It might be a good time to hoard candy bars, as Nestlé (SWX: NESN) warns of an impending “cocoaflation.”
The cocoa market is experiencing unprecedented turmoil, with futures prices more than doubling this year due to a significant global shortage. This surge in cocoa prices is expected to have a ripple effect on the chocolate industry and consumer behavior, according to a Bloomberg report that cited Mark Davies, managing director at Nestlé Confectionery UK & Ireland.
The price spike, which saw cocoa futures reach a record high of over $11,000 per ton in New York this April, is primarily attributed to poor harvests in West Africa. While consumers have been somewhat insulated from these increases due to manufacturers’ advance purchasing and hedging strategies, Davies warns that price hikes are inevitable as companies begin to absorb the higher costs.
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Industry experts anticipate a decline in chocolate consumption as prices increase. The International Cocoa Organization has revised its forecast for the global cocoa shortfall, noting that it will be larger than initially predicted. However, some analysts suggest that the price rally may have already reached its peak.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
