The Cocoa Crisis: How Chocolate Brands Are Managing Record Price Spikes

If you have noticed higher prices in the candy aisle recently, you are not alone. A historic global cocoa shortage is driving up costs, forcing major chocolate makers to rethink their business models. From raising prices to altering recipes, brands like Hershey and Lindt are actively adapting to severe supply chain disruptions and record commodity spikes.

The Root Causes of the 2024 Cocoa Shortage

To understand how candy companies are pivoting, you have to look at the source of the problem. West Africa produces roughly 60 percent of the world’s cocoa supply. The majority of these crops grow in just two countries: Ivory Coast and Ghana. Over the last two years, this region has faced a perfect storm of agricultural disasters.

Heavy rains from the El Niño weather pattern in late 2023 caused widespread flooding. These damp conditions led to a severe outbreak of Black Pod disease, a fungal infection that rots cocoa pods before they can be harvested. Shortly after the floods, intense heat waves scorched the surviving crops. To make matters worse, the Swollen Shoot virus has infected millions of cocoa trees across Ghana, forcing farmers to cut down entire orchards to stop the spread.

These supply shocks caused panic in the commodities market. In April 2024, cocoa futures on the New York mercantile exchange broke past $11,000 per metric ton. To put that into perspective, cocoa traded for about $2,500 per metric ton just one year prior. This massive price jump erased profit margins for chocolate makers overnight.

How Hershey is Changing Its Strategy

The Hershey Company is highly exposed to these volatile cocoa prices, and leadership is taking aggressive steps to protect the bottom line. Hershey CEO Michele Buck addressed the financial pressure during recent earnings calls, noting that the company must adapt its product lineup to survive the shortage.

Hershey is currently implementing several specific strategies:

• Pushing Non-Chocolate Treats: Hershey is leaning heavily into its non-chocolate portfolio. The company is actively expanding and promoting gummy candy lines under the Jolly Rancher brand. Gummies rely on sugar and gelatin, which are significantly cheaper and more stable in price than cocoa butter.
• Altering Ratios in New Products: Hershey is launching items that naturally require less cocoa mass. The Reese’s Caramel Big Cup is a prime example. By filling a large portion of the peanut butter cup with caramel, Hershey reduces the overall volume of chocolate required per package while still offering a new experience to buyers.
• Implementing Shrinkflation: Like many consumer goods companies, Hershey is reducing the physical size of certain products while keeping the retail price the same. A standard chocolate bar might weigh slightly less than it did in 2022, helping the company absorb the raw material costs without scaring away shoppers with massive price tags.

Lindt Relies on Premium Pricing and Forward Contracts

Lindt & Sprüngli takes a very different approach to the cocoa crisis. As a Swiss manufacturer of premium chocolate like Lindor truffles and Excellence bars, Lindt relies heavily on the high quality of its ingredients. They cannot easily swap out cocoa butter for cheaper vegetable oils without damaging their brand reputation.

Instead, Lindt is leveraging its wealthy customer base. Consumers who buy premium chocolate are generally less sensitive to price hikes than those buying standard checkout-aisle candy. Lindt successfully raised its product prices by 10.1 percent globally in 2023. The company announced plans for further mid-single-digit price increases throughout 2024 and 2025 to offset the $11,000-per-ton cocoa costs.

Lindt also relies on advanced financial hedging. Large corporations use forward contracts to buy raw materials at locked-in prices months or even years in advance. Because Lindt secured a large portion of its 2024 cocoa supply before prices peaked in April, they delayed the worst financial impacts of the shortage. However, as those older, cheaper contracts expire, Lindt will have to buy new cocoa at the current inflated market rates.

Industry-Wide Tactics to Protect Profit Margins

Beyond Hershey and Lindt, the broader snack industry is changing how it manufactures sweet treats. Competitors like Mars and Nestlé are heavily promoting products filled with wafers, nuts, and nougat. Ingredients like peanuts and baked wafers are vastly cheaper than raw cocoa. When a consumer buys a KitKat or a Snickers, they are actually purchasing mostly wafer and nougat covered in a very thin layer of chocolate.

Companies are also facing new regulatory costs that drive up prices. The European Union Deforestation Regulation (EUDR) goes into effect for large companies in 2025. This law requires chocolate makers to prove their cocoa does not come from recently deforested land. To comply, brands must use expensive geolocation tracking for every single bag of beans they import into Europe. This added compliance cost is ultimately passed down to the consumer at the grocery store.

What This Means for Consumers in 2025

The cocoa harvest season of 2024 and 2025 will dictate the future of chocolate prices. Early reports from Ivory Coast suggest that crop yields might improve slightly compared to the disastrous 2023 season. However, agricultural experts warn that the underlying issues of aging cocoa trees and systemic underinvestment in West African farms remain unsolved.

Consumers should expect candy prices to stay elevated through at least the end of 2025. You will also likely see more innovation in the candy aisle involving fruit flavors, peanut butter, and caramel as brands attempt to stretch their limited cocoa supplies as far as possible.

Frequently Asked Questions

Why is cocoa so expensive right now? Cocoa prices hit record highs in 2024 due to severe weather and crop diseases in West Africa. Heavy flooding followed by extreme heat damaged crops in Ivory Coast and Ghana, which produce about 60 percent of the world’s cocoa.

Will chocolate prices go back down? It is unlikely that chocolate prices will drop significantly in the near future. While cocoa futures have dipped slightly from their peak of $11,000 per ton in April 2024, they remain historically high. Companies also rarely lower retail prices once consumers prove they are willing to pay them.

Are companies putting less chocolate in their products? Yes. Many brands are launching new products that feature higher ratios of caramel, nuts, or wafers compared to solid chocolate. Additionally, companies are shrinking the overall package sizes of solid chocolate bars to save on raw material costs.