Cadbury predicts 2010 price hikes will be cocoa linked

By Sarah Hills

- Last updated on GMT

Related tags Cocoa Côte d'ivoire Ghana Cocoa bean Cadbury

Cadbury said it may have to further raise its prices for 2010 as the cost of cocoa has remained stubbornly high, economic conditions are turbulent and markets competitive.

The comments came as the chocolate giant announced its 2008 results which showed that worldwide global chocolate sales were up six per cent.

Cadbury CFO, Ken Hanna, said at a presentation of its full year results that the company had already implemented price increases to cover anticipated input cost pressures which would be felt in 2009.

He added: “It is commercially sensitive and we don’t discuss all of our hedging policies, but if cocoa stays high and it is not as high as it was two weeks ago, the industry will have to look a pricing – I would say modest pricing for 2010.”

However, Hanna indicated that a similar move was unlikely in 2009.

He said: “Whilst we have seen a softening in the general basket of non-coca commodities, this has been offset by the weakness of sterling and some South American currencies against the dollar.

“A few weeks ago cocoa was over £2,000 a tonne – that was a 23-year high.

“However prices have recently dropped by around 15 per cent.

“In summary, we believe that through a combination of hedging and price increases already implemented, we will offset 2009 input cost inflation.”

Cadbury said there are eight commonwealth chocolate markets that represent 90 per cent of the company’s chocolate. Most of them use Ghanaian cocoa and the UK is the biggest one.

CEO Todd Stitzer highlighted the community investment projects funded by the Cocoa Partnership and said: “Our continued support of farmers and cocoa growing communities in Ghana will remain a top priority – it is crucial to the quality of our product and the sustainability of our supply chain.”

The Ivory Coast is the world’s number one supplier of cocoa beans, producing 1.3 million tonnes last year, followed by its neighbour Ghana – at 690,000 tonnes.

In September reported that Cocobod, the cocoa regulator for Ghana, had raised the fixed price it pays to producers by more than a third for the 2008/09 season to GHC1,632 (€990) per tonne of cocoa beans, up from GHC1,200 per tonne (€728).

Cadbury results

About 30/40 per cent of the cocoa Cadbury buys is sold in the UK and in 2008 the group's British chocolate market share rose by 0.5 percentage points to nearly 30 per cent.

Profits in 2008 for the group fell to £366m (€408m), from £407m (€454m) in 2007, largely due to the loss of the company's beverage brands following the spin-off of the Dr Pepper Snapple Group.

For the 12 months to 31 December, Cadbury's registered total sales up by 15 per cent to £5.38bn (€6bn).

Cadbury chairman, Roger Carr, said: “Whilst some commodities have softened, the price of cocoas has remained stubbornly high.

“Like all businesses, however, we benefit from a traditionally resilient product range, an enviable global footprint and strong growth market presence, sound cast flow and a healthy balance sheet.”

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