Soaring Chocolate Prices Curb Demand, Reducing Projected Supply Shortfall
Higher chocolate prices are dampening demand this year, leading to a smaller-than-anticipated supply deficit, according to JPMorgan Chase & Co.
Analysts have revised their deficit estimate for the current 2024-25 season to 40,000 tons, down from their previous forecast of 108,000 tons last autumn. This adjustment stems primarily from an expected demand decline of at least 1.8% as historically elevated cocoa prices hinder consumption.
Despite reduced demand, consumer chocolate prices are likely to continue rising as manufacturers attempt to offset increased costs. Last year, cocoa futures nearly tripled amid concerns over West African supply, and they currently trade near $10,000 a ton in New York.
Recent financial reports from chocolate producers indicate a weakening in previously resilient demand. "Historically high prices are eroding demand, and we expect a contraction in global grindings of at least -1.8% year-on-year," JPMorgan analysts stated in a research note.
Decreasing sales volumes suggest that consumers are cutting back. To alleviate cost pressures, the industry is increasingly considering recipe reformulations that replace cocoa with alternative ingredients, as Hershey CEO Michele Buck recently disclosed to investors.