Price of Chocolate to Rise

The CEO of Barry Callebaut announced that chocolate prices will rise between 15 and 18 percent. Reuters reports that Patrick de Maeseneire told the Handelszeitung in Switzerland that raw materials contribute about 25 percent to the total price of a 100 gram chocolate bar and that cocoa, in turn, represents half of that. Since cocoa prices have doubled over the past year and other commodities like milk and sugar have increased in price as well, Mr. de Maeseneire reasoned that a 15-18 percent price increase is warranted.

Regular readers of this blog will remember that Barry Callebaut is well positioned to make such announcements. It has become one of the largest chocolate makers in the world and it supplies chocolate to such giants as Nestlé and Hersheys. At the moment, the company provides about 15 percent of the chocolate used and sold by other companies and expects to increase that percentage to 30.

Mr. de Maeseneire believes that he can pass on price increases to his customers who, in turn, will face reluctant consumers. Decreasing demand for chocolate will, of course, lead to lower sales for Barry Callebaut. Nevertheless, he expects his company’s net profits to grow by 13-16 percent annually over the next three years.

On a personal note, I found that my favorite chocolate, Divine, increased in price by 15 percent last month. So these predictions seem to hold true. At first I was a tad upset since the cocoa used for those bars was most certainly harvested over a year ago and thus not yet priced higher. But then I remembered that Divine is a British company and that the value of the US dollar isn’t what it used to be. Even fair trade companies cannot avoid the exchange rate risk.

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