Businesses face the problem of the more they work, the more they lose.
Talking to reporters of Cong Thuong Newspaper, Mr. Hoang Danh Huu - CEO of EDE Farm Service Trading Company Limited (owner of the Miss Ede brand) - said that businesses are struggling because input materials are increasing, and businesses want to increase prices but do not know how.
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| Cocoa supply in Vietnam this year is about 1,500-2,000 tons, down more than half compared to before. (Photo: Ethnic and Development Newspaper) |
In addition to the price increase, the current time is also the end of the cocoa season, the epidemic is raging in Vietnam and North Africa, causing cocoa production to decrease. Small businesses like Miss Ede do not dare to import more raw materials during this period to stock up because the price is too high compared to reality. High raw material prices push up production costs, the more businesses work, the more they lose.
In the context of the current high price of input materials, businesses are forced to "bear the brunt" and produce only the orders that they have connected with or signed long-term contracts to retain customers. At this time, it is very difficult to boost production. The more production, the greater the loss businesses will face.
“We are forced to increase production of products with a lower proportion of cocoa ingredients, for example, processed cocoa products including milk and sugar, the cocoa ratio will be 40% less than pure cocoa. At that time, the business will still retain a small profit to maintain. As for the case of original chocolate bars (using all cocoa ingredients), it will be very difficult,” said Mr. Hoang Danh Huu.
Compared to this time last year, cocoa prices have increased by about 4-5 times. The output price of the business has also been adjusted up a little, however, it is difficult to exceed 10%, because consumers do not accept too much price increase of a product. Miss Ede's sales partners are also afraid if the manufacturers adjust the price too much.
Not only small businesses, but also large confectionery manufacturers are facing the problem of rapidly escalating cocoa raw material prices.
“Orion, with the best-selling ChocoPie product in Vietnam, said that the current rising price of cocoa materials has greatly affected product costs. We are still trying to shoulder this cost to maintain stable prices for consumers,” said an Orion representative, adding that, however, increasing cost pressure makes it difficult to maintain current prices.
A representative of Saigon Co.op also said that price increases are inevitable when raw materials for chocolate production are escalating. This situation also affects international companies such as Hershey, Mars, Ferrero and Mondelez. They try to maintain prices thanks to reserves, but these companies warn that from 2025, cocoa prices may increase sharply, forcing them to adjust their product prices.
Wait for the new crop, the price will not increase further
According to the report of the Department of Crop Production ( Ministry of Agriculture and Rural Development ), in 2022, Vietnam will have about 3,400 hectares of cocoa cultivation, with an output of nearly 5,300 tons. However, this year's supply is about 1,500-2,000 tons, down more than half compared to before because many farmers have switched to growing other crops.
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| Cocoa prices hit record high, confectionery businesses struggle to fight losses. (Photo: Ethnic and Development Newspaper) |
Puratos Grand-Place Vietnam representative said that the company is currently purchasing about 70% of Vietnam's cocoa output. Compared to the company's cocoa processing plant's capacity of 2,000 tons/year, the current supply is not enough for the company to maintain the factory's operations, so the company is currently having to import additional sources of beans from other neighboring countries in the region and Africa to ensure the factory's capacity.
In the context of the sudden increase in cocoa prices, a representative of Puratos Grand-Place Vietnam said that this is causing many difficulties for businesses in ensuring that the supply of raw materials (cocoa beans) is not interrupted as well as the selling price of the Company's products does not fluctuate too much, affecting the business activities of customers in the Vietnamese market.
Since the beginning of the year, Puratos Grand-Place Vietnam has had to increase prices for chocolate and cocoa products more than once. Depending on the specific product code, the increase is about 20-30%. Compared to the increase in cocoa prices on the world market (ICE London), there was a time when it increased by more than 250% in mid-April 2024 compared to the fluctuating price in mid-January 2024. The company has made great efforts to utilize its reserve raw materials and accepted to cut profit margins to help stabilize product prices to avoid major impacts on the business activities of customers who are accompanying the Company.
According to data from the International Cocoa Organization (ICCO) and the World Bank (WB), three years ago, cocoa prices were around $2,300-2,500 per ton. In the first four months of this year, the raw material increased to $11,000 per ton, four times higher than the same period in previous years. This increase was mainly due to severe crop failures in many producing countries, which account for the majority of global cocoa output, such as Ivory Coast and Ghana. By September 19, cocoa prices had dropped to $8,000 per ton, but were still nearly three times more expensive than the same period last year.
In Vietnam, the purchase price of this agricultural raw material from farmers has doubled compared to last year. Growers in Ben Tre and Dak Lak said that each kilogram of dry cocoa fluctuates between 150,000 and 160,000 VND, sometimes even up to 210,000 VND.
Cocoa prices have increased, benefiting growers. However, for many cocoa farmers in Dak Lak, their planting area has shrunk by nearly half compared to before due to switching to crops such as durian, jackfruit... with higher value and profit.
The increase in input material prices has pushed up production costs, leading to an increase in output prices. This means that consumers may have to buy more expensive chocolate products at the end of the year and during the Lunar New Year. According to a representative of the Ho Chi Minh City Department of Industry and Trade, for items on the price stabilization list, businesses can propose to the management agency to adjust prices when input costs increase by 3-5%. However, confectionery is not on this list, so businesses have the right to decide on their own selling prices based on the actual situation.
“Currently, chocolate businesses not only in Vietnam but also around the world are facing huge risks in terms of costs. If they only sell original chocolate, the more they sell, the more they will lose. In about 2 months, the cocoa crop will enter a new season. Miss Ede hopes that when the purchase season comes, the price of cocoa will not increase any further,” Mr. Hoang Danh Huu shared.
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