Cocoa Prices Cause Turmoil

A tripling of cocoa prices across global commodity markets has presented food makers with a challenge: how can they satisfy chocolate cravings without making it affordable?, reports Inc.

The persistent price hikes could make chocolate a luxury product, gradually climbing out of reach of most people’s food budgets, according to the report. To combat this, Mondelez International, maker of Oreo and Toblerone, recently announced that it will hold the prices of its chocolate products as low as it can despite surging costs, adding that it expects elevated prices to ease later this year.

Companies are also looking at creative ways to minimize cocoa use. An analyst at RBC Capital Markets, Nik Modi, commented on Hershey’s new Jumbo Reese’s Cup, which delivers more peanut butter than a standard product.

“This one has extra peanut butter, so it’s a nice way of trying to get innovation into the market at a premium price, let the consumer feel like they’re getting value, but just changing the product itself to lower the reliance on chocolate,” Modi told CNBC.

He added that food companies may also look to avoid chocolate, especially for those who don’t already primarily deal with the ingredient.

“I think more or less, people will try to stay away from chocolate at this point,” Modi said.

In mid-April, cocoa prices peaked at $12,261 per metric ton. Now they sit at $9,450, somewhat improved, but much higher than last year’s manageable $3,200. The dramatic price elevation likely stems from inclement weather conditions in West Africa, persistent crop diseases, and a recent announcement from the second largest supplier of cocoa, Ghana, that said it is delaying delivery of 350,000 metric tons of cocoa until next year. Full Story