- The Washington Times - Thursday, February 12, 2015

A jump in world chocolate prices could leave lovers looking for a sugar high this Valentine’s Day with a case of sticker shock instead.

Although prices have eased in recent days, some analysts are concerned that galloping ingredient price hikes — especially for cocoa butter, the cocoa bean derivative that gives chocolate its melt-in-your-mouth quality — will eat into sales on what is traditionally a banner season for sweets.

“You’ve got some strong evidence that prices have had a significant effect on consumption,” said Jonathan Parkman, co-head of agricultural commodities at broker Marex Spectron.

The rising prices of cocoa beans and nuts have caused U.S. candy giants Hershey’s and Mars, which together account for nearly two-thirds of U.S. chocolate sales, to hike prices in recent months. Hershey’s, for its part, announced an 8 percent increase in average wholesale price of its candy bars in mid-2014.

Global consumption of chocolate is on the rise, with consumers in the Asia-Pacific region doubling their demand. Long-standing trade restrictions on sugar and other commodities in the U.S. and other industrial markets also boost prices. And production by key African producers has been hurt by travel and export bans implemented at the height of last year’s Ebola crisis. The Ivory Coast, the world’s biggest producer, supplied 34 percent of the world’s cocoa in 2010, with Ghana second at 17 percent.

The average price for a ton of cocoa was $2,921.05 last month, according to the International Cocoa Organization. That was slightly higher than the price a year earlier — but down from a peak of $3,270.27 reached in August. Prices are markedly higher than they were seven years ago, when the global financial slump sent commodity prices plunging as well.

The year 2014 will be the third straight year that global cocoa prices will rise.

The Valentine’s Day bottom line: Chocolate buyers will be paying more and getting a bit less. While the amount of chocolate Americans bought last year rose 1.2 percent to 2.2 billion pounds, the amount they paid for it rose 2.6 percent to $13.6 billion, according to data from Nielsen, a consumer research firm.

A chocolate ‘revolution’

But even amid the price and supply concerns, those in the industry say a new kind of chocolate distribution model is slowly rising to the fore, a delivery system the uses only two ingredients: cocoa beans and organic sugar.

Traditional mass chocolate makers add an assortment of ingredients to make chocolate bars, including soy lecithin, milk, sugar and cocoa beans. The new “bean-to-bar” model, by contrast, uses 70 percent cocoa, compared to as little as 10 percent for the industrial-scale production method. And as with beer and bread, a new class of craft chocolate entrepreneurs has sprung up to champion the new model.

The bean-to-bar approach “really is a revolution,” said Adam Kavalier, a scientist and co-owner of the District-based Undone Chocolate, a small startup chocolate producer and distributor. “People’s tastes are changing, and they want to know what things are going into the chocolates they buy.”

Mr. Kavalier co-owns Undone Chocolate with his wife Kristen. They both have a love for chocolate, a love that started several years ago when they met in college. In fact, Mr. Kavalier gave his future wife a chocolate candy bar on their first date.

The company has been open since December, just in time for the Valentine’s Day rush.

“Business is booming,” Mr. Kavalier said, “so we are having to expand with it.”

Bar-to-bean chocolate is not cheap, however: Chocolate made using this new method can go for $8 per bar.

Mr. Kavalier describes it as the “wine of chocolates, in that it is rich in antioxidants and full of flavor all its own.”

In the end, he said, the added expense won’t matter.”It is kind of where the craft [beer] brewing [industry] was 10 years ago. People weren’t thinking about spending 10 bucks on a six-pack. That sounded crazy. But today they’re everywhere.”

One of the largest bean-to-bar chocolate distributors in the country, San Francisco-based Dandelion Chocolate, is operating at slightly larger capacity than Undone Chocolate, but the five-year-old craft chocolate maker is still refining its production methods.

“Our operation is one of the biggest,” Dandelion Chocolate spokesperson Jennifer Roy said, but “our employees still have to make innovations to our machines to make the process run smoother.”

Dandelion Chocolate’s distribution has grown steadily since its opening.

“We have a list of 350 to 400 retailers from all over the world — small and large — on a wait list to carry our chocolates,” Ms. Roy said. “People have been calling it the new chocolate movement in America. I think that is a good description.”

Valentine’s Day 2016 may give lovers a break. Ernst Tanner, chief executive officer of the Swiss-based chocolate giant Lindt & Spruengli AG, is predicting that cocoa prices will ease in the second half of this year, even as chocolate demand continues to grow.

“Demand is being played up, but we’re growing way faster than other chocolate makers, and I don’t see that,” Mr. Tanner told the Bloomberg news service last month. “Everyone says demand in China and India is coming, but they have such small consumption that it won’t have an influence yet.”

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