The Impact of Climate Change and El Niño on Easter Chocolate Prices

Chocolate lovers around the world eagerly anticipate indulging in their favourite sweet treats as Easter approaches. However, this year, they may find themselves paying more for their chocolate bars. The reason behind this price hike can be attributed to the effects of climate change and the El Niño weather phenomenon on cocoa production in key regions. In this article, we will explore the impact of these environmental factors on cocoa supplies, the subsequent rise in chocolate prices, and the need for businesses to decarbonise to mitigate the effects of climate change.

The Threat to Cocoa Production

Cocoa, the key ingredient in chocolate, is primarily grown in Ghana and Ivory Coast, which together account for 60% of the world's cocoa supply. However, extreme weather conditions caused by climate change and the El Niño phenomenon have severely impacted cocoa production in these regions. Poor weather, increased crop disease, and recent dry conditions have led to significant reductions in cocoa harvests. According to London-based research firm Capital Economics, global cocoa production could decrease by double digits this year due to these factors.

The decline in cocoa production has resulted in a tightening supply, leading to a surge in cocoa prices. In fact, cocoa futures traded on the New York exchange have reached a record high, with prices exceeding $5,798 per metric ton. This represents the highest level in the past 65 years, and cocoa futures have risen by over 120% in the last year alone. The rise in cocoa prices has prompted some of the world's largest chocolate producers to express concerns about the impact on their earnings and consider raising prices to mitigate the effects of higher cocoa costs.

The Hershey Company's Response

The Hershey Company, a renowned chocolate manufacturer, has acknowledged the challenges posed by the soaring cocoa prices. Michele Buck, CEO of The Hershey Company, stated during the company's fourth-quarter earnings call that the high cocoa prices are expected to limit earnings growth this year. In response, the company is committed to its long-term strategy of pricing its products to cover raw material inflation. Buck emphasised the importance of ensuring that the company offers great-value products to consumers while navigating the volatile cocoa market.

The Mondelēz Perspective (Parent Company of Cadbury)

Mondelēz, the parent company of Cadbury, another prominent chocolate brand, has also experienced significant price increases for cocoa and sugar. Luca Zaramella, the CFO of Mondelēz, warned about the rising costs of these key ingredients and the potential impact on the company's operations. In September, Zaramella announced the company's plan to continue its price increases from 2023 to offset higher cocoa commodity costs. He emphasised the importance of implementing pricing strategies that ease the transition for both retailers and consumers.

The Impact on Chocolate Prices

The surge in cocoa prices has already had an effect on chocolate prices, which have increased by 17% over the past two years. Consumer researcher Euromonitor International has reported this upward trend. Analysts at Capital Economics predict that as manufacturers pass on the higher cocoa costs to consumers, the demand for chocolate may start to falter. The rising prices, coupled with the potential decrease in demand, highlight the need for businesses to address the challenges posed by climate change and find sustainable solutions.

Linking Rising Prices with Decarbonisation

The increasing costs of cocoa and other raw materials for chocolate production are directly linked to climate change and its impact on agricultural practices. As extreme weather events become more frequent and unpredictable, cocoa farmers face challenges in maintaining consistent and high-quality yields. To overcome these challenges, businesses in the chocolate industry must prioritise decarbonisation efforts.

Decarbonisation involves reducing carbon emissions and transitioning to cleaner, more sustainable energy sources. Adopting greener practices, such as using renewable energy and implementing energy-efficient technologies, means that chocolate manufacturers can mitigate the effects of climate change on cocoa production. Additionally, supporting and investing in programs that promote sustainable farming practices can help ensure the long-term viability of cocoa farms.

The Need for Proactive Strategies

In light of the challenges posed by climate change and the rising costs of cocoa, businesses in the chocolate industry must take proactive measures to secure their supply chains and maintain profitability. This includes diversifying their cocoa sources to reduce dependence on regions vulnerable to climate change impacts. Exploring alternative cocoa-growing regions and investing in research and development to improve cocoa crop resilience can help mitigate the risks associated with climate-related disruptions.

Furthermore, companies can engage in partnerships with cocoa farmers and cooperatives to support sustainable farming practices. By providing training, resources, and fair trade opportunities, businesses can contribute to the economic development of cocoa-producing regions while promoting environmentally friendly practices.

Taking Action Towards Net Zero Carbon Emissions

Addressing climate change and its impact on cocoa production requires a collective effort from businesses, governments, and consumers. Chocolate manufacturers must commit to reducing their carbon footprint and strive towards achieving net zero carbon emissions. This involves measuring and tracking emissions, implementing energy-efficient practices, and investing in renewable energy sources.

The Bottom Line

The impact of climate change and the El Niño weather phenomenon on cocoa production has led to a significant rise in cocoa prices, ultimately affecting the cost of chocolate. Chocolate manufacturers, such as The Hershey Company and Mondelēz, are grappling with the challenges posed by higher cocoa costs and exploring strategies to maintain profitability. However, this issue extends beyond the chocolate industry. It highlights the urgent need for businesses to decarbonise and address climate change to ensure the long-term viability of cocoa production and other agricultural sectors. By taking proactive measures, embracing sustainable practices, and investing in renewable energy sources, companies can contribute to a more resilient and environmentally friendly chocolate industry. Wouldn’t it be great to eat chocolate that doesn’t impact the planet?