A growing squeeze is hitting major chocolate makers as cocoa prices keep hitting fresh highs. New York cocoa futures point to a substantial stock market gain this year, surpassing $10,000 per tonne after a climb from about $2,900 just twelve months ago. Adverse harvests across producer nations, concentrated in Africa, driven by climate change, are pushing chocolate makers to cut costs without eroding quality. It is not surprising to see more bars padding with caramel as a way to trim expenses, and Easter eggs carrying a modest price uptick in many supermarkets.
In Catalonia and Valencia, Easter favorites face a “perfect storm” of costs, with cocoa trading at multi-year highs and global sugar prices at levels not seen since 2010. Consumers noticed this earlier at Valentine’s Day, when inflation and higher candy costs became evident, and the effect has echoed through Easter eggs. In the United States, the average unit price of chocolate eggs rose about 12%, while the United Kingdom saw about a 50% jump.
With the exception of Nestlé, whose 2023 results edged into negative territory, the latest year’s performance of Lindt and Hershey’s (Kit Kat) has not yet been hit hard by the cocoa rally. Inflation and softer demand weigh on brand results. Lindt reported a 10.3% sales increase over the last twelve months, while Hershey’s climbed 2–3%. Market data shows divergent stock movement: Lindt shares rose about 7.46% in roughly four months, whereas Hershey’s gained only ~0.12%. Nestlé, by contrast, has seen a 4.54% decline in its share price after disappointing investor expectations.
Looking ahead, forecasts for the next year lean toward continued cost pressure. Lindt anticipates ongoing cost growth in 2025, likely pushing end prices higher. The American producer expects slower growth as raw material costs stay elevated. “Given the cocoa price environment, we will use all pricing tools available to manage the business,” stated Hershey’s chief executive Michele Buck when addressing investors. She added that unprecedented inflation over the last two years has increased the burden on many households and affected demand for foods and beverages. Nestlé’s chief executive Mark Schneider pointed to around 4% organic sales growth for 2023 as a benchmark for the near term, even as higher input costs linger.
Impact of Droughts
The cocoa price surge finds its main cause in climate change. West Africa, home to roughly 70% of global cocoa production, has seen the smallest harvests in three years due to heat, drought, and tropical storms that have battered the region. Ivory Coast halted export contracts for the current season last summer after crop damage from El Niño, with much of the harvest lost under heavy rains and a cocoa price jump of about 27%. Other large producers such as Ghana, Nigeria, and Cameroon faced similar challenges as tropical rains damaged trees expected to bear fruit from October onward.
Concerns now shift to a potential rainfall shortage that could affect crops from April through September. In response, the International Cocoa Organization (ICCO) predicts a record deficit this year, potentially reaching 400,000 tonnes. Across the supply chain, firms are taking steps to offset missed African contracts. Guan Chong, a major cocoa processor, is seeking alternative supplies from Ecuador, Peru, and Indonesia to cover gaps in traditional African shipments.
Chocolate makers have followed suit. Beyond passing higher raw-material costs to consumers, some have chosen cheaper fillings. Euromonitor International’s latest analysis shows about 40% of chocolate bars now use caramel or fruit as a strategy to curb rising costs. Hershey’s, Nestlé, and M&M’s have leaned toward fillings like caramel or peanut butter, while Mars has trimmed some bars by roughly 10 grams. In Spain, chocolate producer Valor in Alicante warned that prices will rise in line with cocoa costs, noting the market faces unavoidable increases.
Overall, the sector is navigating through tighter margins and shifting formulas as it adapts to a market that has changed dramatically over a short period. The industry’s response blends price adjustments, reformulation, and selective sourcing changes to sustain consumer access to familiar treats.