Chocolates may bite as rise in demand pushes cocoa prices at 46-year-high

Most chocolates contain 50% sugar and only 30% cocoa, thus the impact on chocolates will not be as steep as in the prices of cocoa

Chocolates are set to become costlier as London cocoa prices on InterContinental Exchange have risen to a 46-year-high of 2,678 pounds or $3,406.76 per tonne, The Hindu businessline (HBL) has reported. Prices of other cocoa-based products are also likely to increase, however, there is also the likelihood of products shrinking in size.

Cocoa prices have gone up by 50 per cent year-on-year (YoY) amid concerns regarding low supplies from key producers of cocoa, particularly from Africa. Moreover, the fear of El Nino posing more risks is also being cited as a reason behind the soaring cocoa prices.

Impact on chocolate prices

Most chocolates contain 50 per cent sugar and only 30 per cent cocoa and thus the effective price hikes in chocolates will not be as steep as in the prices of cocoa, Managing Director of DP Cocoa Products Pvt Ltd, Devabhaktuni Durga Prasad told HBL.

He added, chocolate manufacturing companies usually do not increase the prices as input costs rise, they rather cut the pack size by decreasing the weight of the product.

However, the recent cut in import duties to 15 per cent from 30 per cent earlier will soften the blow of the price hike for cocoa.

Demand for Chocolate

International Cocoa Organisation (ICCO) projections say that the global deficit of cocoa this season may increase to 142,000 tonnes and these estimates may have triggered the bullish run in cocoa prices, the HBL report said.

Some industry experts put the cocoa deficit at about two lakh tonnes. Research agency BMI, which is a part of Fitch Solutions forecasted that the deficit of cocoa will come down to 50,000 tonnes from 210,000 tonnes in 2021-22. The bullish sentiment on cocoa is due to the strong demand for the commodity, the report added.