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.
Higher Prices for Ghana’s Cocoa farmers
Reuters reported today that Ghana’s Cocoa Board (COCOBOD) has decided to increase the farm gate price for the next cocoa year from 1,200 cedis ($1,090) to 1,632 cedis ($1,384) per ton. This is welcome news for cocoa farmers all over Ghana who have been complaining about the low prices offered by COCOBOD during the last season.
Ghana Secures Financing for 2008/09 Cocoa Season
The Ghana Cocoa Board (COCOBOD) has just signed a $1 billion financing deal with a syndicate of international banks to finance cocoa buying for the 2008/09 cocoa season. The bank consortium includes both European and Japanese banks and is believed to be the largest soft commodity financing deal ever.
Readers of this blog will recall my analysis of financial flows that make the Kuapa Kokoo cooperative work (April 16th). The flow chart showed that the cooperative, as a licensed cocoa buyer, reports its anticipated target capacity to COCOBOD and then receives (as loans) the necessary funds to cover the buying of the cocoa from the farmers.
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Shrinking Foods
A couple of weeks ago, I wrote here that Hershey’s price increases might be accompanied by another strategy to pass higher prices on to consumers–decreasing the weight of the product. And, lo and behold, here’s the confirmation. Yesterday, the International Herald Tribune published an article highlighting the shrinking food weights for a number of manufacturers. Skippy Peanut butter jars will contain 16.3oz rather than 18oz and forget the half gallon cartons of orange juice, they’ll contain only 89 rather than 96 fl. oz. As for chocolate, Mars will decrease the volume in some of its candies and others will probably follow.
But then we have already seen the incredibly shrinking package in the chocolate market for some time. When I grew up in Germany, a chocolate bar contained 100 grams of chocolate. For me, that’s a normal size. With the emergence of all the fancy gourmet chocolates over the past decade, however, bar sizes have decreased even before the recent price increases. I guess one way to state the exclusivity of a chocolate bar is to make it small. I wonder what it is in our subconscious that associates small with exclusive rather than rip-off.
Indonesia Follow-up
The International Cocoa Organization just issued a report decreasing Indonesia’s prospective cocoa harvest for 2007/08 by 90,000 tons. Indonesia exported 530,000 tons of cocoa during for 2006/07 and the ICCO had projected exports to reach 570,000 tons this season.The current export volume is estimated to reach 480,000 tons.
