Global cocoa supply deficit to increase by 405% this year
By Emmanuel Osadare
The global cocoa industry is bracing for a significant supply deficit projected to rise by an astonishing 405% in 2024. This sharp increase in the cocoa supply gap is set to send ripples through the chocolate production sector, impacting prices and marketing strategies for businesses worldwide.
As cocoa remains a fundamental ingredient in a myriad of products, from gourmet chocolates to beauty products, this deficit poses challenges and opportunities for marketers and businesses alike. Primarily, this is due to the surge in cocoa prices, a crucial component in chocolate production. Adverse weather conditions and crop ailments in West Africa, which accounts for 70% of the world’s cocoa output, have constrained supply and led to a significant increase in prices.
Hershey CEO, Michele Buck, informed CNBC last month that the company employs a hedging strategy to cope with price fluctuations. The National Confectioners Association stated that the industry is collaborating with retailers to “reduce costs” and maintain affordable chocolate prices for consumers.
The world is experiencing the largest cocoa supply shortage in over 60 years, and consumers may start feeling the impact by the end of 2024 or early 2025, according to Joules. The International Cocoa Organization has projected a supply deficit of 374,000 tons for the 2023-24 season, marking a 405% increase from the 74,000-ton deficit in the previous season.
Christopher Taylor, co-owner of Li-Lac Chocolates, which has been serving Manhattan for over a century, told CNN that high-quality chocolatiers are experiencing unprecedented cost-cutting pressures. To break even, Taylor mentioned that Li-Lac would need to consider a 30% price hike. However, such an increase isn’t feasible for customers, meaning the business will have to absorb some of the costs. He said, “We’re in full cost-cutting mode. We’re implementing some price increases, but customers are resistant to more price hikes, so we’re very cautious. We have to accept the situation and reduce costs wherever possible.”
The high future prices indicate uncertainty about the sustainability of the cocoa industry, Paul Joules, a commodity analyst at Rabobank, told CNN. “The market is clearly in a state of panic as it grapples with the structural supply issues facing the cocoa industry,” Joules said.
RECOMMENDED ARTICLES
Comment
No comments found.