Cuckoo for cocoa? You may have to pay more
Valentine boxes filled with chocolate may become a thing of the past, or at least a costlier venture, amid another warning about the state of the confection.
Lindt & Spruengli Executive Chairman Ernst Tanner cited high raw cocoa costs and adverse weather conditions as among the factors making 2015 his most challenging at the helm of the Swiss chocolate maker, Reuters reported on Thursday. Lindt, which became the third-biggest chocolate seller in the U.S. after it purchased Russell Stover in 2014, expects 2 percent growth in the global chocolate market this year, the same as in 2015.
Yet, even as the world's appetite for chocolate expands, production of cocoa -- the raw material used to make it -- is diminishing, creating a supply and demand imbalance that has the price of the commodity surging, up almost 40 percent since 2012, The Wall Street Journal reported on Thursday.
The newspaper story follows a warning in 2014 from Mars projecting a global shortage by 2020 without industry cooperation to avert the uncomfortable scenario for children and other chocolate-loving consumers.
Global demand for chocolate rose 0.6 percent to a record 7.1 million tons last year, paced by a 5.9 percent increase in Asia, the Journal reported, citing research firm Euromonitor International. Cocoa production traveled in the opposite direction, declining 3.9 percent to 4.2 million tons, estimates the International Cocoa Organization, or ICO.
The rising costs illustrates supply restraints in West Africa, with dry weather damaging crops in the Ivory Coast and Ghana, where about 70 percent of the world's supply of cocoa is produced. Adding insult to injury, a fungal disease known as frosty pod has also wiped out a substantial percentage of the crops, according to the ICO.
But the chocolate industry is committing about $1 billion to address the issues, with global snack maker Mondelez International (MDLZ) committing $400 million by 2020 to help 200,000 farmers increase productivity in six cocoa origins -- Cote d'Ivoire, Ghana, Indonesia, India, the Dominican Republic and Brazil.
The challenges facing the sustainability of cocoa and cocoa farms "are considerable," said a March 2015 industry report. "With cocoa stakeholders collaborating toward sustainability, needed changes can happen."