As chocolate prices climb, Mars and Ferrero families now wealthier than 2 largest cocoa-producing countries
As chocolate prices climb, Mars and Ferrero families now wealthier than 2 largest cocoa-producing countries
And as chocolate billionaires have grown richer, farmers in Ghana and Ivory Coast have seen double-digit drops in their incomes over the past few years.
BY Clint Rainey
Cocoa prices began the week at their highest ever recorded—more than $12,500 per ton, the cost to buy about 150 barrels of oil—and it’s unclear to analysts if they’re even ready to level off yet.
The cause is a sort of perfect storm of catastrophic harvests, decades of the farms themselves being under-resourced, and market speculation that is driving prices even higher. Chocolate brands have already responded with two of their favorite tools to blunt the impact of climbing supply costs: hiking prices and shrinking the product size.
The shortage is a result of ongoing bad weather in West Africa, which produces around 80% of the world’s crop, immediately followed by bad drought. Cocoa is susceptible to extremes and in Ghana and Ivory Coast, the world’s two leading cocoa producers, rains have led to crop diseases, and then drought and heat have pelted what’s left. Some farms’ 6,000 trees have dwindled to fewer than a dozen. The International Cocoa Organization estimates that global cocoa supply will sink by at least 10% this season.
All this is being compounded by deeper structural issues also at play: Most of the world’s cocoa is still grown by smallholder farmers who lack resources of their own to invest in better irrigation or otherwise improve much of anything about their land. Trees, as they age, get more vulnerable to brutal heat and other extreme weather, as well as to plant diseases like black pod rot. Also, human exploitation remains an issue.
For the past decade, cocoa prices have traded at around a fourth or fifth of the current rate—between 2016 and 2023, they ranged from $1,900 to $2,700, before beginning their climb last fall. But now that they’re up, talk in certain industry corners is focusing on the need for them to stay there.
Two weeks ago, world-famous chocolatier Jacques Torres told Yahoo Finance that he is “not against” a correction that keeps prices up. “My belief is that $3,000 or even $4,000 a ton is not enough,” he explained, but warned that “if our chocolates become too expensive, we will sell a lot less. So we have to find way to make that chocolate more affordable.”
The chocolate gap
Others argue that if the industry could adjust to higher prices, the whole supply chain would win. Last month in an interview, Douglas Lamont, CEO of Tony’s Chocolonely (the brand with those bright-colored labels and cartoonish font) told the Financial Times that this is a “great moment for the industry to [commit to paying farmers more] because the [consumer] price is already up,” but added that he fears when prices slide back to planet Earth, big companies like Mars, Nestlé, and Ferrero Group will just react by pocketing the profits.
If history is a guide, he’s probably right: While consumer pocketbooks are hurting and cocoa farmers are juggling underinvestment on top of crop damage, one group is well-positioned to ride out this trend, and that’s the major chocolate makers themselves—or even more so, their billionaire owners.
The widening chasm has antipoverty groups including Oxfam starting to speak out against the brands, whose executives are gathered in Brussels this week for the World Cocoa Conference, the industry’s top annual convention. Oxfam parked itself outside the entrance to protest—with farmers in tow from the world’s first female-led cocoa cooperative, Ghana’s Cocoa Mmaa. The group has also released a new report to coincide with the meeting. It goes after Lindt, Mondelez, Hershey, and Nestlé for taking in almost $6 billion worth of profits last year, and giving 97% of that, on average, back to shareholders.
But the report goes after the Ferrero and Mars families even harder. How are the owners of the two biggest private chocolate companies doing? Their fortunes surged to $161 billion last year, Oxfam says its analysis showed—“more than the combined GDPs of Ghana and Ivory Coast.” In other words, the clans behind the two largest family-owned chocolate companies are wealthier than the two nations where the vast majority of cocoa beans are grown. According to the Bloomberg Billionaires Index, the fortune of Giovanni Ferrero and his family—#34 on Bloomberg’s list—was $37.8 billion last July, but presently stands at $39.9 billion.
Oxfam points to a 2023 survey it conducted with more than 400 Ghanian farmers who supply the major chocolate makers. Results showed they’ve seen an average 16% drop in their incomes since 2020, with 9 in 10 saying that they’re worse off post-pandemic.
In a statement, Oxfam policy adviser Bart Van Besien says these wild $12,500-a-ton prices could have been averted from the start if the companies had paid farmers enough for them to make their farms more resilient. There’s a cruel irony, he adds, in knowing they have no choice but to pay high prices “now that the market demands it,” yet they “pushed back every single time that cocoa farmers have.”
Still, the wealth gap remains largely out of the public’s awareness. A decade-old video that started going viral again on Monday underscored the average Westerner’s low level of knowledge about the circumstances. In the clip, a cocoa grower from Ivory Coast notes to the interviewer, “Frankly I don’t know what you make from cocoa beans. I am trying to earn a good living with growing cocoa. They make good food from them, but I’ve never seen it.”
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