Wake Me Up Before You Cocoa: Is The Death Of Chocolate Near?

So, look at you enjoying your favourite chocolate bar. You might have seen some seductive ads for chocolate on TV or on your phone, which might have made chocolate so alluring to consume when it melts on your tongue. You've probably curled up in the winter with a cup of hot chocolate. Or you might have enjoyed chocolate in multiple bakery products in multiple combinations, forms and permutations. It's almost beckoning to you in a sultry whisper: "Linger on my textures. Now's the time to indulge. Let me make you feel desired, smooth and maybe, even empowered. Let me melt the shackles of what's ailing you. Let me continue to enchant you".

Unfortunately, the romance might be ending. Sorry to burst the bubble, but it might be a rocky road ahead.

Amidst all the ups and downs of 2024, something that might have gone under is what's happening in the world of chocolate. If you've come across Charles Bucket navigating William Wonka's chocolate factory across literature or media, you might know that cacao beans are what make chocolate what it is.?

Unfortunately, the price for these beans is said to be skyrocketing, leading to cocoa processors, which are used to convert the cocoa beans into cocoa butter, reducing production.?

Why's the price rising? It's said that a lion's share of the world's cocoa beans come from African countries, like?C?te d'Ivoire?and Ghana, where there was more rainfall. This was said to?lead to the cocoa pods having some agricultural disease, which decreased crop yield. And then, there's good ol' climate change with rising temperatures and erratic rainfall, along with worrisome weather events, like droughts and heat waves, which may have had negative connotations for the cacao bean.?On top of that, it's said that traders were betting on future price increases, which may have made things worse.

According to Devansh Ashar, Co-Founder & Partner - Pascati, "The prices of futures are going up and as a result, people are buying cocoa as much as they can for their production cycle for the next 6 months, which is creating a shortage. In India, farmers are looking to the West and seeing cocoa being priced at X and wanting to be equally compensated. It's a tough situation to be in at this point, but how the next couple of months pan out could be anyone's guess".

Ashar declares, "The prices had peaked circa April?2024, after which it had significantly come down, after which it shot up again. This seems to be, because people are buying more and more futures, the production cycle in chocolate producers in Africa is not as much as expected. Fluctuations of 25% or 30% in a short period of time in this space is quite unheard of, so it's quite possibly due to speculation".

In India, according to multiple reports, cocoa bean prices have gone up to ?325 per kg to??650 per kg to even??1000 per kg. And it's said that chocolate producers, like Parle, Hershey and Nestle India might be looking at price hikes of up to 15% for chocolates.

According to Robin Dand, Board Member - Academy of Chocolate and Author - 'The International Cocoa Trade', "There'll always be pressure on the ingredients if the price for them increases. Expensive ingredients would be used less and more inexpensive materials would be sought. That said, the elasticity of demand is quite strong for dark chocolate goods. Buyers will put up with increases in price, while cheaper chocolate is very price-sensitive".

All of this could mean: something might be different about the way you interact with chocolate. A lot of folks probably enjoy mass-produced chocolate, while others might indulge in premium chocolate. Either way, would the cacao bean price surge make startups and businesses dramatically rethink costs? Could your go-to 5 chocolate be??50 the next time you purchase it??A price-sensitive consumer market, like India, might pay attention. Would mass-market consumers figure out if the cocoa has been diluted and baulk? Would that impact brand trust?

Dand states,?"What's unaffordable for one is eminently affordable to another. Higher prices will reduce the number of people who will buy expensive chocolate, but, instead, many will buy cheaper chocolate if they can, rather than not buy any confectionery".

It might be a conundrum, as well, for premium chocolatiers who pay a bit extra for ethically-sourced cacao and whose consumers might already be paying a premium. And that could, also, mean your favourite bakery might sell their chocolate cakes, croissants and other chocolate items for more.

Ashar comments, "We are not changing our recipes to put less cocoa butter and we're not going to look at cocoa substitutes. We're a chocolate maker. The only thing at this point that can be done is increase the MRP and unfortunately, the consumer will have to be at the receiving end of this".

So, how will the premium chocolate market consumer deal with this?

Ashar outlines, "I don't think there will be that big of a difference, because the luxury chocolate market caters to clientele who might be unaffected by an increase in MRP, even by 50 rupees, and won't pinch them. It's probably the middle class that buys mass-market chocolates that would feel the pinch, so the larger companies would probably be impacted by this. The small niche market of the premium chocolate market?would find this justified because there's a higher input cost and since the rising price of cocoa is public knowledge, the consumer will understand".

Or rather than increasing prices, some chocolate brands might go the shrinkflation route of keeping the same price and reducing the size of the chocolate bar. Or they might go the skimpflation route by reducing some of the cocoa content and adding some fillings.?

According to an expert who spoke to the BBC, cocoa butter could, theoretically, be substituted with vegetable fat. But, if there is too much substitution, would the product be chocolate or chocolate-flavoured? FoodPharmer might have something to say about that.

"Even a filler, like a cranberry or a blueberry or cashew or almond, would still mean high input costs, so that might not make a difference", chimes Ashar.

"We've been making chocolates for the last decade. This is the first time I've seen?such a drastic change in the price of cocoa, so it's very hard to predict what the market will look like or what the impact could be in the next 5 years. But, if the current scenario persists, there might even be changes in FSSAI regulations or a high percentage of different fats other than cocoa butter being used", opines Ashar.

Maybe, to some extent, India could step up as a cocoa producer. Its annual cacao bean production might be a bit modest, compared to global leaders, but in FY22, according to Statista, Andhra Pradesh produced 11 million kg and Kerala contributed 2.5 million kg of cocoa. That sounds like a lot if you imagine it being weighed. Hopefully, the flavour profile matches.

And beyond this cacao crisis, what are the challenges that chocolate startups face?

"Being a chocolate startup in India has some challenges, like having the right distribution partner and sending chocolates in warmer months in India. Winter months are okay and manageable, but other months might mean transport issues", expresses Ashar.

Could an AgriTech startup in India figure out a way to deal with diseases that impact cacao trees? Can AI play a role here?

Maybe, chocolate might end up having a different status, like wine, and not something for the common person. That could mean a premium brand, who might market their chocolate as a high-quality indulgence might weather the storm better than mass-market chocolate producers.?Or can premium chocolate startups emulate some of the iPhone marketing to make their chocolates a status symbol?

Maybe, this whole cacao crisis is, fundamentally, a climate story. If the ripple effect of this crisis leads to chocolate panic in India, AgriTech startups that could help foster climate resilience will be seen as the real heroes and loveable in the eyes of VCs.

"Cocoa provides a responsible product that allows many growers a route to improve the conditions of their families. Progress in cocoa production is needed with sovereign countries taking full responsibility for their citizens involved in the industry. Increased production increases the return to their exchequer. There is much room for improvement, which is cause for optimism", quips Dand.

Alternatively, could some FMCG startup attempt something bold and audacious to move mass-market chocolate consumers away from cacao to locally-sourced alternatives? That might be one revolutionary move. Imagine weaning people off of chocolate.

As a chocolate enthusiast, will you Cadbury your head in the sand??