More Trick, Less Treat: Expect Smaller Candy This Halloween as Prices Rise – MoneySense

Trick-or-treaters hoping the trend is temporary are likely to be disappointed, as climate change and other factors are expected to make higher cocoa prices a new long-term reality. Companies trying to control sky-high ingredient prices can only pass so much of the cost on to consumers, so they’ve also turned to portion sizes, alternative ingredients and other strategies.

Candy makers are getting creative as cocoa costs remain high

Cocoa prices have more than doubled in the past two years due to poor weather conditions and crop diseases in West Africa, which supplies more than 70% of the world’s cocoa.

The North American benchmark price for a tonne of cocoa was $6,207 on Wednesday, according to the International Cocoa Organization, which publishes a daily average of futures prices for the commodity in London and New York. That’s down from December’s peak of $11,984, but still 60% higher than two years ago. Prices remained stable around $2,500 for more than a decade until 2023.

“It’s down a little from its peak, but it’s still almost triple what it was,” said Jo-Ann McArthur, president of Nourish Food Marketing. “You cannot absorb that as a manufacturer.”

Signs of a turnaround are already visible. Hershey Co. launched chocolate nuggets filled with pumpkin spice latte flavor this fall, while Reese’s peanut butter cups got a Halloween makeover with werewolf tracks, with half of the chocolate layer replaced with vanilla cream. (Some of these new variants are not yet available in Canada.)

With the nuggets, “they’ve used that filling to really change the composition of the Halloween candy and reduce the amount of chocolate,” McArthur said. “They turn something negative into something positive. That’s smart product innovation.”

Climate and economic factors point to continued challenges for cocoa

Some chocolate makers also use cocoa substitutes, such as chocolate powder or a shea butter blend, to reduce ingredient costs, McArthur said. “You’re going to have to fundamentally use less cocoa and less chocolate,” she said. “With climate change, this is likely a long-term phenomenon.”

Climate scientist Anna Lea Albright said climate change-induced heavy rains in West Africa are affecting cocoa yields. “We find that heavy rainfall is damaging, so in a very broad sense this poses a risk to cocoa production without adaptation,” said Albright, an environmental fellow at Harvard University’s Center for the Environment.

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Moreover, factors such as El Niño are factors that vary from year to year, she added.

The environmental impact makes cocoa prices more volatile. According to the International Cocoa Organization, prices rose in early June due to concerns about production in Ivory Coast, but eased due to optimistic forecasts for production in Ghana and Latin America. They rose again in late June after heavy rains in West Africa, which could worsen the outbreak of diseases damaging crops.

Albright said other non-climatic factors, such as the rising cost of fertilizer, are also contributing to cocoa supply disruptions.

“It will be a challenge for all manufacturers who use cocoa in their products,” said Tim Webb, supply chain and purchasing partner at KPMG in Canada. “Cocoa prices are unlikely to return to more normalized levels given tight supplies, tariffs and the additional compliance costs of tracking and disclosing cocoa stocks,” he said.

Rising costs are putting pressure on both chocolate makers and consumers

Some chocolate makers raised prices earlier this year to adjust to rising ingredient costs, while others lowered their sales estimates as consumer demand declines.

Chocolate maker Lindt & Spruengli AG, a global powerhouse, reported higher cocoa costs and lower volumes in its half-year report in July, with slower sales largely concentrated in North America.

Hershey’s, meanwhile, announced earlier this year that it would increase its retail prices and in some cases reduce packaging for the same price. However, the price increases were not reflected in the Halloween packaging.

Average price increases were low, double-digit percentages to offset higher costs of cocoa and other ingredients. Confectionery prices rose 9.2% in September, compared to 5.8% the month before, Statistics Canada reported Tuesday.