Choc horror

Will sweet makers absorb massive price hikes? I should cocoa, says Leo Lewis

n a cruel blow to chocoholics across the world, 2003 is set to be the year that having a sweet tooth started to cost big money. Confectionery prices, including most of the favourite UK chocolate bars, are on the brink of soaring, say analysts, potentially by as much as 40 per cent.

Commodity markets have had a spectacularly volatile run over the past 12 months, but by far the biggest riser has been cocoa. Two consecutive bad harvests and a spate of unrest in the Ivory Coast have spooked markets and upset the balance of supply and demand. Cocoa prices have risen nearly 60 per cent since January, surging to 17-year highs and closing last week at $2,450 per tonne.

The big chocolate makers – Nestlé, Mars, Hershey and Cadbury Schweppes – have always used futures markets and the changing cost of other ingredients to shield customers from cocoa prices. But now, say industry insiders, cocoa has risen too far, too fast. The big four are shortly expected to hike wholesale prices of their leading brands.

Hershey, the US giant, is expected to be the first to make the move, and will be raising prices for the first time in six years. Mars will follow in an attempt to keep its margins at acceptable levels.

In Europe, the Swiss giant Nestlé has confirmed that it will be raising prices to reflect the commodity movements. Cadbury Schweppes, whose Dairy Milk is the most valuable confectionery brand in the world, is also understood by City analysts to be mulling a hike.

Food industry bodies have confirmed that tensions are running high since nobody is yet forecasting any relief from sky-high cocoa prices.