Global cocoa prices have surged to an unprecedented high due to dry weather wreaking havoc on crops in West Africa, reaching a new peak of $5,874 (£4,655) per ton on the New York commodities market.
The key ingredient for chocolate production has seen its cost nearly double since the beginning of the previous year, causing a ripple effect on consumers and putting pressure on major chocolate manufacturers. Hershey, one of the world’s largest chocolate producers, issued a warning on Thursday, acknowledging that “historic cocoa prices are expected to limit earnings growth this year.”
Hershey’s CEO, Michele Buck, hinted at the possibility of price adjustments, stating, “We can’t talk about future pricing, but given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.” This announcement coincided with the release of Hershey’s financial results for the last quarter of 2023, revealing a 6.6% decline in sales as consumers impacted by inflation scaled back spending on confectionery.
Mondelez, the company behind the Cadbury brand, had previously identified rising ingredient costs, including cocoa and sugar, as a challenge for the upcoming year. Chief Financial Officer Luca Zaramella highlighted “significant increases in both cocoa and sugar.”
In December, UK consumer group Which? reported a minimum 50% rise in the price of some festive chocolate boxes over the past year. Despite an overall inflation rate of 8.3% for UK supermarket food and drink in November, chocolate prices surged by 15.3%.
Poor harvests in West Africa, the primary global cocoa supplier, have been driving up cocoa prices. The El Niño weather phenomenon, contributing to drier conditions in Ghana and Ivory Coast, the world’s two largest cocoa bean producers, has further exacerbated the situation. Climate change-induced shifts in temperature and rainfall patterns are also influencing harvests.
Analyst Jack Scoville from Price Futures Group explained, “Traders are worried about another short production year, and these feelings have been enhanced by El Niño that is threatening West Africa crops with hot and dry weather.” The combination of these factors emphasizes the urgent need for the cocoa industry to adapt to changing climate conditions and for consumers to brace for potential price hikes in chocolate products.
