When you think of Valentine’s Day you probably think about love and maybe also chocolate. What you might not love right now though, is the high price of chocolate. Like other chocolate makers, Hershey says it was forced to raise retail prices substantially thanks to higher costs. What’s going on? Well, poor weather impacted the cocoa crop in West Africa where much of the world’s supply of cocoa is produced. In addition, tariffs implemented by the Trump administration further raised the price of cocoa. While the tariffs were recently lifted, it will take time before the policy change is reflected in consumer prices. For now, companies claim they have no choice but to raise prices, but consumers aren’t buying it. One of the world’s largest bulk chocolate makers, Barry Callebaut AG, recently reported a 22 percent decline in sales volume.  

Recently, there are signs that the situation for chocolate lovers may be improving. The pushback from consumers unwilling to pay high prices has put downward pressure on prices. In addition, more favorable growing conditions are expected to boost upcoming harvests. Plunging prices for cocoa are a strong indication that markets are already anticipating that future supplies could be well above forecasted demand. What does this all mean for chocolate lovers? Well, like chocolate, it’s bittersweet. Chocolate might be relatively expensive now, but that sweet spot is likely to come in the near future as today’s higher prices are replaced with much lower prices.

Discussion Questions:

  1. What are the implications of volatility in the cocoa market for producers? How have recent poor growing conditions affected the global supply of cocoa?  What does your response tell you about the price of chocolate going forward?  
  2. Discuss price elasticity as it relates to the price of chocolate. What does your response mean for chocolate producers?