High cocoa prices set to curb demand from chocolate makers. After worse than expected cocoa demand data in Europe, North America and Asia in the fourth quarter, the outlook is expected to remain disappointing.
“I expect first-quarter global grindings to be lower than the equivalent quarter last year,” said Jonathan Parkman, joint head of agriculture at broker Marex Spectron. “If cocoa prices continue to appreciate from here, there is very little chance demand will recover.”
London cocoa futures rose by more than 13 percent in 2014 boosted partly by forecasts that production may fall this season in Ivory Coast and Ghana, the world’s top two growers. Now the higher cocoa prices are leading chocolate makers to consider re-formulating products.
Mondelez International, which owns brands such as Milka and Cadbury Dairy Milk, said higher cocoa prices can lead to smaller chocolate bars. “Price increases come either through a straight price increase or through product downsizing, when keeping a certain price point is important for the consumer,” spokesperson Thomas Armitage said, referring to information shared in an analysts’ call last week after full-year results.
One of the reasons for weak cocoa demand is the sluggish economy in Europe, a major consumption centre.