Opinion | How Chocoholics Are Battling Rising Cocoa Prices

For chocoholics, the taste of chocolates is turning bitter because of the spiraling price of cacao, the raw ingredient of chocolates. For those unfamiliar with chocolate production, cocoa is derived from beans that are finely ground into a powder and roasted, which can then be consumed as a drink or blended with sugar, milk, cocoa butter, and cacao to create chocolate.

In India, cocoa finds its way into non-chocolate products such as biscuits and dairy items, while cocoa butter is utilized in cosmetics and the pharmaceutical industry.

According to the UNCTAD (United Nations Conference on Trade and Development) commodities price monitoring report, the price of cocoa has surged by 136% between July 2022 and February 2024.

Environmental Impact

African countries, including Cote d'Ivoire (Ivory Coast), Ghana, Nigeria, and Cameroon, collectively produce over seventy percent of the world's cocoa crops. However, in recent years, climate patterns in these regions have been affected by El Nino, resulting in hotter weather, shifting rainfall patterns, heatwaves, and heavy rainfall. These unprecedented conditions have led to multiple diseases infesting cocoa harvests and reduced production. The Russia-Ukraine war further disrupted supply chains, increasing fertilizer prices, impacting the cocoa industry, and consequently raising bean prices while affecting quality. The International Cocoa Organization expects a global shortfall of about 374,000 tonnes for the 2023-2024 season compared to 74,000 tonnes last season. This is the third consecutive year for the cocoa production deficit. And the margin of deficit has been increasing every year.

Rising Prices

Globally, cocoa prices have surpassed $10,000 a tonne for the first time, posing significant challenges for chocolate manufacturers in managing their costs. In India, cocoa prices (dry beans), which were around Rs 180 per kg less than three years ago, have now soared to Rs 325 per kg, the highest in 44 years. Reports indicate that major chocolate producers like Nestle India, Parle, Hershey, and others are planning price hikes of up to 15% in some cases over the next two to three months.

India annually produces only 27,000 tonnes of cocoa, primarily used in chocolate manufacturing. However, this domestic production falls short of meeting the demand of the chocolate industry and confectionaries in India, which requires around 50,000 metric tonnes of dry beans per annum. India imports a significant portion of its cocoa requirements, valued at Rs 2021 crores, from other cocoa-growing countries, as per data from the Directorate of Cashewnut and Cocoa Development under the Ministry of Agriculture, Government of India.

Impact on Dining Bills

Cocoa prices have doubled in the January-March quarter from the preceding one, and cocoa butter has risen over 150% in just one year. This surge is affecting the cost of dining out, with restaurant bills potentially rising by 5-8% starting this month as the cost of desserts, chocolates, cakes and other items made of cocoa goes up.

FMCG firms and businesses reliant on cocoa as a key commodity are exploring strategies to cope with supply disruptions and price increases. Anthony En Yuan Huang, general manager-hospitality at Kalyani Developers, states that the hotel industry is grappling with the situation, with chocolates and its byproducts comprising about 6 to 8% of a chef's daily budgetary expenses. Many pastry chefs have already switched to locally available chocolates to manage the current situation. If the rising trend continues, chocolate makers in India are likely to pass on the hike to consumers.

To address the challenge of cocoa shortage and high prices, companies are considering reducing bar or cookie sizes, promoting products with less cocoa, or finding cheaper alternatives. They may utilize emulsifiers and cocoa butter substitutes to reduce costs.

Cocoa powder is a versatile ingredient used in a wide variety of desserts, from rich chocolate cakes to creamy mousse and silky pudding. It adds richness to any dessert, making it a staple in the kitchen for avid bakers and chocolate connoisseurs.

Ekansh Nagpal, Partner at Polka Foods, says that cocoa powder is essential in bakeries for providing rich chocolate flavor and dark color to desserts like brownies, cookies, and cakes. Any increase in cocoa prices would consequently lead to an increase in the prices of these products.

India must increase its cocoa production to meet domestic demand. The government should implement sustainable farming techniques for cocoa farmers to combat the adverse effects of climate change on the crop.

(Bharti Mishra Nath is a senior journalist)

Disclaimer: These are the personal opinions of the author