This Easter, whether you're dyeing eggs or indulging in grandma's famous chocolate brownies, the humble chicken egg and chocolate treats alike are caught in a perfect storm of price hikes.

How did this happen? Tariffs? Or are we simply indulging in more chocolate than ever before?

Let’s unwrap the answer that lies in the cacao supply chain, where a combination of climate change, global cocoa shortages, and rising production costs are putting a squeeze on consumers.

Cocoa prices skyrocket by nearly 90% in just three months

Cocoa farmers produce about 5 million tons of cocoa beans annually, with Europe devouring nearly half of the global supply, closely followed by the Americas and Japan.

The heart of the cocoa industry lies in West Africa, primarily Ghana and Côte d'Ivoire. However, due to rising temperatures, shifting rainfall patterns, and soil degradation in the regions, cocoa production has been experiencing dramatic disruption, affecting both quantity and quality.

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You might think investing this year would solve the possible problems next year. But unlike quick-turnaround crops like wheat or corn, cocoa trees require three to five years to mature, making recovery from setbacks a slow process. Add to this the underinvestment in cocoa plants, and you have aging trees yielding less, leading to a shortage of cocoa and skyrocketing prices.

“Typically, cocoa purchases are secured through futures contracts, which hedge prices 18 to 24 months in advance,” said Barbara Guignard of Efficio Consulting, on the Future of Supply Chain Podcast series. "As these contracts come to an end, the industry is facing the reality of higher costs for new cocoa acquisitions. This is having a significant impact on the sector, as companies will need to start paying higher prices for cocoa.”

Sustainability and supply chains hold the key to unlocking these problems

Easier said than done. But the question is how?

The shortage and price hike are causing significant supply chain challenges, affecting profitability and forcing companies to rethink their strategies. With the market's unpredictability making it difficult for businesses to hedge against price increases, it is adding another layer of complexity to their operations.

“To gain more control over the supply chain, companies need to get closely involved in investing in making crops more resilient to weather conditions,” said Guignard. "This not only benefits the environment but also supports the overall economy."

Sustainability is more than just environmental protection. It involves creating safer working conditions for farmers and providing them with more predictable livelihoods. Investing in sustainable practices, direct farm control, research, and innovation is crucial, particularly in the cocoa industry, where relationships with farms are paramount.

For manufacturers, success depends on building strong supply relationships, negotiating fair terms, and securing longer contracts to shield against price fluctuations while keeping costs competitive to maintain market share. This involves supporting initiatives that promote fair labor practices, environmental conservation, and equitable economic distribution throughout the supply chain.

“Sustainability in terms of social welfare is closely linked to the sustainability of the supply chain,” said Guignard.

Not only do consumers shape the supply chains, but also supply chains shape our "taste buds"

Manufacturers are responding to these disruptions by implementing diverse strategies to maintain affordability and market share. The straightforward strategy is to pass increased costs directly to consumers by raising prices - which is doable for luxury brands but not so much in the mass market where the consumers are price-conscious. Another common way of doing this is shrinkflation, helping them manage rising production costs without explicitly increasing the sticker price.

When browsing the discount store, you might stumble upon some unexpected yet intriguing flavors like orange, apple, or strawberry chocolate - and even jalapeno chocolate (yes, it really exists). Manufacturers have already started cleverly marketing unique flavor combinations to balance out the reduced chocolate content.

By reformulating recipes to use less cocoa or even cocoa-free alternatives, businesses reduce the chocolate content in products without raising prices and adding other ingredients. Not only the fruits and veggies are getting in the chocolate.

According to Guignard, "manufacturers are getting creative by using more sugar and emulsifiers to reduce chocolate content. Consumer tastes evolve and adapt accordingly.”

At the end of the day, consumers pay the price through reduced product value, increased prices, or compromised quality, which underscores the complex balance between supply chain pressures and consumer behavior.

“The future of supply chain is about companies who are adaptable and invest in sustainable approaches and making sure they remain cost-conscious are the ones who will be the winners in all of this,” said Guignard.

Will this Easter mark a turning point towards a more sustainable and equitable chocolate industry, or will the challenges prove insurmountable? Whether you're a manufacturer whipping up new recipes or a consumer trying out unconventional chocolate, it seems like the upcoming Easters are going to be all about flexibility and creativity.

Want to learn about how AI helps create sustainable supply chains while addressing their most pressing challenges? Here’s where to start: Guiding Optimal Supply Chain Performance with Artificial Intelligence