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Why chocolate may be a little pricier this Valentine's Day

Chocolate prices have risen 11% over the past year driven by surging cocoa costs (CC=F). The El Niño weather pattern has disrupted major cocoa-producing regions, causing supply shortages that have caused cocoa futures to spike dramatically.

Yahoo Finance's Brooke DiPalma breaks down the details.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video transcript

[AUDIO LOGO]

JOSH LIPTON: Well, it's Valentine's Day, and Americans are expected to spend $2.4 billion on candy alone. But it's costing more, as cocoa futures have spiked. Yahoo Finance's Brooke DiPalma is here with the details. Brooke.

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BROOKE DIPALMA: Good afternoon to you both, and Happy Valentine's Day.

ALLIE CANAL: Hi. Woo. I know none of us are in red or pink.

BROOKE DIPALMA: None of us are in red.

ALLIE CANAL: But it's OK.

BROOKE DIPALMA: That's OK. It's Valentine's Day. But really, what we're seeing here is the impact of cocoa futures soaring over 100% in the last year, and that's largely because of something we keep discussing, the impact of a climate pattern known as El Nino. And that's causing a lower supply of cocoa. It's also impacting the supply of sugar. And therefore, we are seeing chocolate prices rise. They're up 11% over the past year, according to NIQ, Nielsen data.

And that's not going away. Experts telling Yahoo Finance that it's going to be a couple of years of elevated chocolate prices, given the life cycle of trees that produce cocoa and the time it takes to plant new trees and then produce cocoa ultimately. But it's not really deterring customers here. We know that 57% of consumers plan to buy candy this holiday. That's the most that they're going to spend out of the other categories. And that's followed by things like typical things on Valentine's Day. You get greeting cards, flowers, an evening out, and maybe some jewelry there as well.

ALLIE CANAL: Hey, I mean, yeah, I vote jewelry, but I get candy. Candy is always nice.

BROOKE DIPALMA: Candy [INAUDIBLE]. It's definitely a bit of a lower price point, too.

ALLIE CANAL: Totally.

BROOKE DIPALMA: Despite these jumps.

ALLIE CANAL: Yeah, but these higher prices, they aren't impacting companies like Hershey's, Mondelez. They've actually been weighing in on how higher cocoa prices could impact their business. What have they been saying?

BROOKE DIPALMA: Yeah, a big topic in this past earnings quarter, or earnings season, you could say, prices for Hershey's North America, they jumped 7.2%. Ultimately, these companies taking higher prices because of these higher commodity costs. Hershey's exec said that cocoa is expected to limit earnings growth this year. They followed that by saying that the confection business is going to bear the brunt of the margin impact due to cocoa.

Mondelez, a similar anecdote. They said that cocoa prices are an issue. They said they're well covered for the year. But interestingly enough, they said that they're going to have to take another price increase in Europe because they face more inflation than any other market there. But chocolate pricing playing into Mondelez's 2024 revenue guidance. That's also expected to increase in the higher end range of 3% to 4%.

But largely, this is going to be baked in over the next year. Like I said, these prices are going to remain elevated in the coming years. And so this is not going away. So perhaps next Valentine's Day, well, we'll be talking about it again, guys.

ALLIE CANAL: Not too sweet for these companies.

BROOKE DIPALMA: Not too sweet at all.

JOSH LIPTON: That's good, Allie.

ALLIE CANAL: You know, I--

JOSH LIPTON: That's good.

ALLIE CANAL: I pride myself--

BROOKE DIPALMA: She's really playing into this.

ALLIE CANAL: I pride myself on my puns. Brooke DiPalma, thank you so much.