The increase in cocoa prices, which have risen by approximately 65% since the start of November 2023 compared to the previous year. This increase has been attributed to a global cocoa shortage, with the El Niño phenomenon i.e. climate change-induced drought affecting crops in West Africa, which produces around 80% of the world’s cocoa output. The International Cocoa Organization predicts a decline of almost 11% in global cocoa supply during the 2023/2024 season. Additionally, there are deep-rooted structural issues, including chronic underinvestment in cocoa farms, which exacerbate the supply shortage.
The rising cocoa prices have had a significant impact on the chocolate industry. Companies have been passing on the increased costs to consumers in the form of price hikes, with Hershey, Mars, and Lindt increasing prices by 12-15% in Europe and 15% in the United States. These price increases come on top of hefty increases in 2023. Some manufacturers have also been reducing the size of their products or innovating with recipes that call for less cocoa to offset the higher costs.
The challenges faced by cocoa farmers, who often struggle to make a living income and lack the means to reinvest in their land. This translates to lower yields, which further contributes to the global cocoa shortage. The recent explosion in cocoa prices has not significantly benefited growers, as many are producing fewer tonnes due to the hit to harvests, and they receive only a small percentage of the final price. Geopolitical events have also played a role in the increase in cocoa prices. Higher freight rates due to Houthi terrorist attacks in the Red Sea and export disruptions in Ecuador, the world’s third-largest cocoa exporter, have supported cocoa prices.