When anchor commodities collapse

Chocolate futures

Valentine’s Day, Mother’s Day and Easter are consumer festivals built on chocolate and/or cut flowers.

These festivals are mid-twentieth century creations; part of the post-WW2 expansion in mass market consumption. They are also festivals founded, and completely dependent, on globalisation – specifically agri-production in the global South.

In the 2020s, this model of consumer festival is under serious strain. This is because the anchor commodities of these consumer festivals face a perfect storm of challenges, mostly as an effect of climate change.

As it’s Easter, let’s take the example of chocolate.

In a number of articles in late 2024 and early 2025, the Financial Times reported on what is a growing crisis facing chocolate manufacturers. A combination of extreme weather, ageing trees and disease in Ghana and Côte d’Ivoire (the main global producers) has led to three consecutive seasons of poor cocoa bean harvest and to a global deficit in cocoa beans. A 500t global deficit in 2023/4 is anticipated to be compounded by a further 160-200t deficit in 2024/5. This has had an effect on bean stocks which are at an all-time low in warehouses,100t – because stocks have not been replenished. Reportedly, buyers are even drawing on stocks of beans from Cameroon that have been deteriorating in long term storage, because they are of that low quality that nobody normally wants to buy them. But then, as the industry says – ‘by the time you add milk and sugar you can get away with anything’ in (milk) chocolate manufacture.

The prospect of an improvement in production in West Africa anytime soon is not looking good. The core to the problem is a virus – cocoa swollen shoot virus (CSSV). Affected trees typically die within 4 years of being infected with the virus but the tree’s bean yield starts to decline almost immediately. Estimates of the number of trees affected have recently been revised upwards. It is now thought that some 67% of trees are affected; previously the figure thought to be affected was around 30%. If this is the case then cocoa bean cultivation in West Africa is in a crisis state.

That has major implications for the UK chocolate manufacturing industry, which is heavily dependent on West African beans.

The most immediate indication of the crisis has come in prices. In recent times cocoa bean prices have mostly been around $2k per tonne. In 2023/4 that shot up to $12k per tonne, and a market characterised by stability became increasingly volatile. Not surprisingly, traders and investors who would normally be interested in higher priced commodities (like metals, critical minerals and rare earths) have got in on the cocoa bean boom. As a consequence, chocolate traders need to push more resource into maintaining their hedged financial position and the price of beans continues to remain high. For manufacturers this is a serious headache. In the face of continued high prices for beans, something has to give. Cue ‘shrinkflation’ and ‘skimpflation’. You may have noticed this when shopping for Easter eggs.

In general terms, shrinkflation is where the weight of the product is reduced but it continues to be sold for the same retail price. Skimpflation is more radical – it involves ingredient substitutions and messing around with the original recipe. This is the riskier strategy for manufacturers, because potentially what this does is to alter the taste of a product.

Both tactics have been in evidence with respect to Easter Eggs in the UK market.

In the run up to Easter 2024, UK consumers were vociferous in their complaints about the size of the Easter eggs they’d purchased. Media reports were full of comparison tests and there were many comments from consumers about small eggs surrounded by lots of card – a state that was labelled as ‘over-packaging’. But over-packaging in these circumstances is but a manifestation of shrinkflation. The boxes that surround chocolate Easter eggs are produced to a certain size specification and they’re ordered well in advance from packaging producers by the chocolate manufacturers. Manufacturing smaller products requires that the self-evident gap between product and packaging is somehow filled. In packaging speak, the gap needs to be ‘stuffed’ – in this case by using more card to fill in the gaps. So it was that Easter 2024 became a matter of Spot the Easter Egg in the midst of all the card. Easter 2025 has seen a reduction in box size as well as shrunken Easter eggs.

Then there is ‘skimpflation’. Here chocolate manufacturers are on safer ground – particularly if what they produce is made mostly from milk products and sugar. When ‘chocolate’ is this, most people would not be able to tell the difference if the amount of cocoa butter in the recipe mix was reduced, even considerably.

Consumer taste sets up what is perhaps the biggest challenge facing the UK Easter egg market.

The combination of stratospheric cocoa bean prices and endemic crop failure in long established growing areas has led to the planting of trees in new areas of the tropics. But these economic conditions will have favoured planting trees that produce a higher-value bean than the West African staple, Forastero beans. The latter beans underscore the mass confectionary market. Two different beans - Trinitario and Criolto – are critical to the ‘fine-flavour’ cocoa market. It is these beans that are key to producing the much darker, far more bitter taste that is the hallmark of the premium chocolate market.

And therein lies the UK’s chocolate problem – which is a problem that goes beyond Easter eggs.

UK consumers are accustomed to the taste of milk ‘chocolate’ manufactured from Forastero beans. Very dark chocolate, with a high cocoa content and little milk and sugar is a very, very long way from that taste. And, it’s much more expensive. Even ‘dark’ chocolate is a problem for UK consumers – witness the recent withdrawal from sale of dark Toblerone. So, UK consumers will face an increasingly stark choice – either develop a new taste for chocolate (in the form of very dark chocolate), and absorb the cost, or pay very high prices for smaller amounts of what was an everyday form of confectionary but that is in increasingly short supply.

In these circumstances it may well turn out that the UK has passed the peak in its over-consumption of chocolate.