Recently, the price of cocoa, an important raw material for chocolate, has skyrocketed, with New York cocoa futures prices breaking through the $10000 per ton mark this week, reaching a historic high. In addition, since the beginning of this year, cocoa futures prices in New York have risen by a cumulative 135%; In the more than a year since March last year, the cumulative increase has reached 250%.
Most of the worlds cocoa is produced in West Africa, but since last year, major cocoa growing countries in West Africa - C ? te dIvoire and Ghana - have experienced widespread crop failures, leading to the world facing the largest cocoa supply shortage in over 60 years. The International Cocoa Organization predicts that the supply gap of cocoa from 2023 to 2024 will be 374000 tons, an increase of 405% from the previous production seasons 74000 tons gap.
With the rise in cocoa prices, many chocolate manufacturers are facing higher production costs. For example, in order to reduce cost pressures, American chocolate giant Hershey recently announced that it will launch new products such as caramel filled chocolate and lemon flavored chocolate bars. By adding more flavored ingredients and reducing the proportion of cocoa in chocolate candies, it will avoid product price increases.
Industry insiders predict that as cocoa prices continue to rise, chocolate prices will also see a corresponding increase in 2024.
"Multiple chocolate companies around the world have announced price increases, which is an inevitable result of market supply-demand imbalance and rising costs. Although this will bring some pressure to consumers, it also reflects the real challenges and development trends of the chocolate industry." Zhu Danpeng, Vice President of the Guangdong Food Safety Promotion Association, told Securities Daily reporters that most of Chinas chocolate comes from imports, and as cocoa prices continue to rise, consumer prices are expected to gradually rise.
In fact, internationally renowned chocolate brands including Nestle, Hersheys, Ferrero, etc. have all announced plans to raise prices. During a earnings conference call in March, Martin Hug, Chief Financial Officer of chocolate manufacturer Swiss Lotus, stated that several companies have announced price increases, and the company is also one of them. It is currently difficult to predict what will happen in the cocoa market.
"The market demand remains strong, exacerbating the imbalance between supply and demand. In this context, the supply-demand contradiction has pushed up the price of cocoa and further transmitted it to the retail price of terminal chocolate products." Jiang Han, a senior researcher at Pangu Think Tank, told Securities Daily reporters.
In recent years, Chinas domestic cocoa industry has developed rapidly, with multiple enterprises having business layouts in the cocoa industry chain.
Aipu Groups main business includes industrial chocolate, as well as the distribution of cocoa and chocolate products. The company supplies downstream food production enterprises with chocolate for the production of frozen drinks, baked goods, chocolate candies, and dairy products. The company stated that it has a dedicated procurement department responsible for the procurement of raw materials and currently has a stable group of suppliers with stable supply channels.
Xingguang Cocoa, a New Third Board enterprise, mainly engages in the production and sales of cocoa products. It is currently one of the national standard setters for cocoa butter, cocoa powder, cocoa liquid blocks, and cocoa cake blocks in China. In the companys production costs, the cost of raw material cocoa accounts for over 90%.
A person related to Xingguang Cocoa told Securities Daily that the companys products are mainly sold to large and medium-sized food processing enterprises in Europe, America, and China. The fluctuation of cocoa prices has increased, which has an impact on processing enterprises. The high cost of raw materials will also increase the companys product costs, which will be transmitted downstream and prices will rise.
Faced with the rise in cocoa prices, upstream and downstream enterprises in the industry chain have more than just one way to increase prices. An industry insider told Securities Daily reporters that in addition to price increases, companies should also take various measures to cope with the impact, such as optimizing and diversifying their supply chains. Companies should conduct in-depth analysis of their supply chains and find ways to improve efficiency and reduce costs. Meanwhile, diversified supply channels can reduce the dependence of enterprises on a single source and reduce supply risks.