Cocoa prices decreased from $10,211 per ton in early June to roughly $8,700 per ton as of July 1, according to Trading Economics. Traders are optimistic that prices will level out with improvements in weather conditions in the Ivory Coast, which experienced below-average rainfall but enough moisture in the soil to produce a “promising” crop for October through March.
Nonetheless, companies are scrambling to find cost-effective solutions that deliver consistent quality, including cocoa alternatives, flavor innovations and strong farmer relationships.
Moka Origins: Cocoa price hikes are great for farmers but increased competition between manufacturers
Moka Origins, which produces both cocoa and coffee, began as a farming project in Cameroon to “help farmers grow better quality cacao,” explained Prashant Dault, marketing manager, Moka Origins, during the Summer Fancy Food Show in New York City earlier this week.
Since the beginning, the company has focused on cocoa distribution and aiding its farmers in starting their own farms in Cameroon, while sourcing in other areas such as West Africa.
“The recent cocoa price increase has been fantastic for farmers, because now they are actually getting paid what they should have been getting paid the whole time,” Dault said.
As prices skyrocketed and supply dwindled, organic and conventional cocoa costs “started looking very similar,” explained Mark Lawson, Moka’s director of operations.
Yet for independent brands, like Moka, that source USDA organic cocoa for most of its chocolate bars, the price increase created heightened competition with multinationals that are buying “everything that they can,” including organic cocoa for conventional chocolate products, Dault noted.
“Now they bought everything purely from a supply standpoint, which left small makers like us at a challenge to even find cocoa,” he added.
Despite the uphill competition with multinationals, Moka relies on its direct trade relationships with farmers and paying at or above Fair Trade prices to maintain its business, Lawson said.
According to the Cocoa Future Collaborative, direct trade relationships offer higher wages for cocoa farmers through price guarantees that protect against market volatility. These premiums can range from 10% to more than 300%, compared to Fair Trade premiums, which typically hover around 10%.
“We are not just buying cocoa from an importer based off what they have at that moment. We have relationships at the farm level. We can be talking with them months in advance around preparing cocoa specifically for us,” he added.
Red Velvet NYC: ‘Stuck dealing with it’
For cookie brand Red Velvet NYC, which offers frozen cookies in disposable aluminum skillets for customizable “gooiness,” rising cocoa prices has been “challenging,” says founder Agathe Assouline-Lichten during Fancy Food Show.
She explained that her cocoa costs up close to 300%, which negatively impacting her margins as she only slightly increased prices a year ago. To mitigate cost increases, Assouline-Lichten investigated different chocolate chip brands and sizes apart from its standard 1M chip, such as 2M or 4M chips (mini).
For example, 1M chips equates to 1,000 chips per pound, whereas 4M baking chips are slightly smaller and yield four times the amount to 4,000 chips per pound.
The smaller chip sizes were a temporary solve to the price hikes and currently Red Velvet is “kind of just stuck dealing with it,” as the brand is unable to change its recipes to avoid impacting quality, Assouline-Lichten said.
Other baking commodities, like vanilla and eggs, also are impacting the brand’s margins. While vanilla prices “are going better” thanks to a reliable supplier, egg prices are still double what they used to be, which is a relative win from the quadrupled cost it once was, she added.
