Weighed down by rising cocoa prices, chocolate majors are planning to raise prices – by 15% in some cases – over the next two to three month. Some like The Whole Truth (TWT), a Mumbai-based clean label D2C food brand, has paused the production of its milk chocolates and has steeply hiked the prices of its dark chocolates from Rs 200-299 to Rs 299-375.
In the last six months, the rates for cocoa liquor have gone up from Rs 500 per kg to Rs 1200 per kg and cocoa butter has tripled to Rs 1600 per kg.
While Nestle India said it is closely monitoring the situation, Parle Products hinted that it may initially hike prices by 10-15% over the next two months to cope with the volatility in cocoa prices. Krishnarao Buddha, senior category head, Parle Products, said, the company would take a final call based on the competition dynamic and market challenges. While earlier it was reported that it was a crop-related issue in West Africa, slowly the narrative has changed to the withholding of stocks by traders, he added..
In February this year, the Hershey Company indicated that it may raise prices on its products this year due to increased input costs from a global cocoa shortage, whereas Mondelez also shared its plan of price hikes to cover the inflation in cocoa, in an earnings call.
The Whole Truth’s founder and CEO, Shashank Mehta, said, “We are not expecting any more hikes but no drastic reduction in prices seems possible either. Those using real cocoa, like us, are forced to increase prices and that is sure to dampen volumes.”
The impact of rising cocoa costs has also affected other industries including that of cosmetics and pharmaceuticals. Cocoa beans play a significant role in Juicy Chemistry’s (the skincare brand) product formulations, but the price surge has forced the company to opt for some proactive strategies including exploring alternative ingredients, and continuously reviewing pricing strategies, said its co-founder, Pritesh Asher. “This issue is not unique to us but is affecting businesses across the organic personal care industry, as raw material prices become increasingly volatile. We are working with multiple suppliers for the same ingredient and also locking in prices with suppliers for extended periods to secure a more stable cost structure,” he said.
The sweet spot
The silver lining, however, is that it might shift the focus toward domestic sourcing. Rao of Parle Products said that companies now will be forced to think about sourcing cocoa within India. At present, the country imports around 70% of its cocoa needs from West Africa and other regions.
For some, it’s an opportunity. Manam Chocolate, a Hyderabad-based craft chocolate brand, processes its cocoa from West Godavari and pays a significant premium over the commodity price listed on the exchange. CEO Chaitanya Muppala said people now know that there is something really valuable that goes into making this and they’d rather pay a premium for good quality and world-class chocolate
That apart, this also allows the Indian farmers to demand a rightful price, who, he said, have remained underpaid. “Indian cocoa is unique, it is deforestation-free and child-labour-free. At the same time, it is equitable since in India the government doesn’t regulate the pricing of what the farmer can demand. At present, in the domestic market, there’s a purchasing spree and large industrial players are afraid of not being able to have enough to meet their chocolate demands”, he noted.
Another artisanal Kerala-based chocolate brand, Paul & Mike, has not been affected by the rising cocoa prices and plans to keep the prices constant for the next three months. Currently priced at Rs 250 for 70g, it has its own cocoa farms and is even open to help other domestic brands tide over this tough situation at the old rates, said its founder, Vikas Temani.