Saturday, December 2, 2023

Costly ingredients drive up chocolate price

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Dairy alone brings some relief as cocoa and sugar costs stay high.
A cocoa supply shortage is helping drive up the price of chocolate. Photo: Anna Tarazevich
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Chocolate lovers could have to dig deeper into their wallets for their sweet treats.

Rabobank has warned that the price of two key chocolate ingredients – cocoa and sugar – are likely to remain at high levels in coming months, as manufacturers around the world grapple with soaring input prices.

Cocoa has increased 27% in price in the past year, and may rise further, while sugar has also been trading at record highs, the bank said in a new podcast, “Sweet Inflation and the Chocolate Factory”.

RaboResearch associate analyst Pia Piggott said global cocoa prices have been on an “upward trajectory” since September last year, as the world heads into the potential third year of a cocoa supply deficit. This is due to poor growing conditions in the major cocoa-growing regions in West Africa, particularly the Ivory Coast – which accounts for more than 40% of global cocoa production.

Piggott said the risk of further negative impacts on global cocoa production due to the emergence of an El Niño weather pattern have led the bank to forecast cocoa prices to stay at elevated levels well into 2024.

Adding further upward pressure to the cost of chocolate is the high price of sugar, which typically accounts “for approximately 60% of the weight of an average bar of milk chocolate”.

Piggott said while expectations of a large Brazilian sugar harvest have recently “taken some of the steam out” of international sugar prices, the bank is still expecting only a small global surplus in 2023/24, supporting continued elevated prices.

There is better price news when it comes to another key chocolate ingredient: dairy.

RaboResearch senior dairy and food retail analyst Michael Harvey said a decline from the record and near-record prices seen a year ago for dairy commodities and ingredients is providing relief for chocolate manufacturer margins.

“This time last year, there wasn’t a lot of milk supply around globally and prices for milk powder and milk solids – which are key ingredients in chocolate – were at near-record highs, but fast-forward to where we are now and that broader dairy commodity complex has come back to more normal trading conditions,” he said.

“And our view at the moment is that we are going to have a subdued price environment for those dairy ingredients in the short term.

“So that’s something that will be feeding through the supply chain to food manufacturers, and, certainly for chocolate manufacturers, that means the dairy component will be more


Harvey said Rabobank is closely watching the “consumer response” to higher chocolate prices.

“Because there is belt tightening going on and there’s going to be reduced spending on discretionary products, that might mean a little less chocolate on the go and less impulse purchasing out and about,” he said. “However, consumers will still likely want to have some indulgence and eat chocolate when they are at home.”

And there are “still some bargains around” for consumers when it comes to buying chocolate treats, Piggott said.

“With manufacturers trying to keep market share in the category, they are still putting some of our favourite chocolates on sale to keep us buying them,” she said.

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