Why Your Chocolate Bar May Keep Shrinking, Even As Cocoa Prices Cool

Chocolate lovers in India are facing a double whammy. Global cocoa prices, after scaling record highs recently, are finally softening. But does that mean your Dairy Milk or 5 Star bar is going back to its old size?

Cocoa futures, which touched an unprecedented $12,931 per tonne in Dec. 2024, have since cooled to around $7,500 per tonne in August. That's still more than four times their pre-COVID levels of about $2,000.

The fall is not due to abundant supply, but rather shrinking demand. Cocoa grindings, a proxy for demand, fell 7.2% in Europe, 16% in Asia and 2.8% in North America during the second quarter.

"The hangover from last year's fourth-quarter highs in cocoa prices has come to roost, and the long-awaited cocoa grind data has confirmed the demand destruction widely reported by the industry in recent months," said Tracey Allen, agricultural commodities strategist at JPMorgan in a media report by the firm.

For Indian consumers, that global turbulence translates into stealthier price hikes. A bar that once weighed 55g quietly slimmed to 50g, and could soon dip further, all while the MRP stays the same.

Companies prefer this route over explicit price increases, given India's Rs 20,000-crore chocolate market is highly price-sensitive. Festive gift packs, multi-bar bundles, and premium chocolates are increasingly the focus for manufacturers, who can pass on higher cocoa costs under the garb of "special editions".

The strain is not unique to India. "The global chocolate market has seen a decline in volumes as prices increase, with private labels gaining market share among price-sensitive consumers, while the premium segment continues to expand," said Celine Pannuti, head of European Staples & Beverages at JPMorgan.

"With the chocolate industry set to raise prices potentially by the teens this year, we expect volumes to remain pressured," added Edward Hockin, part of JPMorgan's European Staples team.

Even though cocoa has cooled off recent highs, Indian shoppers shouldn't expect fatter bars or lower MRPs anytime soon. Shrinkflation will remain the go-to tool for chocolate makers. And with global analysts warning that cocoa prices will stay structurally elevated, your sweet indulgence is set to remain both smaller and pricier.

Relief may come from the world's biggest cocoa belt. West Africa, which supplies nearly 60% of global cocoa, is seeing improved weather after erratic rainfall and crop disease wrecked harvests last year. Increased rainfall in the Ivory Coast and Ghana is expected to boost yields in the 2025/26 season, while Ecuador is also expanding output.

"While very preliminary and highly weather-dependent, ongoing supply-side improvements are expected through the 2025/2026 season, with continued recovery across West Africa and ongoing expansion of production in Ecuador," Allen noted.

Despite this, JPMorgan still pegs its medium-term cocoa price forecast at $6,000 per tonne, structurally higher than historical levels until the market rebalances. Indian shoppers essentially may not see fatter bars or lower MRPs anytime soon, with shrinkflation remaining the go-to tool for chocolate makers. And with global analysts warning that cocoa prices will stay structurally elevated, your sweet indulgence may remain both smaller and pricier.