Life can be as unpredictable as the cocoa market—you never really know what to expect. One constant, however, is that this February, much like last year, Valentine’s Day chocolate buyers are likely to face unexpected price hikes. Chocolate makers continue to pass along the rising cost of cocoa to consumers.

So, what’s driving these changes? According to Oran van Dort, a commodity analyst at Rabobank, cocoa prices surged by almost 180% last year, nearly reaching $13,000 per metric ton, though prices have since moderated slightly to just over $11,000. This unprecedented increase stems from a global cocoa shortage caused by several key factors. Severe weather in West Africa—the world’s primary cocoa-exporting region—has severely damaged crops, while local policies fix prices for cocoa beans at levels significantly lower than international market rates. This policy has made cocoa farming economically unviable for many, prompting farmers to leave the industry. Together, these factors have tightened supply and pushed prices higher.

The impact of these higher cocoa prices is clear in the retail market. For example, at Target, the price of a king-size two-pack of Reese’s hearts has risen by 13%, from $2.29 in February 2024 to $2.59 today. Similarly, a 10.8-ounce bag of Hershey’s Kisses milk chocolate increased by 12%, climbing from $4.89 in January 2024 to $5.49 over the past year. Lindt’s products have seen similar trends: a 6-ounce bag of milk chocolate truffles is up 5% from $5.69 to $5.99, and its 85% cocoa dark chocolate bar has increased by nearly 9%, from $3.39 to $3.69.

Industry responses further underline the situation’s complexity. Last month, chocolate supplier Barry Callebaut—whose clients include major companies like Unilever and Nestlé—reported a 2.7% drop in sales volumes during its latest quarter, citing a “highly challenging and volatile market environment.” The company noted that cocoa prices surged by over 70% in that quarter, prompting many customers, particularly in North America, to delay placing orders.

From a professional perspective, these developments highlight the intricate interplay between climatic factors, policy decisions, and market dynamics. They underscore the need for adaptable supply chain strategies and more sustainable pricing models to manage the inherent volatility of global commodity markets.

In its November Q3 earnings call, Hershey announced that its net sales fell after it raised chocolate prices. The company attributed part of its market share loss to the growing competition from small brands and private labels within the confectionery space, emphasizing that its top priority is to revive its chocolate segment. Notably, Hershey’s newly appointed head of US confection, Michael Del Pozzo, left after only a few months and was recently replaced by industry veteran Andrew Archambault from Keurig Dr Pepper.

To tackle these challenges, some companies are exploring innovative strategies. In December, Mondelez—the maker of Toblerone—invested in Celleste Bio, a company focused on cell-based cocoa production, as part of its efforts to alleviate the strained cocoa supply. Meanwhile, Hershey committed $500 million to enhance cocoa farming practices in West Africa. Interestingly, Bloomberg reported earlier this year that Mondelez had attempted to acquire Hershey, but Hershey dismissed the bid as too low.

Not all players are struggling, though. This month, The Lindt & Sprüngli Group reported a 7.8% increase in its organic sales for 2024, driven largely by moderate, mid-single-digit price hikes, and it plans to raise prices even further this year.

How are consumers reacting? With chocolate prices remaining elevated, Richard Donahue, CMO of Ibotta, noted via email that consumer behavior is shifting. He expects some buyers will cut back on chocolate purchases to prioritize essential spending, while others—fed up with constant price increases—may switch to alternative brands, lower-cost options, or private label products.

Data from Ibotta shows that average private-label chocolate prices dropped by 4% from January to December 2024, in stark contrast to a 17% increase for branded chocolates. This price dynamic has helped boost private-label chocolate sales by about 30% year-over-year, compared to roughly a 13% increase for branded items.

This holiday season, there are more private-label options available. For example, Target offers a gift box of Favorite Day peanut butter-filled milk chocolate hearts at $0.83 per ounce, while Reese’s heart-shaped chocolates are priced at $0.92 per ounce. Walmart’s Bettergoods brand has also introduced a 12-count box of Belgian chocolate truffles for $1.18 per ounce. Additionally, some consumers are shifting toward non-chocolate treats, like more affordable gummy candies.

As for when this trend might reverse, the outlook remains uncertain. Although higher cocoa and consumer prices were expected to spur increased production and eventually balance supply with demand, recent dry weather in West Africa has disrupted this cycle. As Oran van Dort remarked, "It's extremely hard to predict where cocoa is headed." For now, it seems that enjoying a bite of chocolate will continue to be a bittersweet experience, with elevated prices likely to persist throughout the year.