Devastated because the price of the seed is crazier than Bitcoin

Recently, chocolate expert Karin Steinhoff went to a warehouse in Amsterdam to buy cocoa beans for her German production shop. But when they stepped inside the building with the trader, they were both surprised to see an unusually large amount of empty space.

The meager harvest in West Africa is significantly reducing the availability of this grain.

Ghana and Ivory Coast produce more than half of global cocoa but are affected by extreme weather due to the climate crisis and the El Niño phenomenon. The situation is further aggravated by epidemics and the lack of investment in restoring old cocoa plantations.

According to Guardian, the price of this commodity reached more than 10,000 USD/ton for the first time after the third consecutive poor harvest in West Africa, putting pressure on suppliers and manufacturers. Cocoa beans are now worth more than some precious metals and are growing faster than Bitcoin, NPR said.

Faced with that situation, Steinhoff had to spend at least 40% more per kilogram than her company previously spent in July 2023.

Bad news

According to Bloomberg, harsh weather and plant diseases in cocoa growing centers cause global output to decrease by 11% this season.

This is especially bad news for chocolate centers such as Germany and Switzerland - countries that are leaders in the production of quality chocolate bars and have a higher per capita consumption than anywhere else. .

'This is a wake-up call for many in the industry because it's clear things cannot continue as normal,' said Steinhoff, who works for the Georgia Ramon company. 'In the future, chocolate will become a bit more of a luxury.'

Cocoa prices are constantly increasing, fueling food inflation, but more than that, many people worry that it could push some manufacturers into insolvency, especially after the negative impact caused by the pandemic. .

Earlier this year, German confectionery company Hussel GmbH once again filed for bankruptcy due to rising raw material and labor costs. Austrian candy maker Mozartkugel went bankrupt in 2021 and was later bought.

'Concentration of the confectionery industry will be accelerated by this cocoa price increase, as not everyone can bear the price increase,' said Hermann Bühlbecker, owner of Aachener Printen-und Schokoladenfabrik Henry Lambertz GmbH & Co. KG, comment.

This means large companies will dominate more of the market, while the number of small and medium-sized companies may face the risk of shrinking.

Across the European Union and Switzerland, the chocolate, biscuit and confectionery industry employed more than 250,000 people in 2020. It helped generate an export value of around 14 billion euros ($15 billion). ), according to trade group Caobisco, which represents more than 13,000 companies.

About 99% of those members are small and medium-sized enterprises, lacking the scale and strength of a corporation, so it is difficult to cope with sharp fluctuations in commodity prices.

"Sweating every day"

Even the world's largest producer of chocolate - Barry Callebaut AG - is struggling with rising cocoa prices.

The Swiss company's market value has plummeted by about 30% in the past year. The company has cut about 18% of its workforce, closing factories near Hamburg and Malaysia as part of the transition.

Meanwhile, Steinhoff said the Georgia Ramon company is looking at ways to cut costs and limit the burden on customers.

But for others, managing higher costs can be more challenging. Some candy manufacturers have contracts with retailers to sell their products at certain prices. So when they run low on chocolate, they may have a harder time covering their costs.

'Demand for high-quality products remains strong, both for gifts and entertainment,' said Bloomberg Intelligence senior analyst Diana Gomes. 'But for the more mass-market brands, which make up the majority of the chocolate confectionery industry, the opposite is happening.'

Lambertz produces baked goods such as chocolate-covered gingerbread - a staple of traditional German holidays, alongside mulled wine and Christmas markets. Cocoa and sugar account for about 70% of the product's cost and the company is not yet sure how much it will need to increase prices this winter.

'This is another complication for the confectionery industry, which is already under a lot of pressure after Covid-19 and rising prices due to the impact of the Russia-Ukraine conflict,' Bühlbecker said.

Chocolats Camille Bloch SA - the Swiss maker of Ragusa and Torino bars - recently announced a price increase after trying to cut costs without laying off full-time staff.

In 2022, the company decided to source 400 tons of cocoa annually from Peru - which is less affected by crop failures and pests than West Africa - but prices still increased.

The company does not hold large inventories and usually buys cocoa beans about 4 months in advance. They have an agreement on a certain quantity and quality of beans, then they buy at the spot price (current market price).

'It's really making us sweat these days,' said Jessica Herschkowitz, a company spokeswoman.

Identity is threatened

However, not only are net profits at risk from expensive cocoa beans, but the very identity of companies is also at stake.

Chocolate labeled as made in Switzerland must meet certain government standards in terms of ingredients, such as being locally sourced - including milk and sugar.

It must also be produced to a significant extent domestically - where wages are often higher than abroad.

Against this backdrop, Toblerone - owned by Mondelez International Inc - decided to abandon the Matterhorn brand for cheaper production in Slovakia.

Chocoladefabriken Lindt & Sprungli AG and Nestle SA label only some of their products as Swiss after moving much of their production elsewhere.

Meanwhile, Camille Bloch - one of the leading chocolate brands in Switzerland for more than eight decades - is continuing to evaluate, using government criteria, whether its production can remain profitable. Are not.

'The cost of being labeled Swiss must be within reasonable limits,' says Herschkowitz.