Yahoo Finance Chocoholics in Japan set for sticker shock after Cocoa surge
By Akemi Terukina and Alfred Cang
(Bloomberg) — Chocolate fans in Japan, among Asia’s biggest cocoa buyers, are heading for a sticker shock later this year as an unprecedented surge in cocoa prices finally filters through to stores.
Itochu Corp., one of the country’s top trading companies and cocoa importers, says a sudden spike in the retail price of chocolate is inevitable and expects processors to use more substitutes to rein in costs.
Cocoa prices have been on a tear, with New York futures more than doubling since the start of the year. The rally may have further to run as crop declines in Ivory Coast and Ghana, the top suppliers, leave buyers struggling for beans and traders pulling out of the market make prices more vulnerable to large swings.
The retail impact will be seen in September if March to April proves to be the peak for cocoa prices, said Yoshitomo Yamada, cocoa and sesame section manager at Itochu. Existing stockpiles can keep processors operating normally for now, with the price spike likely to come about six months later.
“No one knows what to do,” Yamada said in an interview, referring to measures for managing the surge in cocoa prices. “We haven’t had this level of tightness before. We don’t know if $12,000 might be appropriate, or if $15,000 might be appropriate, or $8,000.”
Some of the impact has already begun to reach consumers, with chocolate prices in March rising about 10% versus the prior year, government data show.
Japan is a large market for high-value confectionery and it sources about 75% of its cocoa imports from Ghana, World Bank statistics show. Itochu is one of the largest merchants handling those purchases and supplies national chocolate brands such as Meiji and Lotte.
The country might have to import more from No. 1 producer Ivory Coast due to uncertainties in supplies from Ghana, even though consumers are more familiar with the flavor and branding of beans from there, Yamada said. Some customers have already asked for Ivory Coast cocoa specifically to avoid a shortage, he said.
In addition, Yamada said Fuji Oil Co., a manufacturer of vegetable oils and fats under Itochu, could offer another solution to the cocoa crunch. It is a large producer of cocoa-butter equivalent, known as CBE, made from palm oil and sunflower oil.
Customers will not notice a big difference between cocoa butter and CBE, Yamada said. Demand for this and other substitutes will rise in Asia, where there is a huge diversity of purchasing power, he said.
©2024 Bloomberg L.P.
