BANKING ON THE EASTER BUNNY
AS COCOA COSTS SOAR, SWISS CHOCOLATIERS ARE RELYING ON HIGH MARGIN PRODUCTS TO ABSORB THE SHOCK
Swiss chocolatiers have a battle on their hands as Easter rolls around, with surging cocoa prices sending their costs soaring and consumers cutting back as inflation hits their pockets.
Cocoa briefly topped US$10,000 (364,000 baht) per tonne in New York on Tuesday — a record high which is more than triple the price a year ago and more than double the price since the start of February.
The surge will force chocolate makers to hike their prices even though they have little room for manoeuvre.
Earlier this month Lindt & Sprungli warned that its prices would be going up again in 2024 and 2025, having already been raised by 10.1% on average last year.
They are banking on their higher margin products like pralines — not to mention their chocolate Easter bunnies — to absorb the shock.
The surge in cocoa costs, which comes on top of high sugar prices, “increases the challenges for Swiss chocolate”, Thomas Juch, spokesman for Chocosuisse, the sector’s employers’ federation, said.
The cocoa price hike is happening in a “context of increased price sensitivity” on the part of consumers and is currently partly being borne by the manufacturers who “cannot fully pass on this increase in retail prices”, he said.
This is because prices are adjusted at intervals during negotiations with the supermarket chains and are not changing continuously, said Juch.
Food price inflation in 2023 dampened consumer appetite, with Swiss chocolate export volumes slipping 0.2% to 150,516 tonnes, according to Chocosuisse.
And per capita annual consumption in Switzerland — the world’s largest consumer of chocolate — fell by 1%, to 10.9kg.
Cocoa prices increased almost 70% in New York and almost 90% in London in 2023 following poor harvests in the leading producers Ivory Coast and Ghana, due to heavy rains, a cocoa pod disease outbreak and then drought. Cocoa prices have doubled again since the end of January.
One solution the food industry regularly turns to when raw material costs explode is to alter the recipe.
But Nestle chief executive Mark Schneider said that was not on the cards, with consumers having clear expectations for their favourite products.
“Tinkering now with the recipes and flavour profiles, simply because the input costs for cocoa has gone up, in my opinion would be a mistake,” he said during the group’s annual results announcement.
Jessica Herschkowitz, spokeswoman for Camille Bloch, which makes Ragusa chocolate, put it succinctly. “Recipes are sacred,” she said. The other industry solution is to come up with new products — Ragusa itself being a well-known historical example.
In 1942, Bloch, who was struggling to import cocoa beans into Switzerland due to the disruption in international trade during World War II, created a new bar using the hazelnuts which he could source in abundance.
But for now, “we will have to go through with price increases like all the other chocolatiers” said Herschkowitz.
The family business has “done everything to avoid price increases”, she said, notably by waiting as long as possible “before placing our new orders”.
But the rise in cocoa prices is such that “we have no other options”, she said.
According to Jean-Philippe Bertschy, an analyst with Swiss investment managers Vontobel, Swiss chocolatiers cannot compromise on quality, “even if certain foreign groups are less careful”.
Lindt, for example, makes no compromises because “quality is the basis of its success”, he said.
While presenting his group’s annual results, Lindt and Sprungli chief executive Adalbert Lechner said the company’s answer was to ensure there is “a product for every budget”, like its classic Easter bunny, which comes in six sizes ranging from 10g to 1kg.