Buy Your Easter Chocolate Early - Cocoa Prices Are at Record Highs and Rising

If you plan on purchasing holiday chocolate this year, prices may be a bit higher than expected. Last week, U.S. chocolate company Hershey, one of the world’s largest chocolatiers, reported a 6.6% decline in sales in the fourth quarter of 2023. The drop is partly due to decreased consumer spending, but surging prices for one of chocolates' main ingredients are also to blame.

As dry weather continues to plague cocoa-producing regions in Africa, costs for the ingredient are soaring. In New York, cocoa prices hit an all-time high at $5,874 per ton last week, and London saw a record increase of 7.3%. Cocoa prices around the world are close to double what they were at this time last year.

With global cocoa prices on the rise, confectioners and consumers are likely to be affected.

The rising cocoa prices are directly related to the suffering cocoa crop. Because of El Nino weather patterns, Ghana and Ivory Coast, two of the world’s largest cocoa bean exporters, have experienced much drier weather than usual, resulting in a withering crop. Experts predict that Ghana will export 475,000 to 500,000 tons in 2024 compared to the 650,000 tons of cocoa shipped in 2023 and that the total cocoa bean deficit will be roughly 375,000 tons.

The result is a demand that has outpaced supply, leading to higher-than-normal pricing.

Consumers can expect to feel the pinch of those costs on retail shelves. Many existing chocolate companies took on the unexpected higher costs themselves in 2023 and are expected to adjust retail prices to make up for the hit.

Last week, Hershey announced to consumers that overall profits could be lower than expected for this year and are looking at extensive preventative measures to safeguard the company.

“Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage our business,” said Hershey President and CEO Michele Buck. The company also announced that it will implement a restructuring program over the next two years that could result in layoffs for up to 5% of its 21,000-person workforce. These measures could save the company up to $300 million annually.

After the announcement, Hershey's stock price dropped 3.4%.

Many shoppers have already seen chocolate price increases in their stores ahead of both Valentine’s Day and Easter. According to some estimates, chocolate prices in the U.S. have spiked close to 11% over the last year, and more increases are expected closer to Halloween.

Nestle, a multinational food and drink processing company, said that rather than an across-the-board price increase, they are targeting prices per category, including their confectionary group, as they deal with not only pricier cocoa but sugar as well, according to their Chief Financial Officer, Francois-Xavier Roger.

Cadbury, the world’s second-largest confectionery company, announced that prices on their chocolate have already risen ahead of Easter due to rising component costs.

While costs are rising on both the business and consumer levels, companies are actively seeking plans to keep prices steady throughout the rest of 2024 — though prices aren’t expected to drop until cocoa production evens out and exporters can meet the considerable demand for everyone’s favorite sweet treat.