Rising Prices of Cocoa and Its Effect on New Entrants of Bakers and Chocolate Manufacturers - Saee Gohokar (B.Sc. CA'2023)

Cocoa prices have skyrocketed from $4,200 a ton in January to up to $12,000 a ton in April. This is 4 times of what the prices were in 2023. A multitude of reasons contribute to this dramatic change. El Ni?o effect, climate change, under investments, aging trees are the major problems to name a few. Ghana and Ivory Coast in Western Africa produce 80% of world’s Cocoa. Due to the development of El Ni?o — a weather pattern, which refers to an abnormal warming of surface waters in the equatorial Pacific Ocean — in 2023, West Africa experienced heavier-than-usual rainfalls. This created an ideal ground for the spread of black pod disease, which causes cocoa pods (a case that holds a plant’s seeds) to rot on the branches of cocoa trees. Along with this, trees developed diseases like Witches’ Broom disease, Frosty Pod Rot and Vascular Streak Dieback. Now Cocoa trees are very moisture sensitive. Droughts, heat waves and rainfall leaves these trees very vulnerable.

The situation is slated to get worse. Earlier, when supply plummeted and prices went up, farmers used to plant more cocoa trees, which would bear fruits five years later and boost the supply. However, this is unlikely to happen now because of climate change, which could soon turn some cocoa-growing areas unusable, according to a report by The Atlantic. The most concerning problem in this case is the underpayment of farmers. Some farmers earn around $1.25 a day which is well below the poverty bar in West Africa. Farmers are barely able to meet their ends and unlikely reinvest in their farms. This with the fact of aging of current trees making the situation worse. This leads to a global shortage of cocoa and creating a rift in the supply and demand chain provoking a rise in prices.?

The pre-existing chocolate manufactures will have to be careful about how they manage the elasticity of demand for chocolate, especially as consumers might not be able to take the price hikes needed to offset the huge increase in cocoa costs. Bakers and the New Entrants of Bakers are trying to find their ways around using chocolate. Caramel is their obvious first choice when going for indulgent flavours. Many are making use of more fruits, vanilla and buttercreams in their products. They are making their menus more rounded and inclusive. Raspberries, cherries, strawberries, bananas, apricots, plums are a few fruits trending in the Bakery Industry. Chocolate is still a part of the menus but the rising prices compel them to sell it at higher rates. Cutting down chocolate completely is not an option at all because the market demands it but the situation recently is making it difficult to meet those demands, hence rising the prices?of?cocoa.