Dr. Kristy Leissle writes a two part post on Chocolopolis discussing the losers and winners when cocoa prices rise.
A few weeks ago, as I was preparing to talk to Joe Weisenthal on Bloomberg’s “What’d You Miss?” about cocoa’s price rise earlier this year, my partner, as he often does, asked questions to help me gather my speaking thoughts. My partner said, “You always talk about who loses when the price of cocoa goes down. Who wins when it goes up?”
From years of studying this industry, I can usually start talking right away when someone asks me a question. But this one brought me up short. I had never thought about who wins.
After the Bloomberg segment, I talked to Lauren about this question. She was interested, too, and invited me to write a post to think it through. I have not met too many people working in cocoa who describe themselves as “winning.” Given that, it felt important to devote a post to who does lose out when cocoa’s price rises. In next week’s post, I’ll tackle the winners.
First, large chocolate manufacturers and cocoa processors lose out when cocoa’s price rises. No company wants the price of their primary input to go up. As I read recently in The Cocoa Coast by Shashidhara Kolavalli and Marcella Vigneri, on average across all types of products, cocoa accounts for about half the raw material costs of making chocolate. When cocoa’s price surges, as it did recently, these companies face having to pay more for the ingredient they need the most.