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Opinion: Rising cocoa and sugar prices – cost of chocolate likely to increase ahead of Easter
Siân Yates

Siân Yates

28 March 2024

Opinion: Rising cocoa and sugar prices – cost of chocolate likely to increase ahead of Easter

Cocoa and sugar prices have surged to unprecedented highs, posing challenges for chocolate manufacturers and consumers alike. With cocoa prices reaching record levels due to supply concerns in West Africa and sugar facing deficits exacerbated by adverse weather, the cost of chocolate production is on the rise. Nidhi Jain, commodity specialist at The Smart Cube, delves into the reasons behind these surges and offers insights into strategies for mitigating their impact on chocolate production and pricing.


The last 12 months have been a highly volatile period for the global commodities market. Silver and gold saw their prices rise significantly, while palladium’s value fell, as too did the price of crude oil. However, there are two commodities which have seen their prices surge to record highs – sugar and cocoa. London cocoa prices touched £4,757/tonne in February 2024, an all-time price high for the commodity, while sugar’s value increased by around 50% from August 2022 to November 2023. With Easter only a few weeks away, consumers are set to begin stocking up on numerous varieties of chocolate products. Nevertheless, when it comes to purchasing these products, shoppers must ready themselves for increased confectionery costs as a result of the considerable increases in key ingredient prices.


Record cocoa prices to persist The rise in cocoa prices has been remarkable – the commodity’s value is currently 35% higher than it was in December 2023, and a staggering 132% higher than in February 2023. Cocoa’s price has reached a record high amid continued supply concerns in two of the leading cocoa-producing nations globally, Ivory Coast and Ghana, with cocoa production projected to decline by approximately 10% year-over-year in West Africa.


The decrease in production has been caused by several factors, including the spread of disease in cocoa plantations. Swollen shoot virus in Ivory Coast and black pod disease in Ghana have led to crop deterioration. Uncharacteristically heavy rains in the region – total precipitation in West Africa during the second half of 2023 was more than double the 30-year average – escalated the spread of these diseases, negatively impacting cocoa crop quality and production. Adding to this, following the heavy rains, Ivory Coast's cocoa-growing regions have been experiencing strong seasonal Harmattan winds since late December 2023, bringing dry weather to the nation and reducing yields of mid-cocoa crop.


Sugar prices remain high, but expected to retreat Like cocoa, global sugar prices have risen considerably in recent months. Driving this is a supply deficit of sugar, caused by the adverse weather associated with El Niño. The weather event has brought dry conditions to India and Thailand – two of the top five producers of the commodity globally. Both India and Thailand are already bearing the brunt of dry weather, with sugar output likely to fall by an estimated 10% and 32%, respectively, in the marketing year 2023/24 (from October 2023).


Additionally, a ban on sugar exports by India and delayed harvest in the European Union due to floods, paired with continuing strong demand for sugar, has kept the commodity’s price elevated. Elsewhere, tightening global supply due to low stock levels is resulting in increased prices – a trend expected to persist until March 2024, when new crops are harvested.


Nevertheless, from March, sugar prices are projected to retreat from these highs amid improving supply prospects. Expected favourable weather and higher sugarcane diversion towards sugar production in Brazil may increase supply. Additionally, India has capped the use of sugar syrup in ethanol production, augmenting sugar supply.

The cost of chocolate Sugar and cocoa are key ingredients in the manufacturing and production of all chocolate products. Indeed, according to chocolate manufacturer Whitakers, an average-sized bar of milk chocolate contains roughly 55% sugar and between 20-40% cocoa.


Despite both commodities experiencing sizeable price hikes in recent months, chocolate costs haven’t surged. This is because large chocolate producers have purchased the commodities in advance and stock inventory, especially when they anticipate price rises, enabling the firms to avoid having to significantly increase the costs of their products.


However, in recent months, chocolate producers have failed to restock inventory, anticipating cocoa and sugar prices to drop. Although sugar prices have started falling from the peak levels observed in November 2023 – dropping by 18% month-over-month in December 2023 – cocoa continues rising further and further. As cocoa supplies dwindle, chocolate makers are expected to raise prices accordingly, passing rising costs onto consumers ahead of Easter.


For instance, Mondelēz has already decided to increase pricing for 2024 for North America and Europe, with Europe seeing the major share of increase. This is backed by initial price increases in the region in 2023, which had minimal impact on volume sales.


Mitigating the impact of rising ingredient costs on products Chocolate manufactures can adopt strategies which do not impact product prices, including actively evaluating multiple suppliers. By identifying sellers in several territories, this reduces the dependency on a single provider or area, particularly should a manufacturer purchase from regions where output is waning. Elsewhere, firms should conduct a comprehensive assessment of exposure to Ivorian and Ghanian suppliers, to ensure the fall in cocoa production in these nations is not significantly impacting their operations.


What’s more, chocolate manufacturers should also consider utilising artificial intelligence (AI) as part of their business strategies to maintain profitability and ensure a regular supply of reasonably priced products.


One of the main functions chocolate producers can use AI for is vendor selection. The technology helps firms analyse vendor information and determine which vendor is the best fit for their business based on factors including price and quality.


While market consensus is that chocolate producers must pass on costs to consumer to mitigate the impact of rising cocoa and sugar prices, a plethora of alternative solutions exist.

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