Cocoa futures have skyrocketed, doubling in the past year.
Rising cocoa prices aren’t the only concern for customers this Valentine’s Day.
Cocoa production is tied to climatic changes, which limits supply.
Cocoa prices are rising so much that even the biggest chocolate makers are struggling to stay profitable. That’s not good for your wallet this Valentine’s Day.
Last On Thursday, Hershey Co. said it would cut 5% of its workforce after historic cocoa prices and inflation-weary consumers dampened fourth-quarter earnings.
Climate challenges in West Africa – home to more than 60% of global cocoa production – are affecting crop yields, restricting cocoa supplies and causing prices to rise.
Cocoa futures have soared, doubling in the past year and up 40% since January; Sugar, labor and other factors have also become more expensive. That means higher prices across the board for consumers, who have to spend more money to get their fill of chocolate treats.
“Cocoa is expected to limit earnings growth this year,” Hershey CEO Michele Buck said in a call with analysts on Thursday. Hershey’s product prices rose 6.5% in the fourth quarter; Prices for its confectionery chocolate and other confectionery products in North America increased 9% in 2023.
Other companies are also feeling the crisis. Li-Lac Chocolates, which bills itself as the oldest chocolate shop in Manhattan, told CNN that raw chocolate prices rose 13% in February this year compared to last year.
But Li-Lac left the price of a key range of chocolate products unchanged: “We have not increased prices on Valentine’s Day products for our customers since 2022,” the company said in an email.
Billy Roberts, senior food and beverage economist at CoBank, said in a report earlier this month that retail chocolate prices have risen about 17% over the past two years and will continue to rise.
“Cocoa prices are hitting chocolate makers really hard,” Roberts told CNN. “And it looks like it’s not necessarily going to slow down anytime soon.”
According to the National Confectioners Association, about 92% of Americans plan to give chocolate and candy as gifts on Valentine’s Day this year. In 2023, Valentine’s Day chocolate and candy sales exceeded $4 billion, according to NCA.
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Heart-shaped gift boxes containing chocolates in a Target store aisle in Queens, New York, on January 5, 2023.
Marnie Ives, the general manager of Krön Chocolatier in Great Neck, N.Y., said her company is in the middle of the Valentine’s Day rush.
“On Valentine’s Day, we expect about 400 to 450 customers a day in our retail store, which is a lot for a small store,” she said.
But Ives said rising cocoa prices weren’t the only concern for her customers this holiday.
“Cocoa prices will eventually drop and affect us when we buy things like chocolate in bulk,” Ives said. “But at this level, where we are in the last mile of the cocoa bean journey, we have a lot of other things that go into chocolate and confectionery.”
Ives says her company’s handmade 4-ounce candy bars cost $4 in 2020, $4.50 in 2022 and $5 now. During the same period, the consumer price index for candy and gum rose 28.3%, outpacing the consumer price index for all items, which rose 19.4%.
“It’s not just chocolate that triggers inflation,” she said, pointing out that price increases are also caused by sugar prices, cocoa butter, packaging and labor costs.
Similarly, Karl Schneider, general manager of Holsten’s Candy Store and Diner in Bloomfield, N.J., said his store has instituted standard price increases to control costs, and his customers see the chocolate price increases no different than other prices.
“You know, prices never go down, they never go back to what they were,” he said. “So is this a cause for concern? I mean, yes, but we will do our best to make it as cost-effective as possible for everyone.”
Roberts’ CoBank report said chocolate confectionery dollar sales rose 6.4% year-over-year through December 2023, while volume sales fell 5%.
“For many manufacturers across the industry, not just chocolate goods but the industry as a whole, this is an indication that prices only have so much more room for the average consumer to really go up,” Roberts said.
Issifu Issaka’s parents grew up in Ghana and earned money growing cocoa. 31-year-old Issaka, married with one child, has been running an eight-hectare cocoa farm in the western northern region of Ghana since 2013. He said cocoa production in Ghana depends on the climate.
“Due to climate change, my farm is currently not producing good yields,” Issaka said. “I don’t see good returns on the farm.”
Ivory Coast and Ghana produce more than 60 percent of the world’s cocoa supply, and concerns about climate change there pose risks to cocoa. “Last year, drought in West Africa led to a decline in cocoa production volumes, significantly increasing prices.” said Will Kletter, vice president of operations and strategy at Silicon Valley startup ClimateAi.
According to data from ClimateAi shared with CNN, changes in climate patterns could result in a loss of about $529 million in the West African cocoa bean value chain.
Ghana and Ivory Coast could see a production loss of up to 30%, said Sabi Ibarra Guerrero, an agricultural scientist at ClimateAi. These losses are expected to be primarily due to higher temperatures and heavy rain early in the growing season, increasing the likelihood of blackpod diseases.
The December 2023 International Cocoa Organization market report also cited black pod disease and swollen shoot virus as damaging the supply of cocoa plants. “These heavy rains bring mushrooms,” Issaka said of his own farm. “And this fungus causes the cocoa pod to turn black and you have to spray it with fungicide.”
The low supply has driven up prices. However, farmers are unlikely to benefit from higher cocoa prices in the international market, according to Uwe Gneiting, senior researcher at Oxfam America based in Accra, Ghana.
Gneiting explained that forward prices do not directly impact the farm gate price, which is the price paid to cocoa farmers. In Ghana, the government sets the farm gate price, and Gneiting said conflicting interests between producers and the government often prevent farmers from maximizing their income.
Issaka said that while high demand and low supply are driving up prices, cocoa farmers are being put under pressure.
“The price of cocoa is not good for us farmers, especially at the producer country level,” said Issaka.
Joke Aerts is Head of Credible Scaling at Tony’s Open Chain, an initiative by Dutch chocolate maker Tony’s Chocoloney to end exploitation in the cocoa supply chain. Aerts explained that it could take “a year or two” for the profits from cocoa sales to “reach the farmers.”
“The price that cocoa farmers in Ghana and Ivory Coast receive should be a price that provides a living income and currently the producer price for cocoa is well below the level it needs to be,” Aerts said.
Sia Kambou/AFP/Getty Images
A farm worker harvests cocoa pods at a cocoa plantation in the village of Hermankono on November 14, 2023.
Tony’s Chocoloney emphasizes the need to pay cocoa farmers the living income reference price – a price set they developed together with Fairtrade that is above the producer price and aims to calculate farmers’ true cost of living.
According to Tony’s Chocoloney’s 2022-23 annual report, cocoa farmers in Ghana and Ivory Coast currently earn about $1.42 and $1.23 per person per day, respectively. According to LIRP, this wage must be $1.96 in Ghana and $2.45 in Ivory Coast to be livable.
“Cocoa farmers are fleeing the cocoa sector and moving to other areas,” Issaka said. “The youth are not motivated to go into cocoa farming because when they look at their parents, how they suffered for 40 years, 50 years as a cocoa farmer, they are not interested in it.”
As sales continue, Issaka hopes cocoa farmers can see impactful results from their work.
“The government should ensure that this rising price impacts cocoa farmers’ wallets,” Issaka said.
But companies are still betting on keeping Americans’ taste for chocolate alive, especially around major holidays like Valentine’s Day, Halloween and Easter.
“The demand for chocolate is always very high,” said Ives, CEO of Krön Chocolatier. “People just won’t give it up.”
Contributor: CNN’s Eva Rothenberg.