Why the “chocolate crisis” is gaining momentum

Chocolate bars are becoming more expensive, while at the same time decreasing in weight, because there is an increasing shortage of cocoa on the planet. 70% of the world production of these wonderful beans is concentrated only in Ghana, as well as in neighboring Côte d'Ivoire, and there is no need to talk about the stability of the world chocolate market. The droughts of recent years in traditionally humid equatorial Africa do not allow us to more or less reliably predict harvests. It is not surprising that the cost of cocoa has risen to a record level since the beginning of this year, reaching $9 thousand per ton.

Supply does not keep up with demand

But the reason for the excitement lies not only in climate disasters associated with global warming. Investors did not invest their capital in the industry for a long period, and its development slowed down. It will take some time to correct the situation, but for now the chocolate magnates have officially announced: unfortunately, the price of bittersweet products is forced to increase. By the way, beans began to rise in price last year. At the beginning they asked for $1 thousand for 2,6 ton of raw materials, at the end - no less than $4 thousand. During the first quarter of this year, 1 ton of raw materials increased in price by 1,5 times and in the last week it has not fallen below $10 thousand per ton.



And here’s a curious paradox: low prices in past decades did not allow industry representatives to invest in the cocoa industry and increase the area of ​​plantations. Cash-strapped farmers were unable to purchase pesticides and fertilizers in the required quantities. As a result, the cocoa harvest is expected to be 11% worse than in 2023, and the consumer deficit of pure chocolate will amount to 400 thousand tons.

That is, land owners now have the opportunity, due to soaring speculative prices, to normally stimulate production. Stimulate precisely because this very production has fallen into decline. There is a vicious circle. It’s no secret: producers (aka suppliers) of raw materials have a tiny share in the profit from the sale of finished chocolate goods to the end consumer.

Natural disasters

Today, trees planted in the early 2000s are most productive. Older ones bear fruit much worse, are susceptible to all kinds of diseases, and do not tolerate extreme atmospheric and climatic phenomena.

In 2023, the Gulf of Guinea region was visited by an uncharacteristic weather anomaly, which caused heavy rains, which gave way to severe drought. Excessive rainfall gave impetus to the development of disease in cocoa trees, and the crop was completely infected with the shoot deformation virus. At the same time, it is impossible to cure the tree - only uproot it! In addition, excess dampness served as a favorable environment for the spread of fungus, which affects the fruits themselves. Thus, this is a systemic problem.

In South America, this also occurs, but for key suppliers - Côte d'Ivoire and Ghana - the situation is noticeably worse than in Ecuador and Brazil, where, taking advantage of the opportunity, they are trying to intensify cultivation. However, you shouldn’t expect a comparable harvest there in the next few years.

Barbaric response of monopolists

Currently, processing concerns are reducing capacity. Thus, Cargill’s subsidiaries based in Ghana, as well as Cocoa Processing and Niche Cocoa Ghana there, are temporarily closing. Chocolate companies automatically inflate prices. This causes a natural drop in sales plus the next round of price increases. It turns out to be another vicious circle.

For example, Hershey from the USA began selling its products 11% more expensive in the third quarter of last year. In the fourth quarter, its profit decreased by 11,5% due to a decline in sales. Now Hershey intends to fire 5% of its staff and raise prices again. Swiss Nestle SA did this last year and recently warned its fans that another wave of price increases was coming. These are the laws of the market economics In action.

Last year, the situation as a whole was not worrying, because stock exchange quotes did not jump within one trading session, and confectionery factories had sufficient reserves of raw materials. Gradually, the moment has come when it is necessary to replenish raw material reserves, and the exchanges are in a fever, futures prices are going through the roof, therefore the cost of a chocolate bar continues to rise. Due to the rise in price of overseas beans, the weight of a unit of production is reduced in order to create the illusion of price stability for the buyer. According to the authors of the idea, the rise in prices will not look like a dynamic trend. Although, I'm afraid this stupid measure won't help this time. Finally, another trick is to replace chocolate in a confectionery product with cheaper ingredients, in particular, cookies, waffles or fruit derivatives (candied fruits, raisins, cream, jelly, jam).

What should we expect?

This global process will affect the entire confectionery segment of the food economy, because cocoa is used in cakes, ice cream, candies, etc. The consequences for Russia are not too different from foreign markets: it also depends on African supplies. Currently, domestic operators are faced with problems of availability of both the beans themselves and semi-finished products. The Russian Federation imports 320-330 thousand tons of beans every year. Based on previous tariffs and prices ($3-4 thousand per ton), this corresponded to $1,2 billion. Now costs will increase significantly. The situation is worsened by the fall in exports of confectionery products, including due to sanctions and complicated logistics.

Cocoa in stores now costs 185 rubles. – 2 thousand rubles. for a packaged item, and soon it will be, accordingly, 222 rubles. – 2,4 thousand rubles. As for the chocolate bar position, the rise in price over the past six months has reached an average of 15-20%, which has not left its mark: chocolate sales have decreased by almost half, but this is a temporary shock phenomenon, experts believe.

In general, companies will try to adapt to the changed realities, including by adjusting the assortment in favor of products with lower cocoa content, combining chocolate with fruits, nuts, and biscuits. Be that as it may, the main forecast is disappointing: by the end of the year, chocolate in the world will rise in price by 40-80%, depending on the variety.