From Morningstar: 2024-03-28 07:07:00

As Easter approaches, Brits are stocking up on their favorite chocolates, but prices are set to rise due to a surge in cocoa prices, hitting record highs over $10,000 a tonne. This surge will eventually impact consumers, but producers are holding off price hikes for now, such as Hershey who is already feeling the pinch.

While global cocoa prices have soared by 230%, chocolate inflation in the UK is up by 9% in the last year. Hershey, a 4-Star-rated chocolate producer, is promoting non-chocolate treats for Easter as a response to the surging cocoa prices which are expected to limit their earnings growth in 2024.

Some producers like Lindt and Nestlé are expected to fare better as they have more pricing power to pass on costs to consumers. However, the world’s largest chocolate buyer, Barry Callebaut, is facing challenges in coping with higher cocoa prices and may resort to shrinkflation by reducing product sizes to maintain profit margins.

Consumers can expect “shrinkflation” as companies reduce product sizes to offset rising costs. Despite higher prices, consumer demand for chocolate is expected to remain strong due to its health benefits and untapped markets in China and India. This sustained demand may prevent chocolate prices from returning to normal levels.



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