Chocolate producers in Australia are bracing for the impact of skyrocketing cocoa prices, with significant price hikes expected to be passed on to consumers.
According to a new report by Rabobank, a specialist in food and agribusiness banking, the worst of the cocoa crisis is yet to come as the global chocolate industry grapples with a supply shortage and rising production costs.
In the report titled Soaring Cocoa Prices: The Worst is Yet to Come, Rabobank warns that the true impact of the cocoa crisis has not yet fully materialised, with many companies hedging prices and supply contracts up to a year in advance.
“Significantly higher chocolate prices will likely hit shelves over the coming months and into 2025, providing a major challenge for the chocolate sector, which is already battling a longer-term structural decline in demand,” the report states.
Paul Joules, Analyst at RaboResearch, said since January 2023, cocoa futures have shattered the calm of their previous trading range, peaking at nearly USD $12,000 per metric ton in the first half of 2024.
“This dramatic increase, fuelled by a global cocoa shortage, is primarily due to a disappointing harvest in West Africa, the source of 70 per cent of the world’s cocoa.
“The International Cocoa Organisation (ICCO) reports a 14.2 per cent drop in global cocoa production for the 2023/24 season, leading to a shortage of approximately 462,000 metric tons and the lowest cocoa stocks in 22 years.”
Joules said that chocolate manufacturers are struggling with soaring cocoa costs, which are reflected in higher local retail prices for chocolate.
“This is illustrated in the most recent quarterly (June) Consumer Price Index data, from the Australian Bureau of Statistics, which showed year-on-year inflation in the Snacks and Confectionery category – of which chocolate is part – was running at 4.6 per cent. This followed a similar-sized year-on-year jump seen in the June 2023 quarter, so the cumulative increase in this category between June 2022 and June 2024 is 21.8 per cent.”
Despite these rises, the full effect of the cocoa crisis has yet to hit Australian shelves. The steepest price increases are expected in the second half of 2024 and into 2025, with dark chocolates containing higher cocoa content likely to be most affected.
With rising prices, Rabobank anticipates a shift in consumer behaviour. Shoppers may opt for different types of chocolate, switch between brands, or even move toward private label products or alternative snacks.
“The increased cost of chocolate is expected to lead to a significant drop in consumer demand. This market correction should balance the cocoa supply shortage and stabilise prices,” explained Joules.
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