Chocolate egg surprise for Easter is price shock amid surge in cocoa costs
Consumers braced for further price increases as supply of cocoa fails to keep up with demand
Bloomberg in London
The world's growing love of chocolate means more expensive treats for the Easter holiday.
Demand was rising at the fastest pace in three years, said Euromonitor International, and farmers in West Africa are not growing enough cocoa to keep up. The cost of beans used to make chocolate reached a 30-month high last month, forcing confectioners to charge customers more.
Lucy Armstrong, who sells sweets online from Chichester, England, said the cost of a 10-kilogram pack of bulk chocolate she used to make champagne truffles, pralines and salty caramels surged 18 per cent this year to £59 (HK$770). She has raised the price of chocolate Easter eggs by 50 per cent from last year, just before demand picks up for the holiday on April 20, and she plans another increase in the next six months.
"It's definitely the first time where the chocolate has gone up quite noticeably," said Armstrong, who started Lucy Armstrong Chocolates three years ago and now charges £7.50 for a 170-gram Belgian milk-chocolate egg containing six hand-made chocolates, up from £5 last year. "It is hard to try [to] work out what you can sell and at what price. The problem is it's only going to go up and up and up."
Cocoa may rally to US$3,210 a tonne on ICE Futures US in New York by the end of December, the highest since July 2011, according to the average estimate of 14 traders and analysts surveyed. That would top this year's high of US$3,039, reached on March 17.
The US price of cocoa butter, the byproduct of crushed beans that accounts for 20 per cent of the weight of a chocolate bar, rose 86 per cent in the 12 months to April 11 and was the highest on average for any year since at least 1997, data from the Cocoa Merchants Association of America showed. The cost of other ingredients is also rising, after milk reached records this year in the United States and Europe and sugar futures rallied 20 per cent from a 43-month low in January.
While global bean production would rise for the first time in three years, reaching 4.1 million tonnes in the 12 months to September, that would be less than demand for a second year, with processors set to use 4.18 million tonnes, the International Cocoa Organisation in London said.
Supply concerns are being compounded by increasing prospects of an El Nino weather pattern, which can bring dry winds to West Africa, including top growers Ivory Coast and Ghana.
Long-term output deficits were fuelling "bullish momentum" for prices, Zurich-based Barry Callebaut, the world's top processor and biggest maker of bulk chocolate, said in an earnings statement this month.
The "significant" increases in cocoa and milk-powder costs were passed on to customers, so profitability was not affected, chief executive Juergen Steinemann said.
Even with higher prices, global demand is growing, especially in developing markets including Asia. Seasonal sales of chocolate on holidays including Easter and Christmas would jump 5 per cent this year to US$12.7 billion, Euromonitor said.
"The underlying concern is that there will not be enough cocoa available to satisfy the appetite of consumers," said Andreas Christiansen, managing director of Hamburg Cocoa & Commodity Office, a consultant to the confection industry. "The growing appetite for cocoa or cocoa-based products in emerging markets is what is driving expectations that consumption will outpace production."
In Germany, where per capita chocolate consumption is the highest in the world at 9kg a year, confectioners will produce 206 million bunnies for Easter this year, 8.4 per cent more than a year earlier, according to the Association of the German Confectionery Industry.
By April 14, pre-Easter sales of confectionery products at British grocery chain Waitrose jumped 14 per cent from a year earlier, said Meg Ogilvie, a spokeswoman in London.
The value of chocolate confectionery consumption in emerging markets including Asia, Latin America, the Middle East and Africa would grow more than 5 per cent annually in the five years to 2018, more than double the rate of the world average, said Euromonitor.
Consumers in Asia-Pacific would eat 1.1 million tonnes by 2018, a 27 per cent increase from last year, compared with a 5 per cent gain over that period in Western Europe, the biggest buyer, Euromonitor forecast. By 2018, Eastern Europe would become the world's No2 consumer, displacing North America, where demand would be unchanged, the researcher said.