Cocoa prices have doubled so far this year – and that is more bad news for chocolate lovers after two years of rising prices and shrinking bars.
After rising steadily in the second half of 2023, the cost of cocoa beans – the main and priciest ingredient for chocolate – has skyrocketed over the past two months.
Chocolate makers last year passed on rising costs to shoppers. Hershey’s has admitted it will have to put up prices again – while Cadbury’s plans to shrink products.
Easter is the third-biggest occasion in the US for buying chocolate and candies, with Halloween taking the top spot, followed by the winter holidays, according to the confectioners association.
So, what does all this mean for Easter egg prices – and the industry as a whole?
Easter is the third-biggest occasion in the US for buying chocolate and candies
How cocoa prices had been steady since the early 1970s – until the second half of 2023
What is happening to cocoa prices?
Cocoa prices have soared in recent months due to poor climate and bean disease in West Africa, which is home to 70 percent of global cocoa production.
This, in turn, has tightened supply and seen prices skyrocket.
Sugar prices are also up 7 percent in the last 12 months.
Cocoa futures hit a record high of $10,000 ahead of the Easter holiday. This is a 250 percent increase from last March, CNN reported, outpacing recent surges in Bitcoin, gold and technology company Nvidia.
Are store prices for candy going up this year?
The makers of Hershey and Cadbury chocolates are planning more price hikes to cover a fresh record-setting surge in cocoa prices, even as inflation-hit consumers curb their purchases and company profits face a hit.
Hershey CEO Michele Buck said last week that ‘given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.’
Mondelez, which makes Milka and Cadbury chocolates, is also planning price hikes to cover the inflation in cocoa, executives said in an earnings call in January.
‘Last year chocolate companies were fairly well hedged. They had some stockpiled cheap cocoa as well, but this rally has been going on for well over a year so a lot of these companies are beginning to be fully exposed to these higher cocoa prices,’ said Rabobank cocoa analyst Paul Joules.
Hershey CEO Michele Buck said last week that ‘given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business’
Have prices already gone up?
Major global makers in Europe and the US have more than passed on the rise in cocoa prices to consumers.
Net profit margins at The Hershey Company increased to 16.7 percent in 2023 from 15.8 percent in 2022.
Mondelez International, which owns the Toblerone and Cadbury brands, reported a jump to 13.8 percent in 2023 from 8.6 percent the year before.
The retail price of chocolate rose 11.6 percent in 2023, according to Circana data shared with CNN.
This outpaced the yearly rise in the Consumer Price Index – a common measure of inflation – which went up 3.4 percent.
Separate data from Neilsen shows that these price increases are continuing this year. It said in the 12 months to March, the price per unit of chocolate in the US rose 10.4 percent.
A Mondelez spokesperson told Reuters that premium chocolate makers like Lindt will likely fare better because the already high mark-up on their chocolate means they might be able to hike prices less, in percentage terms, than regular chocolate makers.
Target and Kroger are also reportedly offering bigger discounts on Easter candy this year compared to last (Pictured: Easter candy at a California Walmart store earlier this month)
What about Easter chocolate?
Views are mixed as to whether Easter chocolate will be more expensive this year.
Recommended retail prices are up, ‘So this Easter will be more expensive than last year, and there’s less consumer appetite to spend,’ John Ament, an independent consultant and former global vice president of cocoa at M&Ms maker Mars, told Reuters.
‘It is likely consumers will see a price spike on chocolate candy this Easter,’ Wells Fargo said in a report this month, according to AP.
But some major stores are also offering deals to attract customers.
Retailers have increased discounts on Cadbury, Reese’s, Hershey’s, M&Ms and Lindt this Easter versus last, according to research analytics firm Dataweave.
Big box store Target and supermarket chain Kroger are also offering bigger discounts on Easter candy this year compared to last, according to the firm.
At Target in New York in early March, Reese’s mini eggs unwrapped, another new product for this season, and bunnies were buy one, get one for 50 percent.
A Kroger spokesperson said the grocer updated its strategy to include more frequent promotions on top-selling brand and pack sizes.
The National Retail Federation, an American trade association, expects spending this Easter to remain high by historical standards despite rising candy prices.
Its latest survey showed that consumers were expected to spend $3.1 billion on chocolate eggs and bunnies and other sweets this Easter, down from $3.3 billion a year ago.
Are chocolate bars set to shrink?
A Mondelez spokesperson told Reuters that as input costs rise this year, the company will consider not just price hikes but ‘changing the unit weights’ of its chocolates – a technique commonly known as ‘shrinkflation.’
‘We’ve had a couple of years now of strong price increases in chocolate and you tend to find in the first year, the elasticity is okay, in the second year it gets worse, and now we’re in a third year, its going to be awful,’ said Kepler Cheuvreux analyst Jon Cox.
The National Retail Federation, an American trade association, expects spending this Easter to remain high by historical standards despite rising candy prices
Will recipes change?
Some confection-makers may be pitching more non-chocolate treats for Easter – and beyond.
Hershey is shipping more non-cocoa treats to retailers this Easter in addition to its traditional Reese’s chocolate bunnies and eggs.
It is introducing a new six-pack of cookies ‘n’ cream bunnies, offering full-sized Kit Kat lemon crisp bars and mixing Haribo gummy bears with chocolate bars in its assortment bags.
According to consultant John Ament, mass-market chocolatiers like Mondelez are also more likely to invest in brands not tied to cocoa.
The latest addition to the permanent flavor lineup at Hershey’s is a Chocolate Frosted Donut flavor Kit Kat bar – which is only partially dipped in chocolate rather than completely covered, Bloomberg reported.
But large scale confection-makers are unlikely to be willing to sacrifice taste in order to save money amid rising cocoa prices.
‘Tinkering now with the recipes and flavor profiles simply because the input cost for cocoa has gone up, in my opinion, would be a mistake,’ Nestlé Chief Executive Officer Mark Schneider said on call with journalists in February.