Chocolate suffers inflation’s curse and consumers pay the price

Chocolate should be a comfort food turning sadness into joy. Inflation’s evil grip has arrived, but there are things you can do.

You’ve pushed up mortgage repayments by 50 per cent, you’ve sent grocery prices soaring, turned up the cost of travel to 11 on the expense dial, and smashed us with surging energy costs.

Inflation, you’re not being a very nice person, but now you’ve taken things too far, by going after chocolate.

Chocolate too? In the words of a certain US president, “Come on, man”.

New research from food and agribusiness finance specialist Rabobank says retail chocolate prices are rising after the cost of its two key ingredients – sugar and cocoa – climbed sharply in the past year and look set to stay high.

RaboResearch says cocoa prices are up 27 per cent year-on-year, and its associate analyst Pia Piggott says the world faces a third consecutive year of cocoa supply deficits because of poor production conditions in West Africa.

“The major production regions, particularly in Ivory Coast – which accounts for more than 40 per cent of global cocoa production – have had very wet conditions and flooding, which has been causing rotting and disease in the trees,” she says.

The cost of cocoa and sugar – chocolate’s key ingredients – is soaring. Picture: iStock

Sugar prices are at record highs, and Piggott says sugar accounts for about 60 per cent of the weight of a bar of milk chocolate.

Snacks and confectionery costs climbed 12 per cent in the year to June 30, according to new Australian Bureau of Statistics data, and the bitter story about chocolate supply suggests that won’t reverse soon.

It’s a story we’ve heard many times since the pandemic. Petrol prices surged when Russia invaded Ukraine and millions stopped buying Russian oil. Fruit and vegetable prices in Australia soared after floods.

The impact of supply squeezes flows through to annual inflation, which has fallen from 7.8 per cent to 6 per cent between December and June but still remains uncomfortably high – especially considering many Australians are getting nothing near that through pay rises.

A vast majority of households are feeling the financial squeeze from rising prices and housing costs, but there are a few simple things to do to get greater control – and you don’t have to draw up a giant confusing spreadsheet to get results.

Many people can find cost savings simply by going through their bank and credit card statements line by line and questioning whether the things they buy are needs or wants.

Bank statements highlight recurring expenses that people may have forgotten about but still pay for. A few tweaks can work wonders.

Finance experts and institutions often recommend doing a household budget, mapping and planning where you will spend every dollar.

But a lot of Aussies – including me – would rather sand off their toenails than spend hours buried in budgets.

My philosophy with finances has often been “bite off more than you can chew, then chew like hell” as long as it doesn’t break one key rule: spend less money than you earn.

For much of my early twenties I had maxed-out credit cards, before discovering that a $10,000 credit card debt costs $2000 a year just for the privilege of owing that money, and there were much more interesting things to spend that $2000 on.

Remember that money is a tool to pay for stuff and, more importantly, deliver rewarding experiences. Use it, rather than be enslaved by it and its ability to send you into a debt spiral.

Hopefully today’s high inflation and interest rates are temporary, and we will all emerge as better money managers.

If you can maintain today’s short-term adjustments for the long term, you will be wealthier, and enjoying lots of chocolate – whatever it costs.

Originally published as Chocolate suffers inflation’s curse and consumers pay the price