Cocoa farmers in Ghana and Ivory Coast to get paid extra $400 per tonne for their produce by chocolate makers in the upcoming 2020/21 cocoa season, which begins on October 1, 2020.
As part of a plan to alleviate farmer-poverty on the African continent, chocolate makers have resorted to not buy their cocoa on the futures markets in London and New York. According to them, though cocoa on the futures markets in London and New York meets the futures contracts’ specifications, it is not high enough quality for many of the products they manufacture.
The manufacturers prefer to buy in the physical market where they generally have to pay a premium because of the quality they need.
Hence, a projection indicates that London cocoa futures forecast may plummet by 10 per cent at the end of the year.
The poll which was conducted by Reuters indicates that, the likely drop is as a result of rising production most especially in West Africa and a decline in demand due to the coronavirus crisis.
Not just cocoa
However, the drop in cocoa prices does not necessarily mean chocolate bars will get cheaper. This is partly because cocoa is only one ingredient in the mix hence, a drop in the price of one of the ingredients does not totally change the retail price.
Apart from cocoa, there are lots of other costs which contribute to the price of chocolate bars. These include other ingredients such as sugar and sometimes milk or nuts as well as packaging, marketing, transportation, taxes and retailer margins. The cost of cocoa, is therefore, just one element in determining the price.
Demand hit by lockdowns
Following the implementation of lockdowns across the globe due to coronavirus, people were more concentrated on stocking up on essentials which affected impulse buying of chocolate.
The advent of the pandemic has cast a bleak economic outlook on the demand for luxuries like chocolate and the narrative is expected to linger on in the coming months. Meanwhile, sales at celebrations such as Halloween are likely to be weaker than normal.
Product adjustments
Chocolate makers often prefer not to change the price of a product but are more likely to adjust size or quality.
The makers of Toblerone, for example, in 2016 introduced larger gaps between the triangles of certain sized bars after a rise in the cost of ingredients but later changed them back.
More subtle changes can also be made, such as thinning or thickening the chocolate coating on some confectionery products.
