Volatility in global cocoa markets has been pushing candymakers to revisit their chocolate supplies.
Over the past couple of years, international confectioners have been spooked by the wild swings in cocoa prices, fueled by supply challenges in West Africa and growing worldwide demand.
The cocoa market stabilized after peaking in December 2024 at almost $12,000 per metric ton. As of April 17, cocoa futures are slightly above $3,000 on the U.S. ICE Futures exchange.
Cocoa grindings—a proxy for industrial demand—plummeted across the globe last year as manufacturers faced higher input costs and squeezed margins. It was also difficult for the industry to pass them on to consumers because of fears of losing market share.
Despite the sharp drop in prices, leaders in the confectionery sector remain jittery.
Swiss chocolate maker Barry Callebaut lowered its operating profit forecast, a downgrade driven by industry overcapacity, possible war-driven supply chain disruptions, and declining cocoa prices.
“In the first half of our fiscal year, cocoa bean prices decreased, which is encouraging for future chocolate market momentum and supported strong free cash flow generation,” CEO Hein Schumacher said in a statement.
Labs to Oil
Other companies are snacking on chocolate alternatives, from using other ingredients to pursuing laboratory technology.Mondelez International—the maker of Cadbury, Oreo, and Toblerone—produced a batch of milk chocolate bars using cocoa butter made with Israeli startup Celleste Bio’s cell suspension culture technology.
After launching in 2022, Celleste Bio said it believes that achieving this key milestone will bring it on the path to scale and have its cell-cultured cocoa butter market-ready by next year.
The firm aims to manufacture 50,000 tons of cocoa butter per year by 2035, representing about 5 percent of the 2 million tons necessary to support the chocolate industry annually.
“We are on track to produce 1 ton of cocoa butter annually in a 1,000-liter bioreactor from a single bean, which would otherwise require about a hectare of cocoa trees,” Hanne Volpin, chief technical and scientific officer, said in an April 15 news release.
“To that end, we’ve curated a very robust bank of multiple cocoa bean varietals we can use to grow, test, and scale material without ever having to cut down a single tree in the rainforest.”
Some firms have employed more conventional methods, mainly through reformulations.
Most notably, The Hershey Company reduced the chocolate content in some of its products—the famous Reese’s Peanut Butter Cups, for example—and incorporated milk chocolate with compound coatings, such as vegetable-oil-based substitutes.
Brad Reese, grandson of the inventor of the Reese’s Peanut Butter Cups, called out the company earlier this year in a social media post.
“How does The Hershey Company continue to position REESE‘S as its flagship brand, a symbol of trust, quality and leadership, while quietly replacing the very ingredients (Milk chocolate + Peanut Butter) that built REESE’S trust in the first place?” he wrote in a LinkedIn post.
“This isn’t a supply chain question. It’s a brand governance question.”
Hershey later said that it will return to real milk chocolate.
“We’re going to make some small investments to really align the portfolio to what the brand stands for,” Hershey CEO Kirk Tanner told Bloomberg Television in a March 31 interview. “That consistency is important across the brand.”
To absorb potential price shocks, Jason Reiman, chief supply chain officer at Hershey, said the company plans to diversify its sourcing and bolster stronger supplier relationships.
A couple of these strategies consist of expanding partnerships with Brazil and Ecuador and exploring cocoa alternatives.
“Once we have a resilient supply network, we can turn it to how we think about an agile network,” Reiman said during Hershey’s Investor Day in March. “And when I think about agility, I think about making sure that we have the right capacity for growth.”
Ecuador and Brazil are the world’s fourth- and fifth-largest producers.
Cocoa futures settled the April 17 trading session up by 0.6 percent to $3,300 per metric ton, recording a weekly loss of 0.8 percent. The agricultural commodity is down by 45 percent this year.
