Czech Republic – Chocolate lovers must prepare for significant price increases. The market price of cocoa beans, from which chocolate is made, is now rising sharply, to the nominally highest dollar level for the entire period since December 1978. In Czech crowns, cocoa beans are now the most expensive in the modern history of the Czech Republic.
For the entire period since 1993, a ton of cocoa beans exceeded the price tag of 90,000 crowns for the first time ever on the New York Stock Exchange, which was the determining factor for the whole world. These days it is trading at prices only marginally lower (see chart below).
Chocolate manufacturers – the world produces more than 2,500 billion crowns annually – expect that cocoa beans will remain extremely expensive even in 2024. The reason is that the West African country, which provides two-thirds of the world’s supply, is are facing a dramatic drop in the bean harvest.
The world’s largest cocoa bean producer, Ivory Coast, is looking at a roughly 25 percent lower year-on-year harvest in the 2023-2024 season, according to the country’s cocoa bean market regulator, Le Conseil Cafe-Cacao.
The exceptionally heavy rains, which have not only affected Côte d’Ivoire, are causing a faster spread of the rotting disease, which is fatally damaging the West African bean crop. A poor harvest then drives up the price of beans, so that their processors’ margins become thinner and they therefore do not invest in more expensive production – which is more expensive precisely because of the quantitatively and qualitatively worse harvest.
Margins for processors are getting thinner because, with the current extraordinary inflation, they cannot pass on the increased prices of beans and their processing to consumers as easily as if there was no extraordinary inflation. Consumers have significantly weakened purchasing power due to inflation. After paying for expensive utilities, electricity or gas, or for more expensive housing or basic food, they often simply don’t have any more free money left to spend on chocolate. This – in contrast to basic foods – is of course an unnecessary part of the menu that can be done without.
Chocolate thus shows more and more characteristics of a luxury good, including a higher price and more difficult availability. Its price is also rising due to the marked increase in the price of another key ingredient – sugar. Major global producers of chocolate and confectionery made from it, such as the Swiss company Lindt & Sprüngli or the American Hershey, which also supply the Czech market, recently warned their customers that they must prepare for further price increases. And this despite the fact that end consumers are having more and more difficulty affording the “luxury” in the form of chocolate at all.
Consumers in the Czech Republic should therefore pay extra attention when purchasing chocolate confectionery. Their manufacturers can adopt a strategy of subtly reducing the volume of the packaging while maintaining the price, which is, of course, only a way to give the customer the false illusion that he is still getting the same amount of candy for the same money. This is the so-called “shrinkflation”, which is just another, more disguised form of price gouging, because the customer gets less candy for the same money, as if in a shrink-wrapped package, instead of getting the same amount at a higher price, as in the usual manifestation of inflation.
The world’s largest producer of cocoa beans, Cote d’Ivoire, expects a year-on-year harvest of almost a fifth lower in the 2022 to 2023 season, which ended this September. In Ghana, which is number two in the world, production is expected to fall below the long-term average. The final numbers for the completed season are not yet available. However, both the situation in Ivory Coast and Ghana will significantly contribute to the fact that the world bean market will be in deficit for the third year in a row – which will most likely continue into next year, due to the worsening climatic conditions, also related to the El Niño phenomenon , and the persistent spread of bean rot diseases.
On the Czech market, a noticeable growth of chocolate and chocolate products should be evident especially in 2024, when stocks purchased at cheaper prices will be sold. Making the situation worse is that the world’s suppliers are emptying warehouses – recently the most emptied in almost thirty years. During the covid pandemic, the demand for chocolate and confectionery fell significantly, mainly due to restrictions in the area of retail and air transport, which made it possible to increase stocks. However, after the pandemic subsided, consumers greatly compensated for their temporary “chocolate abstinence”, also thanks to purchases made with covid savings created at the cost of the growing state debt. Empty warehouses understandably represent additional pressure on the price of chocolate and related confectionery.
