CHICAGO, Illinois: Cocoa futures have doubled since the start of 2024, due to rising temperatures and weather conditions damaging crops in West Africa, which produces more than 70 percent of the global cocoa supply.
Futures for a pound of sugar also rose some eight percent in 2024, after rising 2.7 percent in 2023.
Major chocolate companies, such as Hershey’s and Cadbury maker Mondelez, have passed on the costs to consumers.
Hershey’s net profit margins rose 16.7 percent in 2023 from 15.8 percent in 2022, while Mondelez reported a 13.8 percent rise in 2023 from 8.6 percent in 2022.
However, as higher prices dissuade consumers, both companies reported lower sales volumes for their most recent quarters.
Mondelez, which owns Cadbury, has increased prices to counter the surge in cocoa prices, but it admitted that price increases of up to 15 percent within its chocolate category in 2023 and higher prices will likely be a key factor in meeting revenue growth forecasts for up to 5 percent in 2024.
During a conference call in January, Luca Zaramella, chief financial officer at Mondelez, said, “Pricing is clearly a key component of this plan. Its contribution will be a little bit less than we have seen in 2023, but it is higher than an average year.”
As inflation surged in 2023, Hershey raised the prices of its chocolate products and some grocery and food service items early this year. It predicts sales growth of up to three percent in 2024.
Hershey said the company is committed to raising prices to cover inflation, though most of the increase is a carryover from previous increases.
The government’s latest report on consumer prices showed that in February, the cost of candy and other sweets rose 5.8 percent compared with last year.
