I wanted to take the opportunity to share information on the surging price of cacao that the industry is currently experiencing. As an advocate for specialty cacao, the promotion of livable wages for farmers and a fanatic about product quality, I wanted to share my thoughts and resources on what is happening in the world of cacao, and how we plan to manage this shift moving forward at JACEK. The industry is very much in flux, and I cannot overstate the complexity of what is going on however I will do my best to simplify and present an overview. The caveat is that I am by no means an expert on cacao trading but am very aware that the impacts on our business will be significant.
What is happening in the cacao (cocoa) chocolate industry?
Well, a lot!
Firstly, it's important to start off with a brief summary on how cacao is traded globally. There are two distinct trading markets:
Commodity Market (95%): The majority of the world's cacao is traded on the commodity market through futures contracts, with most cacao in the world coming from west Africa.
Specialty Market (5%): This is cacao of the highest quality and standards purchased for artisanal chocolate makers (like JACEK), who have been paying 40-100% over the commoditized price for a long time.
Over the last year, there has been a lot of issues impacting the amount of cacao being grown in the world contributing to the largest deficit of cacao in modern history. The major factors include climate change, plant disease such as 'swollen shoot', aging/migrating farmers and the European Deforestation-Free Regulation (EUDR), as well as many localized factors that differ from region to region.
To put this into context, there was 32% less cacao grown in West Africa (Cote D'Ivoire) alone last year, which is the major global supplier (approx.60% of the world’s cacao). Pair this deficiency in a time when there is a global increase in demand for chocolate, and you have the perfect storm creating the surge in the commodity price of cacao. Simply put, there just isn't enough cocoa in the world for the foreseeable future to serve demand.
How big is the price increase?
There was 'worry' back in November 2023 that the futures price of cacao in the commodity market would hit $4,000/MT from the previous price hovering around the $2,000-$3,000/MT over the previous 25 years+ (see graph below). Fast forward to March 27, 2024, and the futures price for this commodity has hit a record of near $9,500/MT at the time of writing this piece, with continued volatility.
If JACEK doesn't buy from the commodity market, why does the commodity price matter?
When the large players in the chocolate world cannot source their cacao from the commodity market as usual, they will turn to specialty cacao producers to access the beans they need now that the commodity futures price is in the realm of what the specialty market is paying, therefore more players are vying for the same specialized product and putting pressure on already diminished supply.
In addition to this, farmers growing cacao for the specialty market are also facing the same production challenges (environmental and political) as those selling to the commodity market, so they too have less cacao to sell regardless of the price.
This global change is not just about price but also access & availability of cacao globally for the foreseeable future for anyone in the chocolate ecosystem.
Is this all bad?
No, not in the long run.
For too long, farmers have been underpaid for the majority of cacao produced in the world. My hope is that this long overdue correction in price in the commodity market will benefit farmers with a livable wage (ideally much more than livable!) moving forward as they focus on improving their crops and overcoming many of the challenges in growing cacao that they are facing.
I also hope that the surge in pricing will bring light to the historical pricing disparity in the commoditized chocolate industry so that consumers are more intentional on how they buy chocolate, which would benefit everyone.
At the end of the day, we want farmers to choose to grow cacao as there are alternative crops they could choose. Let's not imagine a world without chocolate!
What are the pricing impacts going to be at JACEK?
We work very closely with our suppliers for both the cacao (bean-to-bar products) and chocolate, and we are so grateful for the relationship we have with our main vendors: Uncommon Cacao, Nahua Cacao, Valrhona and Chef's Warehouse.
In 2023, we experienced a 6-8% price increase for chocolate. Our team worked very hard to create efficiencies in the business so that we could absorb the increase without compromising our offering as we understand how tight the economy is already for consumers.
In meetings with suppliers over the last couple of weeks, we have been told that there is still too much speculation and volatility in the market to predict what we can expect in the next 1-2 years. However, we do know that the imminent price increase is 10-12%+, with more significant hikes to come.
My outlook on the future remains very positive and we will use our core value of ‘creativity’ to navigate the shift in the industry. We will continue to work hard on creating efficiencies without ever compromising quality, offering the best value possible. My goal is to be as transparent as possible as we all face these global changes. Price increases will be likely sometime later in 2024 (increases have not yet taken effect yet), but our commitment to you is that we will minimize these as much as possible whilst still producing products that we are incredibly proud of to fulfil our mission of spreading joy.
Want to know more?
Here are the links to some media coverage that I have done so far on the subject:
CTV 1
CTV 2 (minute 18:53)
As mentioned, I am far from an expert on the complex cacao global dynamics, but wanted to share my trusted resources that have been incredibly helpful as we navigate these changes.
Two blog articles by Emily Stone from Uncommon Cacao, one of our cocoa bean suppliers:
Part 1: https://www.uncommoncacao.com/blogs/uncommon-cacao/what-is-going-on-with-cocoa-prices
Part 2: https://www.uncommoncacao.com/blogs/uncommon-cacao/what-is-going-on-with-cocoa-prices-part-2
FCIA (membership required): https://finechocolateindustry.org/
Thank you all for your continued support & trust as we navigate this unprecedented time for our industry.
-Jacqueline Jacek