Cocoa Prices are Changing Product Development

For decades, cocoa prices remained relatively stable, providing manufacturers with a predictable and reliable supply of one of the world’s most popular ingredients. However, the market has become increasingly volatile in recent years, with cocoa prices reaching record highs and creating significant challenges for businesses within the food and beverage industries.

From chocolate bars and baked goods to ice cream and drinks, the rising cost of cocoa is forcing manufacturers to rethink how products are formulated, produced and priced. 

Why have cocoa prices surged?

For the past 25 years, cocoa prices remained relatively stable at around £2,000-£3,000 PMT. However, this changed dramatically in 2024 and 2025, when prices surged to record highs upwards of £8,000 PMT, quadrupling historic levels. Although current pricing has fallen down to around £4,000 PMT, this remains significantly above the levels that prevailed for many years.

Reuters reported that the sharp increase in cocoa costs was caused by severe supply disruptions including adverse weather conditions associated with El Niño and an outbreak of both black pod disease and swollen shoot virus in West Africa, which produces the majority of the world’s cocoa production. These factors significantly reduced crop yields and disrupted global supply, resulting in a substantial cocoa supply deficit.

How is this changing product development?

Companies that rely heavily on chocolate as their main ingredients are among those feeling the greatest impact of soaring cocoa prices. But the effects extend far beyond chocolate itself, with cocoa derivatives (cocoa butter, cocoa liquor, and cocoa powder) also experiencing significant price increases. These ingredients are used extensively across the food and beverage industry with cocoa butter also serving as a key ingredient in many beauty products.

As a result, manufacturers are being forced to rethink. Some have chosen to reformulate products, while others have passed the higher costs onto consumers. Here are just some examples of how chocolate is reshaping the industry:

Compound chocolate

One of the most common responses has been the increased use of compound chocolate. Although it delivers a somewhat similar taste and appearance, compound chocolate cannot legally be marked as “chocolate” because it replaces cocoa butter with alternative vegetable fats and typically uses cocoa powder instead of cocoa liquor. UK legislation requires milk chocolate to contain at least 20% total dry cocoa solids and 20% dry milk solids. Products that fail to meet these requirements must instead be labelled as “chocolate flavoured”. 

This approach is becoming increasingly popular in products where chocolate is not the main ingredient, such as cookies, muffins and snack bars. The lunchbox favourites, Penguin Bars, are just one example of a well-known brand moving in this direction. Pladis decided to continue using cocoa mass, however reduce the content as a more cost-effective alternative. 

Shrinkflation

Another strategy being adopted is “shrinkflation”, a term used to describe a product that has reduced in size while maintaining, or even increasing, the retail price. This has allowed manufacturers to manage the rising cost of ingredients without introducing sharp price increases that have the potential to deter consumers. 

The BBC has highlighted a number of examples that we typically see in the confectionary aisle of the supermarkets. Cadbury Dairy Milk bars, for instance, have gradually become smaller over time. In 2021, a standard bar weighed 200g. Fast forward to 2025 and the equivalent product weighed 180g while costing 89p more. Consumers are therefore paying more for less product.

Cocoa-free alternatives

Perhaps the most innovative response has been the development of completely cocoa-free chocolate alternatives. Companies are beginning to invest in new ingredients that can replicate the taste, texture and functionality of chocolate without relying on cocoa beans.

Leading chocolate manufacturer, Barry Callebaut, announced their partnership with Planet A Foods back in 2025 to develop ChoViva, a cocoa-free alternative made from sunflower seeds. The product is designed to offer manufacturers a viable way to reduce dependence on cocoa while still appealing to consumers.  

As cocoa prices continue to challenge the industry, product innovation is no longer simply about creating new flavours or formats. Instead, it has become a balancing act between managing costs, maintaining product quality and meeting consumer expectations in an increasingly unpredictable market.

Sources: 

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