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Chocolate prices are expected to soar

Chocolate prices are expected to soar

Business

Chocolate prices are expected to soar

Chocolate prices are expected to soarChocolate is loved by many, but chocoholics need to be warned that prices for their favored treat may shoot up significantly during the holidays as cocoa butter prices are expected to soar. Cocoa butter is the special ingredient needed to give chocolate its texture for that melt in the mouth feeling.

Asia’s expanding middle class has resulted in an increased demand for chocolate. Another contributing factor is that sales in countries with large consumption of the treat have seen butter prices nearly double from $4,000 per metric ton just six months ago to nearly $7,000 per metric ton today.

Supplies are now tightening and demand shows no signs of slowing before the holidays ahead – specifically Christmas and New Year. Experts believe that some chocolate makers may not have much choice rather than pass on some of that cost increase to consumers.

Chocolatiers are known to operate a secretive industry. They guard their recipes in order to make their products stand out from the rest. The manufacturers are equally cautious on prices, trying to make sure they don’t overprice their products against those of competitors.

Reuters contacted major sweets makers, but they declined to comment about whether increased cocoa butter prices will make them increase retail prices. Nestle did indicate that price increases are always a last resort. Some smaller chocolate manufacturers have already increased prices much to the dismay of customers.

Reports indicate that chocolate lovers are expected to consume 7.4 million metric tons of chocolate during 2013, which is 2 percent more than last year. Euromonitor International, a global market researcher, said that 7.4 million metric tons of chocolate total about $110 billion in U.S. dollars. These figures are up from 6.9 million metric tons during 2009, when consumption dropped because of the financial crisis.

“In the regions like Asia-Pacific or Latin America, we are seeing more middle class consumers buying chocolates compared with five or six years ago because they have the money to do it,” said Francisco Redruello, senior food analyst at Euromonitor International. “That is what’s driven the growth of chocolates.”

Sales surge in Europe and North America around the holidays, such as Christmas, Valentine’s Day and Easter, which puts added pressure on chocolatiers and confectionary makers to stock up so they can meet the demand. Companies who have not already booked cocoa butter allotments for the next few months are those who are most vulnerable to the price increases.

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Michael Reed covers business and finance related news.

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