Will the soaring price of cocoa turn chocolate into a luxury item?

Chocoholics beware: Getting your fix, which is already pricey, is likely to get pricier.

The Hershey Co. expects record-high cocoa prices as well as higher sugar costs to crimp its earnings growth, and it expects to offset the pain in part by raising prices, the candy giant said in February in reporting its latest financial results. 

"Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business," CEO Michele Buck, president told analysts.

Where are chocolate prices headed? 

Hershey raised candy prices for Valentine's Day and Easter in 2022, then increased the cost of chocolate more broadly in mid-2023 before in February rolling out small hikes on some grocery and food service items, Chief Financial Officer Steve Voskuil said in the earnings call.

Price hikes are also in the works at Mondelez International, owner of Chips Ahoy! cookies and Côte d'Or, the Belgium chocolate brand. Mondelez also owns the nearly 200-year-old Cadbury brand, but outside the U.S., as Hershey acquired the U.S. license in 1988.

"As we price away cocoa, chocolate will contribute to most of the pricing in '24," CFO Luca Zaramella told analysts in the food producer's latest earnings call. He suggested the coming price increases would be larger than average, but less than the up to 15% hikes in 2023. 

"Prices keep on going up for a third year in a row, particularly in chocolate," said Mondelez International CEO Dirk Van de Put. 

Sugar is rising as well, but the ingredient ate up less than 3.4 cents, or 2%, of the $1.79 that an average Hershey bar cost in 2023, according to the American Sugar Alliance, a national coalition of sugarbeet and sugarcane producers.

Expect to pay more for less

In the U.S., Mondelez brand customers are responding to higher chocolate prices by waiting for deals and making less frequent purchases. 

"We see them downsizing, going to smaller formats and buying more of those," said the CEO, who also cited cuts to pandemic-era food benefits for low-income families as cutting into chocolate purchases.

The executive's observations were amplified in recent findings by the National Confectioners Association (NCA). Americans spent $19.3 billion on chocolate at grocery and convenience stores last year, spending 5.8% more than the prior year for the treat, but buying 5.4% less in 2023 than they did the prior year, the trade group found.

Sales promotions are a bigger driver as "fewer consumers perceive chocolate and candy to be as affordable as it has been traditionally," according to an NCA report.

The industry's hurdles are playing out among major cocoa processors including Switzerland's Barry Callebaut and Blommer Chocolate Company — a subsidiary of Japanese cocoa processor Fuji Oil Holdings. Both are shutting down manufacturing plants and laying off workers.

Barry Callebaut CEO told the German newspaper Handelsblatt in late February that the chocolate maker would cut about 2,500 jobs, or 19% of its workforce, within the coming 18 months. 

What's driving up chocolate prices? 

The price of cocoa, which is used to make chocolate, is at or near all-time highs on global markets, with costs having soared 150% from a year ago. The main reason for the spike — extreme weather. Torrential rains in the West African countries where most of the world's cocoa is grown have resulted in a production shortfall going on its third straight year. 

About three-quarters of the world's cocoa — the main ingredient in chocolate — comes from cacao trees in Ghana, Ivory Coast, Nigeria and Cameroon. Severe winds brought dust that blocked the light needed for bean pods to grow in recent months, a season after heavy rainfall spread a rotting disease.

High cocoa prices remain a significant concern due to supply shortages from key producers Ivory Coast and Ghana, according to the International Cocoa Organization's market report for February. The group also expects significant declines in production due to unfavorable weather conditions and diseases in top-producing countries, noting that older trees are producing lower cacao yields.

The impact of the record-high cocoa prices has not yet fully been felt by consumers, as companies hedge prices and contract for supplies up to a year ahead. 

Still, the rising cost of chocolate did catch the attention of one Minnesota shopper at Mackenthun's in Waconia. "Normally I would get M&M's for like $2.50 and now they're $4," Christy Schuth Ittel told CBS Minnesota before Easter.

The increase didn't dissuade Ittel from her holiday candy purchases. "I will still buy it, for sure," she said.

—The Associated Press contributed to this report.

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York.