12 Predictions from rising cocoa prices

A few weeks ago I predicted that cocoa prices, which have risen from around $2.5k per tonnne to over $10k per tonne in a year, would rise to over $15k within the next five years (see here). Since then they’ve declined. So clearly, I’m in one of the two categories of forecasters predicted by JK Galbraith.

I still am willing to “double down” on my wager of a case of craft chocolate bars to anyone willing to bet that cocoa prices won’t reach that level.

And I’m also going to stick my neck out even further with a bunch of other predictions from the rise that we are anticipating in cocoa prices. I’ve tried to explain my rationale here .. and I’ve tried to avoid “obvious” and “predictable” predictions. I’ve tried to move beyond the “shrinkflation”, more sugar, increasing price of lipsticks etc.

Here goes – and do please add your own to the blog (see here). I’ve tried to divide them into a few categories:

Makes sense… but perhaps not immediately obvious

1. White chocolate bars, especially high quality craft chocolate bars will become a rarity, and in the cases of many makers, a distant memory.

The price of cocoa butter has rocketed from $10 a kilo to over $35k, mirroring the price of commodity cacao. These rises are – so far – far more dramatic than the increase in the prices of speciality beans which were already often over $10k per tonne (for example the price of speciality beans – so far – has ONLY gone up by e.g. 50-150% in places like Vietnam, Ecuador, Madagascar, etc), so less than the tripling of commodity cocoa and cocoa butter prices. So unless you are a maker like Chocolarder, Pump Street, Askinosie, etc. who press their own butter, white chocolate bars are going to be tricky. So stock up now!

2. There will be a massive spike in demand for barbed wire, fencing, etc. amongst cocoa farmers (this is already happening in e.g. Madagascar).

As cocoa becomes more valuable, theft is becoming more and more of a problem.

3. There will be a bunch of innovations in cocoa bean sorting machines by makers and traders .. possibly using some of the optical sorting and image recognition technology being used in the coffee industry for roasting.

As cocoa is becoming more valuable, expect more and more “stuff” to be in cocoa bags (stones, water, etc.) .. and more and more “problematic beans” .. as traders are desperate for volume, and makers will be stretched to “hand sort” all of this.

4. Cashflow is going to be a major problem; even for traders who are used to this and especially for small makers .. but hopefully craft chocolate makers will make it through.

Makers will have to put up bar prices once they start taking in new bean shipments .. but it will take some time for them to see the “benefits” from this. In the meantime they have to pay on delivery (and upfront) for their beans .. which are a/the major element of their annual capital outlays and these are literally doubling / tripling.

Sticking my neck out on sourcing and operations

5. Ecuador and Brazil will overtake Ghana in 3-5 years as the no 2 and 3 exporter of cocoa

… wait for Brazil to try to repeat the water management used in California earlier in the 20th century, and “make the desert bloom”. The Cote D’Ivoire will soldier on (literally). Politics, structural factors (monopoly trading boards, smaller farm sizes) plus global warming and El Nino (see this earlier blog).

6. A bunch of new “sources” will also grow cocoa.

For example Thailand, India, China, PNG, provided that another “hot crop” doesn’t appear .. but this will take 5-10 years to make a material difference (maybe China can do faster).

7. There will be a mini-boom in startups promising to make “lab grown” chocolate.

Some of these startups may create new “food like substances” that may have some value for cocoa butter replacements, and may be useful for low quality toppings (biscuits, cakes, etc.). However this sort of promise and venture isn’t “new” – and it’s not clear that anyone out there really has a “breakthrough” for understanding either texture or flavour. We’ve tried a bunch and the result, to date, has been at best “hmm” and far more NO!!!?”

8. At the same time, there will be (are?) some new innovative uses of natural “CBRs” (i.e., Cocoa Butter Replacements).

For example some fruit waste are being used in brownie and cake mixes to produce some really interesting alternatives to cocoa powder.

Safe predictions… with a twist

9. Even though Artificial Intelligence is unlikely to help “flavour” in the same way that Chat GPT can write haikus, poetry, music, pictures (see here), AI should be able to make huge and ever more critical impacts in predicting weather, managing irrigation, pre-empting disease, etc.

And the price of cocoa may help spur some activity here (we’ll write more about these initiatives soon, and see the blog for some more examples from the wine industry and other crops).

10. Cheap big chocolate will continue to use more palm oils, vegetable fats, sugar and other bulking agents.

and still raise prices and make even more money ….. BUT the supermarket “70%” dark are going to struggle (and make even more confusing claims about being “high quality”, craft etc.).

11. More and more makers will experiment with new “formats” and “move beyond the bar” e.g. rounds, neapolitan sharing boxes, etc.

Consumers are used to paying £3.95, £4.95, £6.95, £8.95 etc. for a craft chocolate bar, and so they have a “reference point”. These reference points make consumers more “aware” of price rises in their favourite craft chocolate bars (even if they – hopefully – can understand the logic for the rises …).

On the other hand boxes of craft chocolate that can be gifted, taken to dinner parties, etc don’t have the same “price recognition”. So hopefully this provides another motive for more makers to explore new formats that encourage social sharing (see below for some great examples from Firetree, Marou, Ruket, Vinte Vinte, etc.).

A final ‘wish’ prediction

12. Enterprising craft chocolate makers will release chocolate bars “en primeur”…

…learning from wine and whisky worlds, and you’ll be able to invest in the equivalent of wine/whisky delivered in the future which has capital appreciation baked in .. and is capital gains tax free (it too will count as a wasting asset) –and yes, we are planning to do this! Email us directly if interested.

If you’ve other predictions, comments, questions etc. please email me directly or please comment on the blog.

And in the meantime, do please enjoy some white craft chocolate bars (while we can?).

Links and sources:
https://www.bbc.co.uk/news/business-68788080
https://africalive.net/article/projects-using-ai-to-shape-africas-food-systems/
Smart farming and artificial intelligence in East Africa: Addressing indigeneity, plants, and gender – ScienceDirect