Cocoa prices have doubled so far this year – which 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 most important and expensive ingredient for chocolate – has skyrocketed in the past two months.
Chocolate makers passed on rising costs to shoppers last year. Hershey’s has admitted it will have to raise prices again, while Cadbury’s plans to downsize its products.
According to the Confectioners’ Association, Easter is the third largest occasion in the U.S. for purchasing chocolate and candy, with Halloween taking the top spot, followed by the winter holidays.
What does all this mean for Easter egg prices – and for the sector as a whole?
Easter is the third largest occasion in the US for purchasing chocolate and candy
How cocoa prices have been stable since the early 1970s – until the second half of 2023
What happens to cocoa prices?
Cocoa prices have soared in recent months due to poor climate and bean blight in West Africa, where 70 percent of global cocoa production takes place.
This, in turn, has tightened supply and sent prices skyrocketing.
Sugar prices have also risen by 7 percent in the past twelve months.
Cocoa futures hit an all-time high of $10,000 ahead of the Easter holiday. This is a 250 percent increase from last March, CNN reported, and surpasses recent gains in Bitcoin, gold and tech company Nvidia.
Will retail prices for candy go up this year?
The makers of Hershey and Cadbury chocolates are planning more price hikes to cover another record rise in cocoa prices, even as inflation-hit consumers scale back their purchases and corporate profits take a hit.
Hershey CEO Michele Buck said last week that “given current cocoa prices, we will use 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 increases to cover cocoa inflation, executives said in a January earnings call.
‘Last year, chocolate companies were reasonably well covered. They also had some cheap cocoa in stock, but this rally has been going on for over a year now, so a lot of these companies are starting to become fully exposed to these higher cocoa prices,” said Rabobank cocoa analyst Paul Joules.
Hershey CEO Michele Buck said last week that “given current cocoa prices, we will use every tool in our toolbox, including pricing, as a way to manage the business”
Have prices increased yet?
Major global producers 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 from 15.8 percent in 2022 to 16.7 percent in 2023.
Mondelez International, owner of the Toblerone and Cadbury brands, reported an increase from 8.6 percent the year before to 13.8 percent in 2023.
According to data from Circana, the retail price of chocolate will increase by 11.6 percent in 2023 CNN.
This exceeded the annual increase in the consumer price index – a common measure of inflation – which rose by 3.4 percent.
Separate data from Neilsen shows these price increases will continue this year. It is said that in the 12 months to March, the price per unit of chocolate in the US rose by 10.4 percent.
This is what a Mondelez spokesperson said Reuters that premium chocolate makers like Lindt are likely to do better because the already high profit margin on their chocolate means they can raise prices less in percentage terms than regular chocolate makers.
Target and Kroger are also reportedly offering bigger discounts on Easter candy this year than last year (Photo: Easter candy at a Walmart store in California earlier this month)
What about Easter chocolate?
Opinions are divided as to whether Easter chocolate will be more expensive this year.
Recommended retail prices have increased. “So this Easter will be more expensive than last year and consumers will have less desire to spend money,” John Ament, an independent consultant and former global vice president of cocoa at M&M’s maker Mars, told Reuters.
“It is likely that consumers will see a price increase for chocolate candies this Easter,” Wells Fargo said in a report this month, according to AP.
But some major stores also offer promotions to attract customers.
According to research analytics firm Dataweave, retailers have offered higher discounts on Cadbury, Reese’s, Hershey’s, M&M’s and Lindt this Easter than last year.
Big box retailer Target and supermarket chain Kroger are also offering bigger discounts on Easter candy this year than last, the company said.
In early March, Target in New York unpacked Reese’s mini eggs, another new product for the season, and bunnies could buy one, get one for 50 percent off.
A Kroger spokesperson said the grocer has updated its strategy with more frequent promotions for top-selling brands and pack sizes.
The National Retail Federation, a US trade association, expects spending this Easter to remain high by historical standards, despite rising candy prices.
The latest research showed that consumers were expected to spend $3.1 billion on chocolate eggs, bunnies and other sweets this Easter, up from $3.3 billion a year ago.
Will chocolate bars shrink?
A Mondelez spokesman told Reuters that as input costs rise this year, the company will not only consider price increases but also “change the unit weight” of its chocolate – a technique commonly known as “shrinkflation.”
“We’ve had strong price increases for chocolate for a few years now and you often find that in the first year the elasticity is good, in the second year it gets worse, and now that we’re in the third year it’s going to be terrible.” , says Kepler Cheuvreux analyst Jon Cox.
The National Retail Federation, a US trade association, expects spending this Easter to remain high by historical standards, despite rising candy prices
Will recipes change?
Some pastry chefs may be showcasing more non-chocolate treats for Easter – and beyond.
Hershey is shipping more non-cocoa treats to retailers this Easter, in addition to the traditional Reese’s chocolate bunnies and eggs.
It is introducing a new six-pack of cookies and cream bunnies, with full Kit Kat lemon chip bars and a mix of Haribo gummy bears with chocolate bars in the range bags.
Mass-market chocolatiers like Mondelez are also more likely to invest in brands that aren’t tied to cocoa, according to consultant John Ament.
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 instead of completely covered, Bloomberg reported.
But it’s unlikely that large-scale candy makers will be willing to sacrifice taste to save money amid rising cocoa prices.
“To tinker with the recipes and flavor profiles now, simply because the input costs for cocoa have increased, would be a mistake in my opinion,” Nestlé CEO Mark Schneider said on a call with reporters in February.