Sun. Apr 14th, 2024

A few weeks before Easter, the world price of cocoa continues to soar and the effects are starting to be felt on the local market.

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Cocoa prices are around US$6,000 per tonne, something not seen since the end of the 1970s.

  • Vincent Rességuier ( View profile)Vincent Rességuier

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When you open the door of the Les chocolats de Chloé boutique in Montreal, you are immediately struck by the intoxicating smell of melted chocolate. The workshop is behind the sales counter. All high-end products are made on site from blocks of imported chocolate.

A raw material which is increasingly expensive, explains Chloé Gervais-Fredette, the owner of the store, who also has to deal with the rising prices of milk and eggs, among others.

The price of cocoa beans is currently around US$5,900 per tonne, unheard of since the late 1970s. In the last year, prices have doubled on the benchmark stock exchanges of New York and London.

At first, the impacts were limited because processors adjusted their prices gradually. Competition is weak and some suppliers have significant control over prices, says Ms. Gervais-Fredette, it's difficult and we had to increase our prices.

It finds itself faced with the current inflationary headache for many retailers, that is to say finding a balance between the excellence of the products, the obligation of profitability and the ability of customers to pay .

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For us, it is very important not to lower the quality, but if the prices increase too much, people will not be able to no longer come to see us.

A quote from Chloé Gervais-Fredette, chocolatier

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Montreal chocolatier Chloé Gervais-Fredette had not increased its prices since 2017.

The surge in prices is largely explained by uncertainty around cocoa harvests in Ghana and Ivory Coast, which represent almost 60% of global production.

The autumn turned out to be very humid, with torrential rains due to the influence of the El Niño meteorological phenomenon. The beans were then attacked by viruses.

The harvest is now threatened by the hot and dry weather which has already raged in previous years and caused a loss of yield. Meanwhile, demand remains high.

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A man opens a cocoa pod to extract the beans.

There have been reports that production would be lower than expected, which is pushing up prices, notes Jordan Lebel, full professor of food marketing in the Department of Marketing at the John Molson School of Management at the University of Chicago. Concordia University, in Montreal.

He expects the price of cocoa to increase further in the next year, under the influence in particular of the few multinationals that control almost 80% of the market.

They source their supplies mainly from Africa and weigh heavily on the value of cheap chocolate found in chocolate bars, biscuits and other mass-market treats.

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Daniel Haran in his Montreal workshop, he pours cocoa extracts into a mill

Jordan Lebel expects increases of 10% to 15% in the coming weeks, even if large distributors want to avoid driving away customers in this inflationary context.

Once we have made the decision to increase prices, we do not want to do it repeatedly, so we cross our fingers that it lasts 12, 18 or 24 months, he explains. .

At the same time, he is already noticing reduplication strategies and a modification of recipes to incorporate less expensive ingredients, such as caramel or dairy products.

Daniel Haran, the founder of Chocolats Monarque, imports cocoa beans which he processes in his Montreal workshop. Even if he does not get his supplies from wholesalers, he does not feel the effects of inflation any less.

Recently, he announced to his customers that the price of his products was going to increase from $3 to $5 per kilo, knowing that his chocolate bars are sold in stores for more than $160 per kilo. We are trying to prepare for a long-term strategy where prices could remain as high, he specifies. It's more important for us to maintain quality.

According to him, the price of cheap cocoa is not high enough . $5.9 per kilo, the current price is not sustainable, it would have to be doubled again to get to something that is truly fair. Farmers are, for the most part, very poor in West Africa.

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Ghana and especially Ivory Coast supply nearly 60% of the world's production of cocoa beans

It remains to be seen who will benefit from this soaring prices. Jordan Lebel also thinks that bean producers should be the first beneficiaries. Particularly those in the Gulf of Guinea, where we find mainly small farms.

Their income is stagnating, yet they should make significant investments to cope with the aging of plantations and their infrastructure. The lack of succession also becomes a problem to the extent that their activity turns out to be less profitable.

Prices are increasing, but farmers are slow to gain access to capital. They don't make any more money than they did 20 years ago. It's mind-boggling.

A quote from Jordan Lebel, professor of food marketing

Several producing regions are facing a significant rural exodus, caused in particular by the flight of young people to cities and limited Internet access. Relays for smartphones have been installed here and there, says Mr. Lebel, while doubting that the investments will be sufficient to reverse the trend.

In 10 years, the average age of farmers has increased from 50 to 55, notes Daniel Haran, they are going to retire, they are going to die and there is no succession.

Chloé Gervais-Fredette, who does business with an importer sensitive to these issues, is also worried about the future of producers. In the sector, farmers have the most physically demanding work and they have the most to lose because of climate change, she deplores.

All three recall that the largest margins generally benefit a handful of multinationals. For example, the world's leading chocolate manufacturer, the Barry Callebaut company, which has factories in Quebec and Ontario.

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