Near-record-high cocoa prices are destroying chocolate demand

Rising chocolate prices will hurt demand this year, resulting in a smaller than anticipated supply shortfall, according to JPMorgan Chase & Co.

The bank’s analysts trimmed their deficit estimates for the current 2024-25 season to 40,000 tons, from their autumn forecast of 108,000 tons. That’s mainly because they expect demand to fall by at least 1.8% as historically high cocoa prices dent consumption.

However, chocolate prices for consumers are likely to keep on rising, as companies try to offset higher costs. Cocoa futures nearly tripled last year on concerns about supply from West Africa and are currently trading near $10,000 a ton in New York. Recent earnings by chocolate makers suggest that previously resilient demand is weakening.

“Historically high prices are destroying demand and we look for world grindings to contract by at least -1.8% year-on-year,” the JPMorgan analysts said in a research note.

Lower sales volumes are signaling that consumers are cutting back. To ease the cost pressures, the industry is increasingly looking to reformulate recipes by replacing cocoa with other ingredients, Hershey Chief Executive Officer Michele Buck told investors on Thursday.