Chocolate manufacturers to face elevated cocoa and sugar prices

A Rabobank report has found that chocolate lovers look set to be paying more for their favourite indulgence in the foreseeable future, with the price of cocoa and sugar likely to remain at high levels in coming months.

In recent months, retail prices for chocolate have been rising as manufacturers around the world grapple with high input prices, especially cocoa, which has increased 27% in price in the past year, and sugar, which has been trading at record highs.

Cocoa prices may rise even higher, having been on an “upward trajectory” since September last year, according to RaboResearch associate analyst Pia Piggott. This is due to poor growing conditions reducing production in the major cocoa-growing regions in West Africa, particularly Ivory Coast, which accounts for more than 40% of the global cocoa production. Following very wet conditions and flooding, as well as lower fertiliser availability, trees have been subject to rotting and disease.

In addition, the emergence of an El Niño weather pattern has led the bank to forecast cocoa prices to stay at elevated levels well into 2024.

The high price of sugar, which accounts for approximately 60% of the weight of an average milk chocolate bar, is adding further pressure.

Intercontinental Exchange (ICE) raw sugar is up 20%, which could be substantial for manufacturers. Though expectations of a large Brazilian sugar harvest have reduced some pressure, Rabobank is still expecting a small global surplus in 2023/24.

If there’s any increase in the severity of El Niño, it could lead to more demand than supply, potentially keeping sugar prices really elevated.

There is better price news, however, for dairy, another key chocolate ingredient. According to RaboResearch senior dairy and food retail analyst Michael Harvey, a decline in the record-high prices seen a year ago has provided some relief for chocolate manufacturers. The broader dairy commodity complex has come back to more normal trading conditions, making it more affordable.

Confectionery manufacturers have been taking steps to offset cost pressures, mindful of avoiding too much “demand destruction” from higher prices leading to consumers buying less chocolate. However, there are clear signs of a price inflation in the chocolate category at a retail level, with some types of chocolate in Australia rising in price by around 10 to 20%.

The latest monthly Consumer Price Index (CPI) data for snacks and confectionery is running at a high “double digit” rate, according to Harvey.

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