Cheaper on the market, expensive in stores
Futures contracts for cocoa cooled after record increases, but as CNBC reports, high production costs and weaker consumer sentiment mean that the drop in raw material prices will not quickly translate into lower chocolate prices in stores.
Nevertheless, the latest raw material price hike has become a factor limiting profits for the biggest chocolate producers such as Barry Callebaut, Lindt, and Nestlé.
The first of the mentioned companies reported that although in the third quarter consumers worldwide are buying 4,4% less chocolate than in the same period last year, the company’s total sales increased by 5,7%.
It was the first such positive sales result for the company in over two years.
Lindt notes that price increases across the group, amounting to 11,8%, have led to a decline in chocolate sales volume of 7,5%.
“Record cocoa prices forced unprecedented price hikes across the industry, while geopolitical uncertainty, inflation, and weak consumer sentiment negatively affected demand,” said Lindt CEO Adalbert Lechner.
“The crisis in the Middle East was an additional restraining factor, causing a decline in tourist traffic from Asia and the Middle East to Europe,” he added.
Food company Nestlé reported that the rise in cocoa and coffee prices negatively affected operating profit in the first half of the year, which fell by 2,8%.
The giant expects that as cocoa prices fall, margin pressure will gradually ease.
The confectionery segment accounts for 9,7% of the group’s total sales.
CNBC reminds that recent cocoa price volatility has been mainly driven by poor harvests in West Africa, further deepened by weather events related to El Niño and climate change.
The problem was especially visible on the Ivory Coast and Ghana, which account for about 60–70% of global cocoa bean production.
The market was also affected by Donald Trump’s tariffs, which caused significant supply chain disruptions and contributed to sharp commodity price increases.
Chocolate producers are trying to win back customers by introducing new premium products such as Dubai chocolate and by increasing the use of social media trends.
Barry Callebaut, Lindt, and Nestlé have announced plans to increase their online activity to better respond to changing consumer preferences.
Read more about the cocoa market in the article: The coffee market records its biggest rebound in 26 years. Michał Stajniak, XTB: “Consumers must prepare for a return of inflation.”
See also: Gold price fell 12%, soon further discount? Expert: “With possible de-escalation there is a chance to make up for losses.”
Cocoa price falls after record rises
The price of cocoa futures contracts on Monday, July 27 is at 5330 USD per ton.
Over the past year the commodity cooled by more than 30%.
By the end of 2024, cocoa had risen to nearly 12,000 USD per ton, even though its price has hovered around 2-3 thousand USD over the past two decades.
Chart. Cocoa futures contract price
Source: Trading Economics.
Read also: Gold price will fall by a dozen percent. Banks revise forecasts. There is a risk of further correction XAU/USD
See also: Fuel prices in Poland will rise, shortages at stations? Expert: “It will not be a one-time sharp move that will affect drivers.”
Source: CNBC.
