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Consumers will need to brace for price hikes in chocolates and also in some chocolate-containing products such as cookies and ice-creams among others due to soaring cocoa prices globally.
Cocoa prices, which topped $10,000 a tonne during intra-day trade on Tuesday, was quoted at $9,163 for July contacts on New York Intercontinental Exchange. Cocoa prices have more than doubled this year on as the crops in Ivory Coast and Ghana, which together make up about 60 per cent of the world’s cocoa production, have been ravaged by disease. This is the third year in a row that the global market faces deficit.
Jayen Mehta, MD, GCMMF (Amul), told businessline that cocoa prices in India have increased by atleast three times. “So all of the players, who use pure chocolate and are in the consumer space, will be affected. Institutional players, who do not use pure cocoa butter and use vegetable fat, may not feel the pinch,” he stated. The company produces large volumes of chocolates and also uses it as an ingredient in ice-creams and beverages.
“We will need to keep taking calibrated price increases. But Amul is very competitively priced and so we are hopeful consumers will continue to stay with the brand,” Mehta said.
Passing gains to growers
“We work with Campco and are in constant dialogue with them. They are also passing on these price increases to the farmers. They are also ensuring the supplies are there,” he said.
A Kishore Kumar Kodgi, President, Campco, said the co-operative is a major supplier of semi-finished cocoa products such as cocoa butter and cocoa powder to some of the industrial customers. Based on the market situation, Campco revises its prices for these semi-finished products while participating in the tenders called by these industrial buyers. The industrial buyers are procuring it at the revised price, he said.
On the retail segment where it markets ready-to-eat finished products such as chocolates, he said as of now there is no change in the price for chocolate products in the retail markets. A decision on revision could be taken in future based on the market situation, he said.
A Nestle India spokesperson said, “We are currently monitoring the situation.”
Hedging strategies
While typically companies use hedging strategies to manage price volatility in commodities, industry players said it will not be easy to fully absorb the impact of this kind of decadal-high-cost surge.
Mayank Shah, Vice-President, Parle Products, said, “There has been an unprecedented rise in cocoa prices compared to previous year. No company will be able to absorb this kind of a price hike. So over the next 1-2 months, there could be significant price hikes taken by companies that make products where cocoa is a key ingredient. We are closely monitoring the situation. We may also need to initially hike prices by 10-15 per cent over the next 1-2 months to cope with this volatility in cocoa prices.”
He said cocoa prices have been seeing a rise over the past year, but large players were able to use hedging strategies and future contracts to manage this volatility and not increase chocolate prices. “But I believe the situation has now changed and they will have to pass on the cost increase to consumers,” Shah said.
Treble gains for growers
Stating that the cocoa prices are the highest in 45 years, in a Linkedin post, Shashank Mehta, Founder and CEO, The Whole Truth Foods, said the company is pausing production of milk chocolates and hiking prices of dark chocolates.
Increase in the price of cocoa has made farmers to focus more on this crop. Many farmers in Dakshina Kannada region grow cocoa as an intercrop in the arecanut plantations. Hariprasad P, a grower from Arantodu village in Sullia taluk of Dakshina Kannada district, Karnataka, said he has been growing cocoa as an inter-crop for the past more than three decades. Stating that he got a maximum of ₹65-70 a kg for wet cocoa beans last year, Hariprasad said he sold it at ₹200 a kg a day ago.
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