A bar of chocolate could soon become a luxury item in Australia as sky-high cocoa prices force local chocolate makers to hike prices, shrink their sizes and substitute ingredients.
Global cocoa production is also predicted to fall 13 per cent this financial year due to persistent disease and extreme weather – especially heavy rainfall – decimating cocoa crops in producing countries such as the Ivory Coast and Ghana, the International Cocoa Organisation said.
Cocoa prices have soared and production decreased since bad weather and disease decimated cocoa crops in West Africa.Credit: Luis Enrique Ascui
The spike in cocoa prices has made it harder for local makers of chocolate, biscuits, flavoured milk, ice-cream and cake mix to stay profitable, and could force some to move production offshore, the Australian Food and Grocery Council says.
“Businesses need to start looking at other solutions, which might include smaller pack size. It might mean reduced product quality, it might mean ceasing local production, or it might mean increasing wholesale prices where they can,” said the council’s chief executive, Tanya Barden.
Mondelez International, which owns Cadbury and Toblerone, recently increased the recommended retail price of its Cadbury Dairy Milk blocks by $1, blaming a tripling in cocoa prices and the price of sugar hitting a 13-year-high.
A Mondelez spokesperson said: “Looking ahead, as we expect continued high costs, we are exploring various options to offset the increased manufacturing costs.”
Cadbury recently increased the price of Dairy Milk blocks by $1 because of sky-high cocoa and sugar prices.Credit: iStock
“This usually involves a combination of recommended retail price increases, changes in packaging sizes or adjustments to product offerings.”
Paul Joules, agriculture analyst at RaboBank, said that as well as lifting prices and reducing product sizes, chocolate manufacturers might also use more caramel filling or palm oil to reduce reliance on expensive cocoa.
“I’d really consider it [chocolate] maybe not quite a luxury good, but it could be about to become one because of how expensive it can potentially become,” he said.
Jones said consumers would probably “become more savvy and search for value”, turning to supermarket chocolate brands rather than premium brands.
Australian Food and Grocery Council chief executive Tanya Barden warns food manufacturers are struggling with rising costs.Credit: Ryan Stuart
“And typically, within those supermarket brands, they’d be the ones to have those ingredients, like palm oil and the cheaper ingredients, as opposed to those luxury brands that might be focused more specifically on dark chocolate, which has a high cocoa content.”
Barden said the spike in cocoa prices might be the straw that broke the camel’s back for local manufacturers after years of price hikes in energy, freight and shipping.
“We’re trying to help consumers understand the valid reason why they’re seeing higher prices for these products,” she said. “Just as we see sticky inflation in the economy, manufacturers are facing the same sticky inflation in their businesses.
“The risk is that when assets age, businesses then decide to replace those by going offshore ... or as some consumers have seen, some products might reduce in size or they might need to change the quality or reduce the range of products available because a manufacturer can’t just keep producing goods where the cost of that outweighs the income they receive.”
Chocolate makers are battling rising cocoa, sugar and energy prices.Credit: Dean Sewell
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