Cocoa prices have tumbled. Chocolate prices haven't
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Wholesale cocoa prices have plunged 70% from their late 2024 peak. But don't expect cheaper chocolate any time soon.
Why it matters: Chocolate sellers' reluctance to cut consumer prices, despite a collapse in the price of their key input, illustrates how corporate pricing decisions often work.
Between the lines: Companies really, really want to avoid lowering consumer prices.
Case in point: U.S. chocolate candy giant Hershey told analysts late last month that despite the drop in cocoa, the company sees "no change in the pricing environment."
- Why? Companies typically don't cut prices unless competition or economic conditions force them to. And that's largely because of another big factor: consumer inertia.
- Along with market power, academics say inertia — driven by shopper reluctance to switch brands or merely by inattention to prices — is a powerful force for companies seeking to keep prices elevated.
How it works: Companies would prefer not to wake such shoppers from their cart-filling stupor. And some theorize that overt price changes are some of the top triggers for consumer behavior shifts.
- Companies saw a lot of that during the post-COVID inflation, when rising prices angered people and prompted them to make a change to their typical basket.
- But it can work the other way as well. Some research shows that far from being a discrete decision — a price cut can "train" customers to expect further discounts to come. That potentially puts prices — and profits — in decline for a longer period than one might expect.
- Companies sometimes prefer to pass along some of their windfall from falling input prices to consumers in oblique ways.
The intrigue: After getting criticism for recipe changes for some candies, Hershey recently announced it was changing some of those products to higher-cocoa-content "dark chocolate" formulations, though a spokesperson for the Hershey Company tells Axios that the decision was "not driven by cocoa prices."
What they're saying: "We don't take pricing lightly," Allison Kleinfelter, head of communications at Hershey, wrote in an email to Axios.
- "We absorbed unprecedented cocoa costs for two years before taking pricing in 2025 that didn't fully cover those costs. Cocoa markets remain volatile and elevated, and our plan is to recover those costs over the next few years while keeping our brands affordable and accessible."
