With the price of cocoa reaching all-time highs, customers may expect to pay more for chocolate Easter bunnies and eggs.
With the price of cocoa reaching all-time highs, customers may expect to pay more for chocolate Easter bunnies and eggs. (Photo : by Scott Olson/Getty Images)
Rising Costs and Their Impact on the Chocolate Industry
With an approximately tripling from the beginning of 2024, cocoa futures have risen this year. West Africa provides about 70% of the world's cocoa supply, but its crops have been strained and harmed by rising temperatures and unfavorable weather.
Prices for sugar are also going up. After increasing 2.7% in 2023, futures for a pound of sugar are up almost 8% in 2024.
When cocoa futures reached an all-time high of $5,874 per metric ton in February, Citi analyst Thomas Palmer noted, "The magnitude and pace of recent price increases seem to be unprecedented."
Large chocolate manufacturers, such as Mondelez, the creator of Cadbury chocolate, and Hershey's, have been passing those expenses along to customers, and then some. In 2023, Hershey's net profit margin increased slightly to 16.7% from 15.8%. According to Mondelez, their 2023 percentage increased from 8.6% to 13.8%.
When consumers become weary of paying greater food prices, both corporations reported declining sales volumes for their most recent quarters.
The National Retail Federation reports that although overall chocolate spending is still high by historical standards, it is predicted to decline this Easter. According to its most recent poll, shoppers anticipate spending $3.1 billion, or $24.78 per person, on candy for Easter this year. A year earlier, the amount was $3.3 billion, or $26.31 per person.
Cadbury, a mainstay of Easter baskets, is owned by Mondelez, which has been using price hikes to offset the spike in cocoa prices. According to the corporation, it holds a 13% market share in chocolate worldwide. It admitted to price hikes in its chocolate category of up to 15% in 2023, and it is expected that increased pricing would play a major role in fulfilling revenue growth projections of up to 5% in 2024
In a January conference call, Mondelez's chief financial officer, Luca Zaramella, stated, "Pricing is clearly a key component of this plan." "Its contribution will be a little bit less than we have seen in 2023, but it is higher than an average year."
In response to the sharp spike in inflation last year, Hershey said that it will be raising the price of several food service and grocery goods as early as 2024. It anticipates a 3% increase in revenue this year.
Although the majority of the price rise is a carryover from earlier hikes, the corporation has stated that it is dedicated to boosting prices to keep up with inflation.
According to the government's most recent data on consumer pricing, the price of candy and other sweets increased 5.8% in February over the same month last year. Since late 2023, increases have been circling that point.
Although overall inflation has decreased, food costs have remained stubbornly high. According to the most recent USDA data, American consumers spent more than 11% of their disposable income on food in 2022-the largest amount since 1991.
