Chocolate Demand Melts Away As Prices Rise

Sky News is taking a closer look at commodities, the raw materials which are bought and sold on markets around the world.

Although not strictly speaking a commodity, the core ingredients of chocolate - cocoa, sugar and milk - are. Here is what you need to know.

:: So why is chocolate demand falling?

We are still consuming a lot of chocolate in the UK - 11kg per person each year by some estimates.

That makes Britain one of the biggest chocolate eating nations out there, alongside Germany and Switzerland, data from the International Cocoa Organisation suggests.

But yes, demand is falling, dropping by 1% last year, according to data from market research firm Mintel.

The reasons behind this are twofold.

Firstly, the negative publicity surrounding sugar and its health implications "has not gone unnoticed by chocolate confectionery eaters, with 28% saying the high sugar content of chocolate makes them limit the amount they eat", Mintel said.

The other reason behind the slowing demand has been an increase in chocolate bar prices.

According to Euromonitor, North American chocolate prices per kilogram have risen by 27% over the last five years to $14/kg

Similar price increases have been witnessed across Europe.

:: If demand is falling why are prices rising?

Normally when demand falls economic theory suggest that prices should fall.

The reason this has not been the case with chocolate is because cocoa, the most important ingredient, has been rising in price.

London cocoa prices are 52% higher than they were this time last year.

:: Why are cocoa prices so high?

Essentially due to adverse weather conditions and fungi outbreaks in the few countries which grow cocoa beans.

Ghana, the world's second largest cocoa producer, has been affected by both, meaning output is around a fifth lower than last year, leading to the spiralling cocoa price.

Shortages are likely to persist as the cocoa season draws to an end in September.

Around 70% of the world's cocoa comes from West Africa so the commodity is very susceptible to price swings due to the weather or fungus.

The Ivory Coast, the world's biggest cocoa grower, goes to the polls in October and although the presidential election is likely to be peaceful, any uncertainty could spell further volatility for the coca market.

Finally, increased demand for dark chocolate, which requires higher concentrations of cocoa, from China and India is also bolstering prices.

:: I think chocolate demand will rise, how can I benefit from this?

Unlike fine wine, you can't or at least shouldn't stock up on this year's chocolate 'vintage' and store it in your cellar.

However, chocolate production is concentrated with a few major players and some have their stock listed on the public markets.

Mondelez, which is one of them, is listed in New York, and manufacturers well known brands including Cadbury's, Toblerone and Milka.

Its shares have risen 16.3% in the last year.