Climate-related cocoa shortages put strain on the global chocolate industry

Cocoa shortages pushed the commodity price of cocoa to a whopping  $12,500 per ton on the London market last spring, up 400% from the typical price over the past decade.

Climate change is transforming agriculture worldwide, with shifting weather patterns wreaking havoc on production systems. Unpredictable temperature extremes and variable rainfall caused billions of dollars in crop losses last year in the U.S. alone, according to the American Farm Bureau Federation. 

These trends are being observed around the globe, affecting everything from corn to coffee to cattle, and cocoa is no exception. Cocoa only grows within a narrow region around the equator, making it especially vulnerable to changes in climate conditions.

Heavy flooding and crop disease in West Africa last year intensified a growing bean deficit in the region, which produces over 60% of the world’s cocoa. Increasingly unfavorable growing conditions place additional stress on production systems struggling from underinvestment. Low profit margins for farmers often prevent them from implementing management practices that can advance crop resilience and productivity. 

The International Cocoa Organization projects that global cocoa supply will drop by 13% to 4.38 billion tons in 2024, with cocoa stocks potentially hitting their lowest levels in 45 years. This has serious implications for the almost $120 billion chocolate industry, which is expected to grow at a compound annual growth rate of 4% per year through 2030, according to Grand View Research.

Surging commodity cocoa prices have already trickled down to consumers in the form of product price increases, reductions in product size known as “shrinkflation,” and ingredient substitutions. Some companies are expanding their non-chocolate offerings, while others are making chocolate without any cocoa at all. These strategies might work for mass chocolate manufacturers like Hershey’s and Mondelez, but they only go so far for craft chocolate makers whose businesses depend on high-quality cocoa beans. 

Two such chocolate makers, Dandelion Chocolate and Fruition Chocolate Works, said they increased their prices by 10%-20% in the last six months. While Dandelion upped their price by 10% to $11 for a 56-gram bar, Fruition’s price jumped by 20% to $12 per 60-gram plain dark bar. 

The two craft chocolate makers are part of approximately 400 specialty chocolate companies across the U.S., according to Carla Martin, Harvard lecturer in the Department of African and African American Studies and founder of the independent nonprofit Fine Cacao and Chocolate Institute. This number has doubled since Martin and her team at the FCCI made their first calculations in 2017.

“Every chocolate bar is like a partnership between a cocoa producer and a chocolate maker,” said Greg D’Alesandre, chief sourcing officer at San Francisco-based Dandelion Chocolate. Dandelion and others like it say that they use ethically sourced high-quality cocoa from one origin (one producer or one region) and add only sugar (and sometimes cocoa butter) to make their single-origin chocolate in small batches. This highlights the distinct flavor of the beans in the final product. Much like wine and grapes, the flavor of chocolate is influenced by the cocoa’s genetics and the conditions under which it’s grown and processed.

With so much riding on the flavor of the beans, sourcing becomes more important than ever. It takes significant time to establish and maintain necessary partnerships, infrastructure, and production processes at each origin, according to Dandelion. 

But this attention to detail comes at a premium: The company typically pays at least double the commodity price of cocoa. But at the end of last year, they were paying $13,000 per ton for their most expensive beans, which is not far below the current commodity price. 

This illustrates a challenge that many craft chocolate makers are facing – as the gap between their price ceiling and the commodity price closes, the marginally higher prices they can offer may no longer be as enticing to cocoa sellers. In some instances, current market conditions have resulted in the sale of their cocoa to other buyers. Longer term, high commodity prices may eliminate the primary incentive producers have to invest in maintaining high-quality production processes. 

Dandelion is paying more for its cocoa across the board, but as access to cocoa from their established origins fluctuates due to declines in production, sales to other buyers, and prohibitive prices, they are seeking out new cocoa origins.  

Dahlia and Bryan Graham of Fruition Chocolate Works are doing the same. Fruition opened in 2011 in Shokan, New York, selling their chocolate both wholesale and retail. Their retail cafe space stocks chocolate bars and confections made with their chocolate, as well as drinks and baked goods. Dahlia Graham said they experienced a near tripling in price of their most-used beans earlier this year. Such price increases are pushing them to re-think their origins.

“We still do transparent trade, and we’re evaluating sources that have really unique fine flavor profiles where there are good labor practices on the ground. All the different things that we look for, we still take into consideration. But when we’re looking at price lists and the differences are $2, $3, $4, $5 difference [per kilo], price plays into what we’re able to do,” said Graham. 

In addition to changing origins or buying less from established partners, Graham foresees possible adjustments to their business model, such as reducing their number of origins to narrow their product line or expanding the retail confectionery or wholesale arms of the business. 

Both Dandelion and Fruition produce confections and have retail cafe spaces that contribute significantly to their economic viability. In fact, Greg D’Alesandre reported that Dandelion is now primarily a hot chocolate and confections business, with chocolate bars playing a less prominent role than they once did. 

Both chocolate makers expect strong sales this holiday season, which is by far their busiest time of year. But what exactly comes next for the industry is unclear. Changing weather patterns and shifts in the supply chain based on market conditions will persist, and going forward, Carla Martin worries that new tariffs on foreign products under a Trump administration will mean an exponential cost increase for chocolate makers’ manufacturing equipment, packaging, and raw materials. “I think it is going to be openly hostile to the kinds of businesses that fall into this specialty category,” she said. 

Despite the current challenges, Greg D’Alesandre calls the cocoa price increases a “much needed reset in the industry.” “Because so many of the stories are coming from the perspective of the chocolate side of things, many of the stories feel gloom and doom, but let’s talk about cocoa farmers for a second. The people who get the least amount of money for doing things in the world getting more money is a thing we should all celebrate,” D’Alesandre said. “It’s definitely the right thing to happen.”