditions.
“Consequently, the price of chocolate, which is the most popular and the largest byproduct from cocoa processing, is rising. However, indications are that the upward price adjustment will be gradual given the magnitude of the increase at commodity level, due to a need to avoid a potential demand shock,” said Paul Makube, senior agricultural economist at FNB Commercial.
Chocolate makers such as Tiger Brands and Nestle have seen a significant increase in input costs, forcing the companies to adjust their pricing.
“The upward cost pressure from cocoa bean prices has significantly impacted the cost of chocolate production at Tiger Brands,” the company said. “This is compounded by price increases in other key ingredients and increases in input costs related to logistics and mitigating infrastructure challenges.
“Ongoing efforts to improve cost leadership and drive efficiencies have allowed us to absorb some of the cost pressure to drive value and affordability for South African consumers; however, the company has had to pass some price increases on to retailers,” it said.
These recent price increases are among the most significant in recent memory, posing substantial challenges to the industry
— Zumi Njongwe of Nestle
Zumi Njongwe, business executive officer: confectionery at Nestlé East & Southern Africa, said the company had felt the impact of the surge in cocoa prices in the past three to six months. “We foresee between a 60% and 250% increase in cocoa prices, which is a significant challenge that we are managing,” she said.
Njongwe said Nestle was being forced to review its pricing to offset increased production costs. “These recent price increases are among the most significant in recent memory, posing substantial challenges to the industry.”
Nestlé sources its cocoa globally, but a significant portion comes from West Africa, particularly from countries such as Ivory Coast and Ghana.
Anje du Plessis, a consultant at Euromonitor International, said consumers should brace for multiple price increases in 2024 as manufacturers and retailers respond to the drastic rise in cocoa prices.
She said in the short to medium term consumers could expect to see smaller pack sizes at the same prices, the use of cheaper ingredients, products imported from cheaper producer countries or of lower quality.
Between January and March this year, there was an average 4.5% increase in the prices of leading chocolate brands. On average since 2021, tablets (slabs) have increased by 20%-30%, while single-serve chocolates have risen by between 30% and 40%.
Consideration of consumer inflation, elevated interest rates, and subdued global economic growth is crucial in navigating pricing
Globally, the International Cocoa Organisation (ICO)'s first forecasts for the 2023/2024 year indicated that supply would fall by 11% to 4.45Mt, Makube said. Surging cocoa prices would cut demand by 5% to 4.78Mt. However, the recent forecasts of a quick transition from the El Nino weather pattern to La Nina for the year ahead boded well for a potential recovery in output in some of the producing areas.
“This means we might see a price correction when supply and demand come back into balance next year. Hopefully, the elevated prices will encourage reinvestment in primary production to avoid huge fluctuations in supplies, and the consequent price response,” Makube added.
Mpudi Maubane of Spar Group said the impact of the rise in cocoa prices had not yet been felt as the chocolate price hike was due to be implemented in September or October this year.
In February, there was an annual price increase of 6%-10% on chocolate across all suppliers. “This was the normal inflationary increase, which was applied to stock currently in hand, the bulk of which was purchased last year. This has not yet impacted on sales; we do however expect to feel the true impact following the September/October announcements,” she said.
One of the companies yet to feel the pinch of high cocoa prices is Cape Town-based handcrafted chocolate maker, Honest Chocolate, which buys its cocoa directly from farmers in Tanzania.
Co-founder and CEO Anthony Gird expects prices from farmers in the East African country to start rising as chocolate manufacturers start buying there due to low supply from Ghana and Ivory Coast.
“This will affect us as a small business.” Gird said the company had always paid a premium for cocoa but the prices had not changed as they had in Ghana and Ivory Coast.
Honest Chocolate, which was started 14 years ago and employs 20 people, has a factory in Woodstock where it also runs workshops on chocolate making. Its chocolates are sold online, including on Uber Eats and Checkers Sixty60, and also by selected independently owned stores in several cities.
Gird said not all chocolates would to see a price spike as some contain less cocoa than others. “The darker the chocolate, the more expensive it is going to be.” Honest Chocolates mostly contain 70% cocoa.
Makube said a sustained upside in cocoa prices would not only hurt demand but accelerate a shift to alternative products.
Some big chocolate makers have started experimenting with cocoa substitutes, which have a feel of chocolate but are synthetic, in anticipation of a shortage of cocoa beans, said Gird.
“If prices remain elevated, I think they will be introducing those into the cheap chocolate products,” he said.
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