The escalating troubles of the $100 billion industry show how climate change can disrupt and transform the market.
Climate change is causing chaos for the world’s chocolate lovers. Climate change-induced drought has ravaged crops in West Africa, where about 80% of the world’s cocoa is grown. Global cocoa supply is down more than 10% over the 2023–2024 season. As a result, cocoa prices have soared to an all-time high due to a global supply shortage.
With all this confectionary madness, we decided to check in with our old friend Spencer Hyman, one of the world’s most knowledgeable craft chocolate experts. His London-based chocolate tastings and website, Cocoarunnners, are must-go destinations for experiencing the world’s finest craft chocolate — and the latest chocolate industry gossip.
Spencer Hyman, founder, Cocoarunners
Here is what the “oracle” of chocolate told us. The story of the escalating troubles of the industry show how the effects of climate change can disrupt and transform an industry.
- Brace yourselves for sticker shock on the candy aisle.
Cocoa prices will rise due to a global supply shortage, chronic underinvestment in cocoa farms, and investor speculation. Chocolate brands are grappling with the impact of higher cocoa costs, driving price hikes and shrinkflation.
- Bye-bye, white chocolate.
High-quality craft white chocolate bars could soon become scarce. The price of cocoa butter has rocketed from $10/kgkilo to over $35k — rising even more dramatically than commodity cocoa. So unless you are like Chocolarder, Pump Street, Askinosie —makers who press their own butter — white chocolate bars could become hard to find.
- Watch for a boom in startups promising “lab-grown” chocolate.
Some of these startups may create new “food-like substances” that may have some value for cocoa butter replacements and may be useful for low-quality toppings (biscuits, cakes, etc.). However, this sort of promise and venture isn’t new — and it’s not clear that anyone out there really has a “breakthrough” for understanding either texture or flavor. We’ve tried a bunch, and the result, to date, has been, at best, “hmm” and far more “NO!!!!”
- Chocolate entrepreneurs will start auctioning off “fine chocolate” like exotic wine
Learning from the wine and whisky worlds, you’ll soon be able to invest in the cocoa equivalent of wine/whisky delivered, investors hope. Even better, gains are tax–free, and capital gains are tax–free. Sticking my neck out on sourcing and operations.
- Cocoa crop security is becoming a real concern.
As cocoa becomes more valuable, theft is becoming a growing problem. Farmers are using record amounts of barbed wire fencing to protect their crops. This is already happening in Madagascar.
- Marketing that moves “beyond the bar”
Chocolate makers are experimenting with new “formats” and trying to “move beyond the bar.” Merchants know consumers will only pay so much for a chocolate bar. The solution? Chocolatiers are marketing craft chocolate in fine boxes as a hostess gift for dinner parties, hoping to displace wine as the first choice.
- More rubbish chocolates!
“Big Chocolate” uses less chocolate and more palm oils, vegetable fats, sugar, and other bulking agents to buffer the price shocks. So, despite the floods and droughts, confectionery capitalists can still make money.
Chocolate makers are struggling with how to keep the prices reasonable and the chocolate content at 70%. Expect creative new ways to define “quality.
- Supermarket’s’ will grapple with a 70% dark chocolate crisis
A chocolate-eater favorite, chocolate makers are struggling with how to keep the prices reasonable and the chocolate content at 70%. Expect creative new ways to define “quality.”
- What? There is a stone in my chocolate!
As cocoa becomes more valuable, expect more and more “stuff” to be in cocoa bags — stuff like stones, bugs, water, and “problematic beans” — as traders, desperate for volume, will look to new ways to “hand sort” all of this.
- Bye-bye Ghana. Hello Brazil.
A bunch of new producers will jump into cocoa. Ecuador and Brazil are expected to overtake Ghana in three to five years as the number two and three largest cocao exporters.. Thailand, India, China, and Papua New Gunea are rushing to cash in on West Africa’s chocolate woes. However, making a material difference will take up to a decade. Well, maybe China can do it faster.
- Innovation will follow profits
Watch for Brazil to try replicating the water management used in California in the early 20th century and “make the desert bloom” for new cocoa plantations in what used to be Amazon rain forests. At the same time, expect innovative new uses of natural “CBRs.”— Cocoa butter replacements such as fruit waste is used in brownie and cake mixes to produce interesting alternatives to cocoa powder.
- Cash flow is increasingly a problem
Makers will raise chocolate bar prices once they start receiving new bean shipments, but it will take some time for them to see the benefits of this. In the meantime, they have to pay on delivery (and upfront) for their beans, a major element of their annual capital outlays, which are doubling or tripling by the day.
- And, of course, AI
Artificial Intelligence can’t grow cocoa, but it will make an increasingly meaningful impact in predicting the weather, managing irrigation, pre-empting disease, and more.
Who said humans are not resilient — particularly when it comes to their survival — and their favorite treat?
