When Mars Inc. made a slight change to its popular Galaxy chocolate bar last year, reducing the standard weight of the product by 10g, UK shoppers were surprised, but cocoa traders were not.
The 113-year-old company, known for its sweets such as Twix and M&M's, seems to be following the golden rule from the confectioners' textbook: when the cost of cocoa rises, they find ways to sell smaller doses of chocolate – or new chocolate-free flavours.
Cocoa prices have risen to record highs, Bloomberg writes, and market participants don't expect them to decline anytime soon.
Prices have risen sharply as the world's largest producers in West Africa struggle with drought and disease, as well as logistical problems that could last for years.
From the 1980s to 2023, cocoa futures were below $3500 per tonne every year. On 22 February, cocoa futures exceeded $6000 per tonne for the first time, and the market fears that prices will rise further.
"We have been actively trying to find ways to offset the rising costs of raw materials. Reducing the size of our products is a decision we did not take lightly," commented a spokesperson for Mars Wrigley UK.
Until now, companies have been passing on higher costs to consumers. But no one needs chocolate to live, and every price increase threatens sales. Consumers are likely to cut back on spending on chocolate and sweets if prices rise, according to a September survey by consumer insight company NIQ.
As a result, companies are cutting back on packaging, using automation to reduce production costs, and promoting products with less or no cocoa.
Nestlé SA recently launched a hazelnut flavour in the UK in its Aero chocolate bar range, which is two-thirds lighter than its competitors thanks to air bubbles.
In the United States, Hershey Co. announced its intention to increase its chocolate-free chewing candy production capacity by 50%.
Thus, the rise in cocoa prices is encouraging companies to continue diversifying, pushing them to develop new and innovative products to keep consumers' attention in a changing market landscape.
Background. As reported, cocoa is showing the largest monthly price increase in more than 20 years.