Chocolate lovers, brace yourselves this Easter. The cost of everyone's favorite confectionery has risen more than 10 percent over the past year and could be increasing further.
The price of chocolate has increased to 1.82 pounds $2.57) a kilogram, up from 1.64 pounds a year ago, thanks to rising cocoa and sugar prices, according to Mintec, the commodities data company.
The milk chocolate index — a weighted index of sugar, whey powder, whole milk powder and cocoa powder and butter, which are products made from the cocoa bean — has been lifted by a 26 percent rise in cocoa powder, a 19 percent rise in cocoa butter and a 15 percent increase in sugar.
Apart from their own supply and demand fluctuations, food commodities prices have also been helped by the recovery in the oil price. Compared with 2012, the cost of milk chocolate is a third higher, although it is 10 percent lower than in 2014, when all the ingredients were at high levels.
But the key chocolate ingredient prices have been driven by the weather. Drier than normal weather due to the El Niño phenomenon has been partly behind the rally in cocoa prices, while sugar prices seem to have bottomed out last August after four-year decline.
Analysts at Rabobank are forecasting further volatility in both cocoa and sugar due to the weather and foreign exchange fluctuations. "There is a strong possibility" of a further sugar supply shortfall, said the bank.
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The hotter than normal weather is proving to be a double whammy for chocolate makers, not only by increasing costs, but by hurting demand.
A hot summer in 2015 followed by an extremely mild start to winter decreased chocolate consumption, said Swiss chocolate maker Lindt earlier this month, although the company managed to expand its market share.
In the three months to November, sales volume for the global chocolate confectionery market fell almost 4 percent, according to Barry Callebaut, the Swiss chocolate company.
The warmest February on record may have hit chocolate consumption as people tend to eat more chocolate in colder climes. "People tend to eat less chocolate when temperatures are high," said Carlos Mera, an analyst at Rabobank.
This year, some chocolate makers see an earlier Easter leading to lower sales. In Germany, the confectionery industry is forecast to produce 200 million chocolate bunnies, down 6 percent from the year before, due to a shorter Easter sales period, according to BDSI, the industry association.
The rise in the cost of chocolate is expected to further accelerate the trend of chocolate makers raising prices and making smaller bars.
"Chocolate makers' sales volumes are struggling, but the [sales] value is going up quite significantly," said Jack Skelly, analyst at Euromonitor, the consumer research group.
In the U.K., for example, 2016 seasonal sales — chocolate sales over Christmas and Easter — are expected to remain virtually flat from the previous year at 67 tonnes, but the value is forecast to rise 4 percent to 845 million pounds, he added.