Be wary of wholesale chocolate price hikes, warns Euromonitor
Nestlé, Hershey, Mondelēz International and Mars Chocolate North America all introduced chocolate confectionery price hikes in the first half of the year in response to rising input costs, particularly from cocoa.
Don’t hamper emerging market growth
Iman Hamidaddin, consulting analyst at Euromonitor, said in a podcast that chocolate manufacturers should carefully weigh up the impact of upping wholesale prices as consumers in emerging economies such as India may be put off.
“While this is unlikely to have too much of an effect for consumers in Western countries, higher prices in emerging markets such as Asia Pacific could hamper manufacturers’ efforts to penetrate these markets.”
“…When passing on rising cocoa costs manufacturers must consider the impact the higher unit prices will have on the affordability of their products,” she said.
Cocoa prices up 23%
Mars’ price hikes only came in North America, but Hershey upped its wholesale prices globally by 8%.
Mondelēz said in its Q2 results in August that some European customers, notably in France, had rejected its price hikes.
The average daily cocoa price in September was 23% higher than the same period last year at $3,221 per MT, according to International Cocoa Association (ICCO) data.
According to Euromonitor International, cocoa accounted for 14% of manufacturing costs for a 100 g chocolate bar in May 2014, with the bulk of costs coming from processing.
Large chocolate manufacturers also tend to buy cocoa far in advance. Hershey CEO John Bilbrey said in a recent interview with CNBC that Hershey’s 2015 cocoa demands were already purchased and were waiting processing in its US factories. He said that Hershey would not raise wholesale chocolate prices any further this year in response to possible cocoa supply constraints due to Ebola in West Africa.
Growth strategies: India should be at the heart
Hamidaddin said in her podcast that Asia Pacific would account for a third of global value growth and half of volume growth in the confectionery market between 2014 and 2019.
She said that growth in the global confectionery would be mainly in chocolate as consumers in developed and emerging markets moved to chocolate as an affordable luxury.
“India is expected to remain the fastest growing chocolate confectionery market and given the size of its population and its market potential it should be at the heart of international confectionery players’ strategies.”
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