Dive Brief:
- Sky-high cocoa prices could take a bite out of chocolate manufacturers' sales ahead of Valentine's Day.
- Cocoa prices are nearly 65% above what they were a year ago, with futures hitting a 46-year high, according to a CoBank report.
- Prices are expected to remain elevated until a new cocoa crop from West Africa comes to market later this year.
Dive Insight:
Candy manufacturers are just beginning to recover from the toll of elevated sugar prices. Now, depleted cocoa supplies will leave chocolate confectioners with little choice but to raise prices, potentially limiting future sales growth.
“The cocoa issues come at a particularly challenging time for manufacturers, considering the increase in sugar prices they’ve been coping with over the past three years,” Billy Roberts, senior food and beverage economist for CoBank, said in a statement. “While sugar prices have recently retreated, cocoa futures prices remain near record levels and show little sign of any significant movement.”
Heavy rains and the spread of black pod disease have decimated the cocoa crop in West Africa, which makes up 70% of the world's output. Last summer, Ghana's projected yield was the lowest in 13 years, with the country noting farmers might not be able to meet some cocoa contract obligations.
The tightened supply is weighing on food manufacturers. Mondelez’ reported weakened chocolate sales volume growth, while Hershey saw sales decline in 2023. Mondelez executives said in January that chocolate will make up most of the company's pricing actions in 2024.
Higher chocolate prices have yet to dissuade consumers, though that could change as costs continue to rise. Dollar sales of chocolate confectionery have grown due to elevated prices, though volumes have declined, limiting overall sales growth, according to CoBank.
"We’re anticipating single-digit declines in both dollar and unit sales until pricing stabilizes and consumer discretionary incomes rebound,” Roberts said.
