The confectionery space can expect alarming price rallies ahead of Halloween, prompted by the ongoing cocoa crisis and sugar supply slumps. With a less fruitful Halloween anticipated, consumers can expect to pay more at the tills for their sweet treats and are being advised to budget for higher confectionary expenditures.
Seasonal sales are huge, making up almost two-thirds (64%) of total chocolate and candy sales, the National Confectioners Association (NCA) states. Halloween is the second biggest season, generating $5 billion. Confectioners have been eyeing up innovation through new product launches, exciting formulations and spooky-inspired marketing campaigns.
Yet, while ‘Summerween’ has seen Halloween goodies collaborate with summer must-haves and see the season’s products hit the shelves earlier, concerns are that it’s not enough to overcome the price hikes, confectionery is experiencing.
Cocoa and sugar prices spike
In April 2024, London cocoa prices reached a record high of £10,265 per metric tonne, marking a 142% increase since January 2024. Although prices fell to £5,302 in September 2024, they are still up by 44.9% compared to the start of the year.
It’s a “dramatic rise”, Nidhi Jain, commodity specialist at The Smart Cube (part of WNS Procurement), shares. And it’s one that’s driven by concerns over tight cocoa supplies from West Africa. This is particularly prominent in the Ivory Coast and Ghana, which produce approximately 60% of the world's cocoa. “Looking ahead, these supply issues are highly likely to keep prices elevated in the run-up to Halloween,” Jain says.
Price hike concerns are not only limited to the effects of cocoa supply restrictions but also sugar, with cost increases taking place in South America and Asia. “Similarly, sugar prices are expected to rise over the rest of 2024 due to supply disruptions in major producing nations like Brazil and India, combined with seasonal demand growth,” Jain adds.
Increases in confectionery costs due to these cocoa and sugar supply problems are a risk for brands wanting to make the most out of one of the busiest sales periods of the year. They are likely to affect seasonal Halloween confectionery procurement and sales.
“Given the volatile costs of these two commodities, there will be unavoidable effects on the consumer, with manufacturers considering price increases to confectionary products,” says Jain. As a result, retailers may need to adjust their strategies by seeking alternative suppliers or diversifying product lines to offset rising costs.
“But higher prices for sweets and chocolates seem inevitable as commodity costs rise,” adds Jain. These higher prices are reflected in recent reports stating that the average price of chocolate has increased 11% this year in the last three months of 2024 compared to 2023.
Avoiding basket abandonment
Despite both commodities experiencing sizable price hikes, in previous years, sweets and chocolate prices have usually been mitigated by confectionery producers purchasing the commodities in advance and stocking inventory.
When anticipating price rises, having a stock inventory enables firms to avoid increasing their products’ costs. Keeping on top of inventory is vital to respond to potential interest from consumers. Yet, this seems to have been a struggle. “In recent months, producers have failed to restock inventory, anticipating cocoa and sugar prices to drop,” adds Jain.
However, after witnessing a correction in the first half of 2024, sugar prices have resumed an uptrend. There was a drop of approximately 30% in June 2024 compared to November 2023 due to La Niña-induced dry weather concerns in Brazil.
Prices may remain range bound, between 20–24 lb (units of measure US customary) in coming months with the start of the sugarcane harvest season in India and Thailand, the second and third largest sugar exporters in the world, respectively. “As cocoa supplies dwindle, chocolate makers are expected to raise prices, passing rising costs onto consumers ahead of Halloween,” notes Jain.
Make risk a priority
Ahead of Halloween, there are several recommendations for procurement teams regarding identifying and monitoring risks, like adverse weather conditions. These include ensuring
that teams focus on challenges that can impact supply chains and assess alternative suppliers from different regions.
“By doing so, they can reduce their company’s dependence on a single provider or location, especially if they are buying a commodity from an area faced with challenges in their production pipeline,” says Jain.
“Manufacturers should map their dependence on suppliers,” adds Jain. The idea is that by performing a thorough evaluation of their supplier exposure across geographies, organisations can ensure that any decrease in production doesn't severely affect their operations. For example, chocolate manufacturers are advised to assess their reliance on Ghanaian and Ivorian suppliers.
Can AI save cocoa costs and consequences?
As we head into the 2024/2025 cocoa season, with rising costs affecting the confectionery sector and sugar prices impacting the sweet treat aisle, the sector is looking at how artificial intelligence (AI) can help. Deficits for cocoa are at 0.16 million tonnes, marking the fourth consecutive year. AI is considered a solution that manufacturers can utilise to address production issues without higher costs.
The industry is exploring how artificial and human intelligence can work together to tackle rising cocoa prices and their consequences. “AI can significantly help here by accelerating research and suggesting suppliers that manufacturers might not have worked with before,” says Jain. Using a combination of AI and human intelligence (HI), procurement teams can also expedite risk management.
Developed systems can continuously monitor various risk factors, such as geopolitical events and natural disasters. As a result, teams can track pivotal events that may disrupt the supply chain significantly earlier than before and develop contingency plans accordingly.
Attention moves to how best to introduce and integrate AI systems into traditional procurement and sales processes. “When integrating AI, it’s essential to adopt a ‘copilot strategy’,” Jain says. Procurement specialists can therefore leverage AI to manage large datasets, detecting early signs of supply chain issues.
“However, AI is not the overall ‘pilot’,” Jain notes. At the helm of it are humans and HI. “Teams should use HI to interpret and contextualise the data and evaluate its effect on organisational decisions,” Jain shares. This method focuses on enhancing employees’ skills while promoting a mindset that values data and intelligence as central to decision-making.
“Overall, despite emerging trends and unprecedented weather changes, there are ways companies can respond to these shifts,” says Jain. By preparing accordingly at the very top of the supply chain, consumers at the very bottom would no longer have to continuously reassess their budgets, especially during seasonal events,” Jain adds.
