The Strategist

Easter Bunnies Will Come at Higher Price


03/25/2016 - 14:58



The cost of a chocolate bunny, favorite Easter treats of many Europeans, increased by more than 10% over the last year and may continue to grow. This is associated with price hike of chocolate and ingredients. According to Mintec British company, the price of a kilogram of milk chocolate increased from 1.64 pounds ($ 2.3) to 1.82 pounds ($ 2.6) in a year. The experts link this to the fact that its constituents cocoa powder (26 %), cocoa butter (19%) and sugar (15%) became more expensive.



Tammy Green
Tammy Green
In many respects, cost of the main ingredients depends on the weather. Cocoa has risen in price partly due to drought caused by natural phenomenon of El Niño, and sugar prices began to recover in August 2015 after four years of decline. According to forecasts of Rabobank analysts, price of cocoa and sugar will remain volatile because of the weather and currency fluctuations, and there is a "high probability" of further shortage of sugar supply.

However, weather warmer than usual creates another problem for chocolate manufacturers - the demand is reduced. In 2015, due to the hot summer and too soft beginning of winter, chocolate consumption declined, according to recent financial statements of Swiss Lindt. According to Barry Callebaut, another Swiss chocolate producer, worldwide sales of chocolate confectionery decreased by almost 4% last fall. This February in the UK was record warm, and this could affect the demand, too. "People tend to eat less chocolate when temperature is higher," - notes analyst of Rabobank Carlos Mera.

This year, Easter in Catholic countries is celebrated earlier than usual (27 March). According to forecasts of the German Confectionery Association, the country will produce 200 million chocolate bunnies due to the short period of Easter sales. This is 6% less than in 2015.

It is expected that the rise in chocolate’s price will accelerate next trend - manufacturers will be even faster to raise prices for their products, while reducing their size. "The producers of chocolate have a problem with sales, yet they pushing up the cost ", - says Euromonitor’s analyst Jack Skelly. He predicts that sales of chocolate at Christmas and Easter should remain at 67 tons in the UK, just like last year. In value terms, however, they will grow by 4% to 845 million pounds ($ 1.2 billion).

In the summer of 2014, the cocoa beans market value  - the key ingredient of chocolate - rose by 18% and reached a peak of three years: a ton of raw materials costed $ 3 234. Thus, the market reacted to Euromonitor’s report, which predicted global sales of chocolate to increase by 6% in 2014 and reach $ 117 billion.

This will lead to higher cocoa prices: production in recent years around the world has been gradually shrinking due to reducing in the number of plantations, drought and other factors. The deficit is already being felt, and will continue to be even worse. According to Mars and Barry Callebaut, the demand for beans will exceed its production by 1 million tons in 2020; by 2030, this gap will reach 2 million tons.

Every year, suppliers of cocoa beans are closing their businesses since it becomes unprofitable to grow the raw material in exporting countries.

More than 70% of world cocoa market accounts for Côte d'Ivoire and Ghana. ICCO estimates that 90% of the raw material grows on small family plantations that are inherited. Farms with chocolate trees are located in distant areas of civilization, and the majority of the owners and the workers on the plantations never tasted chocolate.

Every year, suppliers of cocoa beans is becoming less - in countries that export becomes unprofitable to grow the raw material.

More than 70% of world cocoa market accounted for Côte d'Ivoire and Ghana. According to ICCO estimates that 90% of the raw material is grown on small family plantations that are inherited. Farms with chocolate trees are located in distant areas of civilization, and majority of the owners and workers on the plantations never tasted chocolate.

source: ft.com




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