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Mars: No immediate chocolate price increases in face of cocoa deficit

By Oliver Nieburg+

18-Jun-2014
Last updated on 18-Jun-2014 at 12:51 GMT

Mars pressured by cocoa prices but no looming chocolate price increase due
Mars pressured by cocoa prices but no looming chocolate price increase due

Mars says it is experiencing the same pressures on the cocoa market as Nestlé, but currently has no plans to raise chocolate prices.

In April, Mars’ rival Nestlé said that it would increase its confectionery prices after it complained that higher commodity prices, particularly for cocoa, had contributed to a 13% slump in sales for its confectionery category in Q1.

No immediate price increase

Asked if Mars would also be forced to increase its prices, Andy Harner, global cocoa vice president at Mars Chocolate told ConfectioneryNews:  "We don't have to disclose as much as a public company would about what our financials are. But you can assume that there's a lot of similarity in the portfolio and the buying patterns of Mars with any of its direct competitors. So for those kinds of statements around forward price projections of commodities we've experienced a lot of the same thing."

However, he said Mars had no immediate plans to raise prices. “I'm not aware of any price increases that are looming and those are usually independent decisions from the buying of the cocoa or any other raw material,” he said.

Supply situation

The International Cocoa Organizations (ICCO’s) recently projected a cocoa surplus of 30,000 metric tons (MT) for the current crop year, but a deficit of just under 100,000 MT for 2014/15.

The average cocoa price for May 2014 stood at $3,030 per MT, almost 30% higher than May last year.

More sourcing from Asia

Harner said that Mars stood by earlier predictions of a 1m MT cocoa shortfall by 2020 and hinted that countries in Asia-Pacific could plug the future supply gap.

"It's not really a difference in our sourcing because there hasn't been any difference in supply yet,” he said. “But if you were to look out to 2020-2030, you definitely see a lot of the Asia-Pacific producer countries talking about getting to a point to be able to supply more of their needs."

"All the major processors, including us, have added capacity in the Asia-Pacific area. There's no secret that there's going to be more demand for cocoa there.”

The Beneficiaries: Indonesia and Vietnam?

Indonesia is the third largest global cocoa producer and the largest in Asia-Pacific. Efforts have also been made from companies such as Cargill and Puratos to develop the Vietnamese cocoa market, which borders with the burgeoning Chinese chocolate market.

Harner said Mars’ cocoa sourcing was largely in line with the global cocoa market, but refused to share a country-by-country breakdown.

"We know what the figures are but to share them implies they are fixed and they are not. The flexibility is there to source from all over the world."

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