Small confectioners move away from just selling chocolates as global cocoa shortage hits hard

[The_King]

SINGAPORE: A recent surge in cocoa prices has caused some small confectioneries in Singapore to branch out from simply selling chocolates in order to save costs and increase revenue. 

These smaller retailers, which have been hit much harder in terms of profit margins compared with larger stores, are now offering experiential services like chocolate-making workshops.

The price of cocoa – the base ingredient of chocolate – has skyrocketed over the past one to two years due to a global supply shortage. Its key producers, Ghana and the Ivory Coast, have been hit by climate change and disease outbreaks.

Decades of underinvestment in cocoa plantations as well as investor speculation have also driven prices up.

Cocoa futures prices have more than tripled from slightly more than £2,200 (US$2,750) per tonne a year ago to almost £8,800 now. Prices briefly hit an all-time high in March at slightly more than US$10,000 per tonne.

“UNPRECEDENTED” INCREASE IN COCOA PRICES

Singapore-based artisan chocolatier Anjalichocolat is one retailer that has switched its business model amid such market challenges. It has a physical store in Tanglin Mall and sells its sweet treats online as well.

Founder Anjali Gupta told CNA that her company’s small size means it does not buy large enough quantities of sustainable chocolate, which is already priced higher than regular chocolate, to get a bulk discount.

“The recent increase in cocoa prices has been unprecedented and it’s definitely given us a curveball,” she said.

“If we were to break even, then we would have to increase our prices by about 30 per cent and we don't think our customers can accept that kind of price increase. We will increase our prices slightly and then we would have to manage the other parts of our business.”

The firm has held chocolate-making workshops since 2015, which Ms Anjali said have been “very popular” as corporate team-building events. It recently invested in a new workshop studio in Dempsey in January 2023.

Another boutique chocolatier, Embrace Chocolate, is paying double the price for raw cocoa beans now compared with the start of the year.

The vegan bean-to-bar shop in Joo Chiat, which produces only about 600 chocolate bars every month, is set to pay even more amid the increasing cocoa prices. Founder Namita Gupta said her shop may have to pass on the cost to consumers by S$0.50 to S$1.

Cocoa beans used by Singapore bean-to-bar chocolate shop Embrace Chocolate.

Ms Namita said suppliers have warned of an upcoming premium, on top of the higher prices they have already been paying.

“One thing that we’ve done is we stopped giving any discounts and giveaways … Most of the sales happen over a conversation with customers, so then it’s a bit easier to make them understand why there is an increase in prices,” she added.

Ms Namita pointed out the importance of letting the public know about the global cocoa shortage as well.

“If people want to continue eating good chocolate, they might have to pay a little more,” she said.

 

DEMAND TO REMAIN HIGH FOR NOW

Despite efforts by chocolatiers to absorb costs for now, chocolate prices are expected to remain high in the short term.

New cocoa trees take as long as three to four years to produce beans, according to the International Cocoa Organisation, which also estimates that global production of cocoa could drop by 10 per cent this year.

Still, economists said demand for chocolate is unlikely to be deterred.

Mr Song Seng Wun, economic advisor at CGS-CIMB Securities, said such demand depends on the global labour market and whether people are still earning enough to spend on less essential items like chocolate.

“But (in) the near medium term, it is really all about whether governments in key cocoa-producing countries in West Africa invest in the infrastructure in upgrading yield,” he added.