Turning crisis into opportunity: how cocoa price hikes are reshaping the confectionery sector

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The increase in cocoa prices, which reached $9,186.50 per metric ton as of November 29, 2024 (source: Investing.com), is having a significant impact on the global confectionery industry. This rise, equivalent to 2.5% compared to the previous week, is attributable to several factors: adverse weather conditions in West Africa, crop diseases such as the “swollen shoot virus” and “black pod disease,” and growing financial speculation.

Adding complexity to the scenario, the delay in the implementation of the European Union Deforestation Regulation (EUDR) is creating further uncertainties. The announcement of this postponement has led to significant volatility in commodity markets, with cocoa prices surging by 7.1% in a single day, as reported by Areté Agrifood. This unstable regulatory environment is exacerbating challenges for companies in the sector, which have adopted innovative strategies to contain costs and maintain competitiveness.

Meiji, a Japanese leader in the confectionery sector, has tackled the crisis with a revolutionary approach based on upcycling cocoa husks. Through the “Now Open the Cacao” project, the company has collaborated with the startup Fabula to transform husks, traditionally considered waste, into innovative materials stronger than concrete. This strategy not only reduces waste but also opens new business opportunities, allowing Meiji to diversify its revenue streams and reduce its reliance on traditional raw materials.

In the United States, Hershey has opted for a mix of measures to balance rising costs. The company has decided to increase the prices of its products, passing part of the cost burden onto consumers, and launched the “Advancing Agility & Automation” program, aimed at generating significant savings through advanced automation and operational optimization. Simultaneously, Hershey is revising its product packaging and sizes to offer a diversified range at accessible prices, thus meeting the evolving needs of consumers.

Lindt & Sprüngli, for its part, has focused on operational efficiency and managing market volatility. The company has raised retail prices while maintaining stable sales volumes thanks to its strong brand image and consumer loyalty. It has also improved production processes to mitigate the impact of rising costs and implemented financial hedging strategies to shield itself from price fluctuations. Despite these efforts, Lindt foresees further price increases in 2025 if cocoa costs do not decrease.

The increase in cocoa prices represents a challenge that manufacturing companies must address in the long term. Passing the costs onto the shelf price can be a useful strategy to offset value sales, but in the long run, it may lead to a high risk of eroding consumer loyalty and sales volumes. The stabilization of cocoa prices is still a distant mirage, and to remain competitive, manufacturing companies will need to bring innovation to their offerings. A chocolate without cocoa, perhaps?

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