Big chocolate brands profit; African cocoa farmers not so much
Shoppers may get a bitter surprise in their Easter baskets this year. Chocolate eggs and bunnies are more expensive than ever as changing climate patterns eat into global cocoa supplies and the earnings of farmers in West Africa.
About three-quarters of the world's cocoa — the main ingredient in chocolate — are produced on cacao trees in Ghana, Ivory Coast, Nigeria and Cameroon. But dusty seasonal winds from the Sahara were severe in recent months, blocking out the sunlight needed for bean pods to grow. The season prior, heavy rainfall spread a rotting disease.
With exports from the Ivory Coast, the world's top producer, down by a third in recent months, the global price of cocoa has risen sharply. Cocoa futures have already doubled this year, trading at a record high of more than $10,000 per metric ton in New York on Tuesday after rising more than 60% the previous year. Farmers who harvest cacao beans say the increases aren't enough to cover their lower yields and higher production costs.
Yet the high Easter demand for chocolate carries a potential treat for big confectionery companies. Major global makers in Europe and the United States have more than passed on the rise in cocoa prices to consumers.
Net profit margins at The Hershey Company increased to 16.7% in 2023 from 15.8% in 2022. Mondelez International, which owns the Toblerone and Cadbury brands, reported a jump to 13.8% in 2023 from 8.6% the year before.
“It is likely consumers will see a price spike on chocolate candy this Easter,” Wells Fargo said in a report this month.
Mondelez said it raised chocolate prices up to 15% last year and would consider additional price hikes to help meet 2024 revenue growth forecasts. “Pricing is clearly a key component of this plan,” Chief Financial Officer Luca Zaramella said in January. “Its contribution will be a little bit less than we have seen in 2023, but it is higher than an average year.”
Hershey's also raised prices on its products last year.