Get ready to shell out more for your chocolate Easter treats this year as cocoa prices hit all-time highs.
The cost of cocoa has doubled since the beginning of 2024 due to surging cocoa futures. The main cause is the impact of rising temperatures and adverse weather conditions on cocoa crops in West Africa, which supplies over 70% of the world's cocoa.
Not only cocoa, but sugar prices are also on the rise. Sugar futures have increased by about 8% in 2024, following a 2.7% rise in 2023.
In February, Citi analyst Thomas Palmer noted that the recent price hikes are unprecedented, especially when cocoa futures hit a record high of $5,874 per metric ton.
As a result, both companies have seen a decline in sales volumes in their latest quarters as consumers are becoming increasingly reluctant to pay higher prices for food.
There is an expected decrease in spending on chocolates this Easter, although the total amount remains high compared to historical data, as per the National Retail Federation. The latest survey indicates that consumers are projected to spend $3.1 billion on Easter candy this year, which amounts to $24.78 per person. This is a decline from the $3.3 billion spent last year, averaging at $26.31 per person.
Mondelez, the owner of the popular Cadbury brand for Easter baskets, has been implementing price hikes to offset the rise in cocoa prices. The company claims a 13% share in the global chocolate market. It has announced price increases of up to 15% within its chocolate category for 2023, and anticipates that higher prices will play a crucial role in achieving revenue growth projections of up to 5% in 2024.
"Pricing is undeniably a crucial aspect of this strategy," stated Luca Zaramella, the chief financial officer at Mondelez, during a conference call in January. "Its impact will be slightly lower compared to what we experienced in 2023, but it will still be higher than an average year."
Hershey Contemplates Further Price Hikes
Hershey had raised chocolate prices across the board last year due to inflationary pressures, and mentioned that it had increased prices on certain grocery and food service items at the beginning of 2024. The company foresees sales growth of up to 3% for the current year.
The company has expressed its commitment to raising prices to mitigate inflation, with a significant portion being a continuation of previous adjustments.
Amidst a general decrease in inflation, food prices have continued to remain high. In 2022, U.S. consumers allocated over 11% of their disposable income towards food, marking the highest percentage since 1991, as per the most recent statistics released by the USDA.
