Cocoa prices remain high amidst supply concerns, requiring creative solutions from brands

After years of experiencing low world market prices, the cocoa industry rose by 136% between July 2022 and February 2024, achieving the highest levels in about five decades. This price hike is mainly due to production shortfalls caused by extreme weather conditions and an increase in global cocoa demand. This has led to what analysts have called a chocolate crisis, with brands passing the burden of higher cocoa costs onto their customers. For some buyers, however, chocolate products are less and less accessible, and for 2025, it is forecasted that the surge in cocoa prices will continue to put massive pressure on earnings. 

What are the reasons behind the cocoa shortage?

Ghana and Ivory Coast—the countries where most of the world’s cocoa beans are produced—have been significantly impacted by extreme weather conditions that have altered drought and rainfall patterns and reduced crop yields. Moreover, due to climate change, diseases and pests have also affected the trees, including the CSSV (cacao swelling shoot virus), causing illness among producer families in Ivory Coast. But these aren’t the only reasons behind the cocoa supply shortages. 

Many producer families are also giving up growing cocoa because they cannot keep up with the increased costs of production and harvesting. It is believed, however, that the cocoa price explosion could have been prevented if farmers had received a fair price for cocoa, as they wouldn’t have to quit and instead would focus on improving their farms to make them more resilient to pests and climate change issues. 

How are consumers responding to the spike in cocoa prices?

As some chocolate manufacturers have started noticing, customers’ behavior could shift amidst the rise in prices. Some customers may not be able to absorb the increase as they prioritize core purchases, while others may shift their category purchases into less impacted items, whether a lower-cost brand, a tangential category, or a private label product, as they are tired of the increases everywhere. 

This isn’t good news for brands, as they run the risk of losing consumers if the prices of their products rise without the perceived value accompanying these spikes. And the major fear is that these purchasing habits won’t be a temporary consequence of the current chocolate crisis but rather become permanent. Therefore, brands will have to put in a lot of effort to formulate exciting offers and encourage buyers to switch back and choose their products. Given that there’s a heightened awareness of sustainability among customers in the cocoa industry, brands shouldn’t ignore adopting eco-friendly practices such as choosing a sustainable cocoa supplier, and they also must be transparent in supply chains, as this will play a major role in purchasing decisions.

How are brands approaching the cocoa crisis?

The continuous cocoa disruption is running into its fourth season, so by now, the crisis in this sector has become clear, and chocolate manufacturers don’t expect prices to recover within the next 12 months. Before the chocolate crisis hit in late 2021, manufacturers and brands had opportunities to increase pricing, but that’s not the case anymore in today’s context. Right now, they need to be as creative as they can to tackle price hikes without losing their customers.  

However, chocolate manufacturers find themselves struggling, as they need to find a balance between meeting customers’ needs in terms of preferences and meeting their needs in terms of price. They may also have a tough time in the media in the current situation. For instance, the term shrinkflation has raised a lot of negative attention lately, and arguably, the sector may feel the focus has shifted from customers’ wants to a conversation centered solely around price. 

Manufacturers are considering how they should approach their marketing strategies. Probably one of their biggest concerns is what will happen to them from a promotional perspective. Increasing their prices would mean no longer being able to continue advertising a product at the desirable price point, so it’s genuinely tough for them to adjust the cost in the short term. Brands are evaluating their marketing mix and considering avenues such as upping prices, changing pack sizes, reducing cocoa content, and using alternative ingredients to cocoa. The secret is to figure out what balance is most pragmatic or probable for them, and there’s no doubt that there will be differences in approach between startups, growing brands and multinationals. 

Sustainability remains essential in ensuring the chocolate industry’s future

As mentioned previously, climate change is profoundly impacting cocoa production, and its effects have become more apparent at the beginning of 2024, putting millions of farmers’ livelihoods and the global chocolate supply chain’s sustainability at stake. With many farmers living in developing regions, it’s paramount to protect and help pivot their livelihoods by giving them adequate support to diversify production and move to other resilient crops. Investing in agroecological production and ensuring fair markets on a constant basis is essential to see a change in the current cocoa crisis and avoid drastic price increases. 

Needless to say, the problems need to be looked at at a systemic level, requiring collaboration among stakeholders from the entire ecosystem. Innovative startups are spearheading a revolutionary shift towards a more sustainable chocolate industry, and there’s no doubt that sustainability will continue to be paramount to the future of cocoa. Technology is playing an essential role in tackling the challenges that the cocoa industry currently faces, with notable innovations including lab-grown cocoa, offering a sustainable alternative to traditional farming, precision fermentation which helps create cocoa-like ingredients without relying on traditional farming, as well as biotransformation, which uses fava beans to mimic cocoa flavor profiles. Initiatives such as reforestation programs, direct farmer partnerships, sustainable agriculture training, fair trading pricing mechanisms, and partnerships with a supplier committed to sustainability such as ofi also remain essential in the transformation of the cocoa industry. 

Moreover, as mentioned previously, brands are also looking for cocoa substitutes as a way to tackle the crisis, which can include carob powder( a cocoa alternative with a chocolate-like flavor), dark malted flours, which is an innovative ingredient for the partial replacement of cocoa, and grape seeds and jackfruit seeds, which are also emerging as novel sources to replace cocoa.

The bottom line

The cocoa industry is clearly experiencing a difficult period, requiring urgent action to tackle the crisis and ensure that customers’ needs are met. While the market isn’t expected to recover very soon, it’s imperative to look for creative solutions to prevent the issue from escalating even further. 

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