Freya Chocolate | Strong price increase: – There is hardly anything more dramatic

Cocoa prices have risen very sharply, especially since October. Within a few months, prices had nearly tripled.

– Cocoa scarcity is likely to continue for a long time to come. It may take several years before we see more normal prices, says Christian Anton Smedchog, who heads analysis firm Agri.

He is one of the country's leading experts when it comes to commodity prices and agricultural products. Cocoa is used in making cakes, sauces, ice cream, smoothies, drinking cocoa and of course in chocolate.

– Cocoa scarcity will have a big impact on prices when it comes to chocolate, for example. Chocolate with a high amount of cocoa will see a sharp rise in prices, especially those with a high amount of cocoa, says Smedshog.

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– Strong up

Some types of chocolate contain more than 70% cocoa, but most contain a little less.

– Freya's milk chocolate bars contain about 30 percent cocoa, and are otherwise composed of sugar and milk fat. This means that the price of chocolate will not rise as much as the price of cocoa itself, Smedchug says.

But as the price of cocoa rises dramatically, milk chocolate will continue to rise sharply, Smedshog says.

It is estimated that 200 grams of Freya milk chocolate can cost 50 per cent more than the “regular price”. Before Easter, you would have a chocolate bar on offer for around 25 Norwegian kroner. They are now sold at a regular price of around NOK 40. This means that the price of the register can reach 60 NOK.

– The last solution

Freya is owned by global food giant Mondelez. They stress that they cannot talk about future prices due to strict rules prohibiting so-called price signals.

But Mondelez's communications director in Norway and Denmark, Øyvind Olofsen, does not hide that the situation is difficult.

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– In particular, we are seeing a significant rise in costs associated with input factors across our supply chain, with key ingredients such as cocoa and sugar reaching record high prices, while other input costs such as energy, packaging and transportation also remain relatively high, he says. .

This combination of market factors means that producing our products is still much more expensive than before, says Olofsen.

He understands that a lot of people are struggling with the economy.

– He says that increasing prices in chain stores is a last resort for us.

“But when absolutely necessary, we implement carefully considered price increases that enable us to continue offering our products to consumers, without compromising on the good taste and quality they expect,” says Olofsen.

Possible fist contraction

In Norway, Orkla-owned Nidar is a major chocolate producer as well as Freia. Smedchug says producers have different options when it comes to compensating for the increase in cocoa prices.

One possibility is that the products contain less cocoa. They compensate with other flavors. He simply says they change the recipes.

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Another possibility is that they are cutting back on products and keeping the price the same as today, Smedchug says.

In other words, they can resort to disinflation. But Orkla CEO Nils Selte has previously distanced himself from this, so it is questionable whether Nedar will opt for this solution.

– And then of course they can choose to keep the product exactly as it is, but raise the price, Smedchug says.

– unique

A sharp rise in cocoa prices is rare.

– We have never seen a more dramatic price for raw materials than we are seeing now for cocoa. We have to go back to 2007-08 when there was significant growth in rice prices. We have increased by 2.5 times in 3-4 months. This is unique and Smedchug says the price increase has reached an all-time high.

He says there are reasons why prices will remain high for a long time.

The reason is that it takes time, usually six years, from when a new cocoa tree is planted until it can start harvesting, Smedchog says.

– A perfect storm

There are very few countries that produce cocoa. Ghana and Ivory Coast produce more than 60 percent of global production.

The cause of the crisis is complex.

– In recent years, few new trees have been planted due to low prices. And then we were hit with a combination of bad weather and fungal and viral diseases on the trees. In that sense, this is a “perfect storm,” Smedchug says.

– One problem is that stocks are emptied in the period when prices start to rise. Then stocks mitigate the price rise. But then the inventories are emptied and the price rise accelerates. He says inventories are completely underestimated as a dampening factor on the prices of many raw materials.