Central bankers may assert that inflation is under control, but for chocolate lovers, the outlook is less sweet. Prices of popular treats like Freddo frogs continue to climb as confectionery companies pass on the surge in cocoa prices to consumers.
Cadbury Australia, owned by Mondelez, has doubled the price of two of its most beloved chocolate items after cocoa futures soared to record highs this year, driven by volatile weather and disease. The price of a Freddo frog — a classic treat since its creation in 1930 — is set to double to A$2 "peter milios" <peter.milios@corporateconnect.com.au>, with the rising cost of cocoa cited as the primary reason for the price hike. This increase will also affect Caramello Koalas.
"Due to the record global price of cocoa and increased input costs, we have adjusted the recommended retail price from $1 to $2, marking the first price change in over a decade," Cadbury Australia stated in a social media post on Friday.
Annually, Australians consume around 90 million Freddo frogs, available in a variety of flavors.
In the UK, the Freddo frog has become an unofficial gauge of the rising cost of living, with each new price increase compared to its 1994 relaunch price of 10p. Though the price reached as high as 50p, aggressive discounting by supermarkets like Sainsbury's has brought it down to 30p in a bid to retain budget-conscious consumers.
Belgian Biscoff maker Lotus Bakeries noted on Friday that while commodity prices have stabilized, cocoa remains an exception.
The price of commodities such as cereal, sugar, and meat surged following Russia's 2022 invasion of Ukraine, driven by soaring energy costs and supply chain disruptions. While these prices have since returned to pre-conflict levels, central banks have indicated that global inflation is now under control. The Bank of England and the European Central Bank have cut interest rates, and the Federal Reserve is expected to follow suit in September.
However, certain commodity prices, like cocoa, continue to rise due to volatile weather and, in some cases, trade tariffs, even as overall food inflation declines.
Cocoa futures in New York and London hit record highs this year, with prices in New York exceeding $12,000 per ton in April after poor weather and disease ravaged crops in Ghana and Ivory Coast, which produce two-thirds of the world's cocoa beans.
Chocolate manufacturers like Mondelez, Nestlé, Lindt, and Hershey are feeling the pressure from these higher prices. Hershey recently cut its annual profit forecast after reporting a 17% drop in second-quarter sales. Despite raising prices due to the cocoa surge, inflation-weary consumers have scaled back on chocolate purchases.
In July, Cadbury's parent company, Mondelez, missed its second-quarter revenue targets as consumers opted for cheaper snacks. However, CEO Dirk Van de Put noted that chocolate sales remain strong. "Chocolate is still a great category. It continues to grow with resilient volume despite rising prices," he said.
Swiss chocolatier Lindt has also managed to raise prices with minimal impact on demand. Although the volume of chocolate sold in the first half of the year was flat, revenues increased by 7%, and profit margins reached a record 13.5%.
Recent improvements in weather conditions in West Africa have sparked hopes of a supply rebound, leading to a drop in cocoa prices. Cocoa traded in New York fell below $7,000 per ton this week, though this is still roughly double the price from the same time last year.
However, with disease continuing to spread in Ghana's cocoa-growing regions, some industry experts fear that hopes for a recovery in global supplies may be premature. Another year of shortages would exacerbate the challenges faced by chocolate manufacturers.
Commodity price fluctuations are passed on to consumers with a delay because companies like Mondelez purchase cocoa up to a year in advance rather than on the spot market. As a result, price drops are not reflected in supermarket prices until the following year.
