Nestlé (NSRGY) might be the company that breaks your chocolate addiction with its latest warning to consumers.
The food company, which manufactures popular brands such as KitKat, Toll House and Nesquik, claims that consumers have yet to feel the full impact of the global cocoa shortage, and that it will soon start to put a damper on their wallets as companies are facing higher costs to make goods that contain the ingredient.
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Cocoa prices gradually began to increase in January this year. In April, cocoa reached a record price high of $11,000 per metric ton. In July 2023, it was around $3,000 per metric ton.
The skyrocketing prices are the result of a significant decline in cocoa bean production by major suppliers in West and Central Africa. The region produces more than 60% of the world’s cocoa bean supply. Climate change is to blame for the weaker production as droughts destroyed crops in the region.
Nestlé UK and Ireland Managing Director Mark Davies said in a recent interview with Bloomberg that the company expects to see lower demand for chocolate as companies are planning to increase their prices for chocolate goods.
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“Demand appears to be resilient at the moment, but as prices go up we would expect to see dampening demand,” Davis said in the interview.
Consumers haven’t fully experienced higher costs for food products that rely on cocoa due to many companies securing the crop ahead of the crisis at lower prices, but that will change within a matter of months.
Higher prices for chocolate comes at a time when consumers are already experiencing higher prices for goods across multiple industries. The inflation rate last month in the U.S. was 3.3%. Between January 2020 and May 2024, consumer price inflation increased by almost 22%, according to NerdWallet.
Amid the cocoa shortage, some companies are reportedly looking for alternatives to cocoa. Start-up companies such as Voyage Foods and Planet A Foods are already developing cocoa-free chocolate.
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Voyage Foods uses plant-based ingredients such as grape seeds, “a vegetable oil blend” and cane sugar to develop their chocolate, while Planet A Foods uses “home-grown ingredients” such as oats that undergo “fermentation, roasting and processing” to make a chocolate-like taste, according to their websites.
Consumers might even see companies change their ingredients to rely less on cocoa. That means chocolate goods may have an increase in additives such as sugar, shea butter, palm oil, coconut oil, etc., according to a recent report from CNBC.
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