# Chocolate prices are falling.  So why aren't chocolate prices falling?

Source: https://www.youtube.com/watch?v=Gl3MO9dsJ_A
Recap page: https://rapidrecap.app/video/Gl3MO9dsJ_A
Generated: 2026-03-13T10:33:41.309+00:00

---
## Quick Overview

Chocolate retail prices remain high despite a 70% plunge in cocoa prices because large manufacturers hedged their cocoa exposure months in advance at elevated 2023 prices, meaning consumers won't see lower prices until these hedges roll off, likely in late 2026 or 2027, while companies simultaneously employ shrinkflation and skimpflation to maintain high profit margins.

**Key Points:**
- Cocoa prices have plunged approximately 70% since their peak, yet retail chocolate prices have not decreased.
- Largest manufacturers hedged their cocoa exposure months in advance using inventory locked in at last year's elevated prices.
- Consumers will not feel the price difference until these hedges expire, which analysts predict will be late 2026 or more meaningfully in 2027.
- Manufacturers are defending profitability through shrinkflation (reducing product size) and skimpflation (using inferior ingredients, like replacing cocoa butter with other fats).
- Brad Reese, grandson of H.B. Reese, is leading a campaign against Hershey for replacing milk chocolate with compound coatings in products like Reese's Mini Hearts.
- Nestle reported an 80-basis point improvement in gross profit margin despite high cocoa and coffee costs, driven by recipe reformulation and efficiency programs, delivering over 1.2 billion CHF in efficiencies.
- China is noted as the only place where candy buyers can still get real chocolate, as Western manufacturers have replaced high-quality milk chocolate with cheaper alternatives.

![Screenshot at 0:08: The video introduces the core issue by stating that while most of the world's cocoa comes from West Africa, Chinese firms now have first option to buy cocoa that previously went to Europe and North America, setting the stage for the analysis of Western chocolate pricing.](https://ss.rapidrecap.app/screens/Gl3MO9dsJ_A/00-00-08.jpg)

**Context:** This video discusses the disconnect between the drastic drop in global cocoa commodity prices and the stagnant or increasing retail prices for chocolate products in Western markets, primarily the US and Europe. The analysis centers on corporate hedging strategies and the use of shrinkflation and ingredient substitution (skimpflation) by major confectioners like Hershey and Nestle to maintain profitability despite falling input costs.

## Detailed Analysis

The video explains that despite a massive 70% plunge in cocoa futures prices, retail chocolate prices remain high due to manufacturers employing aggressive hedging strategies. Large manufacturers locked in their cocoa supply months in advance at the previous high prices, meaning consumers will not see price relief until these hedges expire, estimated to be late 2026 or 2027 for most major players. Simultaneously, companies are using 'shrinkflation' (reducing product size while keeping the price the same) and 'skimpflation' (using inferior ingredients) to maintain profit margins. Brad Reese, grandson of the inventor of Reese's Peanut Butter Cups, is leading a campaign against Hershey for substituting milk chocolate with cheaper compound coatings, noting that his ancestor's original product identity is being eroded. Furthermore, Nestle's 2024 full-year results transcript shows an 80-basis point improvement in gross profit margin, partially offset by commodity price increases, achieved through recipe reformulation (saving $500 million) and logistics network redesign. The speaker concludes that only in China can consumers still find genuine milk chocolate, as Western companies are actively replacing high-quality ingredients with cheaper alternatives.

### Cocoa Price Action and Retail Lag

- Cocoa prices fell sharply by 70% from their peak
- Retail chocolate prices have not decreased due to manufacturers sitting on inventory locked in at last year's elevated prices
- Consumers won't see price relief until hedges roll off, likely late 2026 or 2027

### Corporate Profit Protection Tactics

- Manufacturers are defending profitability using shrinkflation (smaller packages for the same price) and skimpflation (using cheaper, inferior ingredients)
- Brad Reese is campaigning against Hershey for replacing milk chocolate with compound coatings and peanut butter-style crèmes

### Industry Earnings Context (Nestle)

- Nestle reported an 80-basis point improvement in H2 gross profit margin despite high cocoa costs
- Efficiencies came from recipe reformulation ($500 million) and enhanced technology/logistics programs
- This profit is achieved despite commodity price increases offsetting efficiency gains

### Geographic Divergence

- China is noted as the only place where candy buyers can still get real chocolate
- Western companies are replacing high-quality milk chocolate with cheaper alternatives

![Screenshot at 0:08: Embedded YouTube thumbnail showing a previous segment discussing chocolate prices hitting records as Ghana, Ivory Coast, and China cut out Western firms.](https://ss.rapidrecap.app/screens/Gl3MO9dsJ_A/00-00-08.jpg)
![Screenshot at 0:37: Chart displaying the sharp, sustained decline in New York Cocoa futures prices \(ECC/E\) throughout 2023 and into early 2024, illustrating the 70% plunge.](https://ss.rapidrecap.app/screens/Gl3MO9dsJ_A/00-00-37.jpg)
![Screenshot at 2:53: Image of Brad Reese, grandson of H.B. Reese, wearing a Reese's branded shirt, juxtaposed with text detailing his objection to ingredient changes.](https://ss.rapidrecap.app/screens/Gl3MO9dsJ_A/00-02-53.jpg)
![Screenshot at 4:27: Side-by-side comparison of old Mr. Goodbar packaging labeled "milk chocolate with peanuts" versus the new packaging labeled "chocolate candy with peanuts."](https://ss.rapidrecap.app/screens/Gl3MO9dsJ_A/00-04-27.jpg)