Near record-high cocoa butter prices have driven up the cost of chocolate production by as much as 20%; a price hike that will likely be seen on shelf, according to commodity analysts Mintec.
The organization said that cocoa butter prices had driven up the production cost of chocolate.
“The chocolate and Easter eggs many of us are buying may seem a bit more expensive this year, when compared to last year,” said Mintec in an update.
Cocoa butter prices in March 2014 were 65% higher than the same period last year and neared record highs seen in October 2013. This translated into a 20% rise in the cost of producing a 100 g wrapped milk chocolate bar compared to last year due to the price hikes for cocoa and milk powders, Mintec said.
Reports in the UK however suggest that supermarkets such as Tesco have been heavily discounting Easter eggs to stay competitive with fellow retailers.
Rising chocolate production costs are driven by an escalating supply crisis.
The International Cocoa Organization (ICCO) has forecast a cocoa supply and demand deficit of 115,000 metric tons (MT) for the 2013/14 season and companies such as Mars and Blommer have forecast a 1m MT deficit by 2020.
“The cocoa deficit is going to be a bit higher than expected [for 2013/14],” Euromonitor ingredients analyst Lauren Bandy told ConfectioneryNews. She added that 2020 deficit forecasts had not been overhyped and was likely to happen.
Consumers willing to pay more?
But Leatherhead market analyst Mia Naprta indicated that consumers were prepared to pay more for Easter eggs, particularly for inventive designs.
“The number of new Easter themed (and seasonal in general – Christmas, Valentine etc.) product launches increasing year after year. Consumers’ willingness to pay more for creative, innovative treats, which are giving them not only a 'taste of chocolate', but play on their other senses is also interesting.”
Cocoa: ‘Default reason’ to raise prices
Some confectioners have already committed to rising pricing and cite commodity costs as the rationale.
In its first quarter sales update, Nestlé said that it would increase pricing in its confectionery segment in response to currency and commodity challenges.
Bandy said that cocoa prices were often used gratuitously as justification to raise chocolate prices.
“Cocoa butter prices are almost a default reason to raise prices,” she said. According to the analyst, cocoa butter still accounted for a fairly small percentage of the overall cost of a chocolate product when other factors such as labour, processing, packaging and shipment costs were taken into account.