Daily Briefing (Insiders Only): Cocoa Prices Hit Another Record High… So What’s Next?
The chocolate sector is closing out a year plagued by adverse weather conditions and supply chain woes in West Africa on an increasingly bitter note.
Prices for the commodity (as measured by the New York cocoa futures index) rose to a new record high – about 5.5% to $11,938 per metric ton on Monday – and reinstated concerns over extreme price volatility, CNBC reported. What’s more, the 2023-24 marketing year saw the global cocoa market register a deficit of 478kt, its largest in over 60 years.
How did we get here? A mix of low rainfall, plant disease, and aging trees in 2023 led to a “disappointing crop” in the Ivory Coast and Ghana this fall. The two countries produce roughly two-thirds of the world’s cocoa, so the shortage quickly led to dramatic price swings.
Though port arrivals have climbed 30% year-over-year in 2024-25, they’re still roughly 15% below 2022-23 levels, according to Reuters data cited by Jefferies. It’s unclear whether the improvement over 2023-24 was propelled by a better harvest or the fact that some beans were harvested earlier than anticipated given weather-related risks.
What does this mean for CPG? Confectionery giants like The Hershey Company and Mondelēz International have hiked prices on select products and will likely continue doing so if the cost of cocoa doesn’t stabilize.
- During an earnings call last month, Hershey CEO Michele Buck told analysts, “We’d expect pricing next year to look a lot like this year. We’ll make sure we’re competitive and work with retailers to make sure we get a good execution of that.”
- Still, Buck expressed confidence in the improvement of cocoa fundamentals and believes there will be a global surplus in 2025 driven by a recovery in West Africa.
Ushering in a new era: As cocoa prices continue to soar, more investors are betting on alternatives to preserve the $100 billion chocolate industry. Earlier this month, Planet A Foods secured $30 million in a Series B funding round co-led by Zintinus and Buda Principal Investments, and Celleste Bio nabbed $4.5 million in a seed round with participation from Mondelēz’s SnackFutures Ventures. In May, Voyage Foods closed its Series A+ round at $52 million.
Steve Molino, partner and head of investments at Clear Current Capital, views the innovation strategy of the alt-cocoa space – fermentation, plant cell culture, upcycling, and more – as similar to the alt-protein space but with a slightly different storyline. He believes that consumers and big strategics are pushing back on alt-proteins but willingly searching for cocoa alternatives because they fear losing chocolate altogether.
“If everyone is going to ensure that we have a cocoa supply that is resilient to climate change, it needs to be a ‘yes’ to everything. Yes to regenerative agriculture, yes to precision agriculture, yes to plant-based alternatives that use side streams and upcycle them, and yes to trying plant cell culture,” said Molino.
Will the price spikes accelerate the adoption of cocoa-free chocolate products? We suppose only time will tell.
