Cocoa prices are skyrocketing. Will it affect your Valentine’s Day chocolate?

Cocoa prices are rising so much that even the biggest chocolate makers are struggling to remain profitable. That doesn’t bode well for your wallet this Valentine’s Day.

Last Thursday, Hershey Co. said it would cut 5 percent of its workforce after record cocoa prices and inflation-weary consumers hurt fourth-quarter profits.

Climate problems in West Africa – home to more than 60 percent of global cocoa production – are damaging crop yields, limiting cocoa supplies and causing prices to soar.

Cocoa futures have soared, doubling last year and rising 40 percent since January; sugar, labor and other factors have also become more expensive. That means higher prices in the future for consumers, who will shell out more to get their fill of chocolate.

“Cocoa is expected to cap earnings growth this year,” Hershey CEO Michele Buck said on a call with analysts on Thursday. Prices for Hershey products increased 6.5 percent in the fourth quarter; Prices for its confectionery, chocolate and other sweets in North America increased by 9 percent in 2023.

Other companies are also feeling the pressure. Li-Lac Chocolates, which calls itself the oldest chocolate shop in Manhattan, told CNN that prices for its raw chocolate increased 13 percent this February compared to a year ago.

But Li-Lac has kept the price of a key set of chocolate products stable: “We have not increased prices on Valentine’s Day products for our customers since 2022,” the company said in an email.

Billy Roberts, senior food and beverage economist at CoBank, said in a report earlier this month that retail chocolate prices have risen about 17 percent in two years and will continue to rise.

“Cocoa prices are hitting chocolate candy makers hard,” Roberts told CNN. “And it looks like it’s not necessarily going to slow down anytime soon.”

The ultimate Valentine’s sweet

About 92 percent of Americans say they plan to share chocolate and candy for Valentine’s Day this year, according to the National Confectioners Association. In 2023, sales of Valentine’s Day chocolates and sweets will exceed $4 billion, according to the NCA.

Marnie Ives, CEO of Krön Chocolatier in Great Neck, New York, said her business is in the midst of the Valentine’s Day rush.

“On Valentine’s Day we expect between 400 and 450 customers each day in our store, which is a lot for a small store,” he said.

However, Ives said rising cocoa prices are not the only concern for his customers this holiday season.

“Cocoa prices eventually go down and affect us when we buy things like bulk chocolate,” Ives said. “But at this level where we are at the last mile of the cocoa beans journey, we have a lot of other things related to chocolate and sweets.”

Ives says his company’s handmade 4-ounce chocolate bars cost $4 in 2020, $4.50 in 2022 and $5 now. During the same period, the consumer price index for candy and chewing gum rose 28.3 percent, outpacing the CPI for all items, which rose 19.4 percent.

“It’s not just chocolate that triggers inflation,” he said, noting that price increases are also driven by prices of sugar, cocoa butter, packaging and labor costs.

Similarly, Karl Schneider, general manager of Holsten’s Candy Store and Diner in Bloomfield, New Jersey, said his store has implemented standard price increases to manage costs, and his customers are seeing chocolate price increases that are no different. at other prices.

“You know, prices never go down, they never go back to what they were,” he said. “So, is it worrying? I mean, yes, but we will do everything we can to make it as profitable as possible for everyone.”

Roberts’ CoBank report details that year-over-year dollar sales of chocolate candy grew 6.4 percent in December 2023, while volume sales fell 5 percent.

“It’s kind of an indication to a lot of manufacturers across the industry, not just chocolate candy, but across the industry, that there’s a lot more room for prices to really grow for the average consumer,” Roberts said.

A farm worker harvests cocoa pods on a cocoa plantation in the village of Hermankono in November 2023. Unusually heavy rains in Côte d’Ivoire have substantially reduced expected cocoa production from farms. (Sia Kambou/AFP/Getty Images)

The prospects for cocoa in 2024

Growing up in Ghana, Issifu Issaka’s parents made money farming cocoa. Issaka, now 31 years old, married with one child, has operated an eight-hectare cocoa farm in the northern western region of Ghana since 2013. He said cocoa production in Ghana depends on the climate.

“Currently, due to climate change conditions, my farm is not producing well,” Issaka said. “I don’t see good returns on the farm.”

Ivory Coast and Ghana produce more than 60 percent of the world’s cocoa supply, and concerns about climate change pose risks to cocoa. “Last year, the drought in West Africa has caused a compression in cocoa production volume, and that has significantly increased prices,” said Will Kletter, vice president of operations and strategy at Silicon Valley startup ClimateAi.

According to ClimateAi data shared with CNN, changes in weather patterns could result in a loss of around $529 million in the West African cocoa bean value chain.

Ghana and Ivory Coast could suffer a production loss of up to 30 percent, said Sabi Ibarra Guerrero, an agronomist at ClimateAi. These losses are expected to be primarily due to higher temperatures and heavy rainfall early in the growing season, which increases the likelihood of black pod diseases.

The International Cocoa Organization’s December 2023 market report similarly cited black pod disease and sprout bloat virus as detrimental to cocoa crop supply. “These heavy rains bring mushrooms,” Issaka said of his own farm. “And this fungus causes the cocoa pod to turn black and you have to spray it with a fungicide.”

The low supply has caused prices to rise. But farmers are unlikely to reap the benefits of rising cocoa prices on the international market, according to Uwe Gneiting, a senior researcher at Oxfam America based in Accra, Ghana.

Gneiting explained that futures prices do not directly translate into the farmgate price, which is the price paid to cocoa producers. In Ghana, the government sets the producer price, and Gneiting said competing interests between manufacturers and the government often prevent farmers from maximizing their profits.

Issaka said that while high demand and low supply are driving up prices, cocoa farmers are coming under pressure.

“The price of cocoa is not good for us farmers, especially at the level of producing countries,” Issaka said.

Joke Aerts is the credible scaling director of Tony’s Open Chain, an initiative by Dutch chocolate maker Tony’s Chocoloney to end exploitation in the cocoa supply chain. Aerts explained that it may take “one or two years” until the profits from cocoa sales “reach the farmers.”

“The price that cocoa farmers receive in Ghana and Côte d’Ivoire should be a price that allows a decent income, and currently the farmgate price of cocoa is well below the level they need,” Aerts said.

Tony’s Chocoloney emphasizes the need to pay cocoa farmers the Living Income Reference Price, a set price they developed with Fairtrade that is higher than the farmgate price and aims to calculate farmers’ real cost of living .

According to Tony’s Chocoloney 2022-23 annual report, cocoa farmers in Ghana and Ivory Coast currently earn around $1.42 and $1.23 per person per day, respectively. That salary must be $1.96 in Ghana and $2.45 in Côte d’Ivoire to be livable, according to the LIRP.

“Cocoa farmers are fleeing the cocoa sector and moving to other areas,” Issaka said. “Young people are not motivated to dedicate themselves to cocoa farming because when they look at their parents, how they have suffered for 40 years, 50 years being cocoa farmers, they are not interested.”

As sales continue, Issaka said he hopes cocoa farmers can see impactful results from their work.

“The government should ensure that this price increase has an impact on the pockets of cocoa farmers,” Issaka said.

But the companies They remain confident that Americans’ taste for chocolate will last, especially around major holidays like Valentine’s Day, Halloween and Easter.

“The demand for chocolate is always very strong,” says Ives, CEO of Krön Chocolatier. “People are just not going to give up.”

Contributing: CNN’s Eva Rothenberg

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