Cocoa, Sugar Prices Soaring
From the February 13, 2009 Wall Street Journal:
While prices for many commodities have fallen, a supply shortage caused in part by crop diseases in Ivory Coast and Ghana sent cocoa up 38% from its lows in November, to $2,644 a metric ton on Thursday. The price of sugar, another raw material, is up 23% since October to 13.13 cents a pound, the result of a smaller-than expected crop in India, the No. 2 producer after Brazil.
The International Cocoa Organization predicts that supply will fall faster than demand in the global cocoa market, which is likely to push prices still higher. Chocolate makers usually buy cocoa butter, cocoa liquor or powder from processors, who purchase cocoa beans at market prices and tend to quickly pass on the price moves.
Cocoa surged 65% in the first half of 2008, to a 28-year high of $3,360 a ton on July 1, before falling back and then climbing again.
In a deflationary enviroment it is tough to be in a business where costs are still shooting up.
Premium Chocolate Compensates for Feelings of Powerlessness?
A great little behavioral economics piece in today's New York Times Magazine on the appeal of high-end chocolates. As an example of a phenomenon known as "compensatory consumption" it seems that people will pay more for chocolates when they are feeling powerless. This opens huge opportunities to move some product -- say at departments of motor vehicles or following certain unmentionable medical procedures.
See's Candies is way ahead of us with the kiosks they've placed in airport terminals. The key spot would be right after clearing security.
Goodbye, Joseph Schmidt?
Hershey announced recently that they were closing the Joseph Schmidt manufacturing facility in San Francisco. (Along with Scharffen Berger Chocolate, which they also bought.) Our retail stores have carried Schmidt confections for decades, and we've spent a few days trying to figure out if they were just moving production to another plant or deep-sixing the brand entirely. We've been told they are stopping production entirely.
They might as well; we saw the quality in product and packaging go down as soon as Hershey got control and started looking for a replacement.
Schmidt was a true innovator in confections, and the brand he founded should not die. I wish I had the jack to save it, assuming Hersey would sell it, but I believe it would be well out of reach for a little guy like me.