Cocoa prices soar over $12,000
Life is like a box of chocolates — increasingly expensive.
Cocoa futures crossed $12,000 per metric ton in early trading this morning, nearly triple the price at the start of the year — threatening to raise the cost of America’s favorite indulgence.
The now precious bean’s price rise is partly blamed on drought-diminished harvests in West Africa, a region which produces around three-quarters of the world’s cocoa. So far, the impact on consumers hasn’t been quite as extreme as the raw moves in the commodity itself, though major players in the chocolate market like Nestle, Lindt, and Mondelez all hiked prices at some point this year, citing higher cocoa costs. Some are even expecting an unprecedented ~10% increase in chocolate prices the coming year, potentially leaving a bitter taste in consumers’ mouths.
Cocoa alone is only one small part of the chocolate supply chain, accounting for roughly 10% to 20% of these chocolate companies’ cost of goods sold, according to Jefferies. Still, the soaring price of chocolate’s core ingredient might be one reason why major confectionary companies are looking to consolidate. Last week, Hershey rejected an acquisition offer made by Mondelez, which, based on the company’s valuation, was likely north of $40 billion in total.
At the end of the day, the price burden from cocoa’s skyrocketing costs all comes down to the sticky wallets of customers with a sweet tooth. Some major chocolate companies are even trying new recipes — ones that use less cocoa and more artificial flavours — to get around the soaring prices. Yum.
