Chocolate: A luxury item since the rally in cocoa prices

Climatic changesplant diseases and the low wages offered for years in cocoa-picking plantations that have kept many workers from going to work there, are the factors that are expected to continue to cause problems in production, which this season is expected to be reduced by 11%.

This is a development that creates the conditions for an even greater increase in prices, which are once again close to historical levels. These prices now stand at $10,800 an ounce, having risen more than 250% over the past twelve months. The continuous rally in cocoa prices has also contributed to food inflation and made chocolates and chocolate products consumed in most countries of the world much more expensive.

These are developments that change the facts in the industry and the market, since the conditions have changed and they are not going to return to the previous regime, say international players in the industry. In the future, chocolate will look more like a minor luxury, senior chocolate industry executives told Bloomberg.

Also, these conditions create the conditions for a round of takeovers to begin in the chocolate industry, because many mostly smaller companies in size will not be able to withstand the competition and high prices.

Confectionery sector consolidation will be further accelerated by new cocoa price hikes because not everyone will be able to pass on the price increase to consumers, the same sources told Bloomberg.

The whole situation also creates risks for the workers in these industries. Across the European Union and in Switzerland the chocolate, biscuit and confectionery sector employed more than 250,000 workers in 2020 and had exports worth around €14 billion according to trade group Caobisco which represents more than 13,000 companies in the sector. About 99 percent of those members are small and medium-sized businesses that lack the scale and influence of larger companies that can to some extent absorb large price increases, Bloomberg reports. Concerns are now beginning to grow about the solvency of some smaller such European companies, which are under significant pressure from increases in the price of cocoa and energy for chocolate production.