Chocolates are displayed at the Wolfgang Candy Co. shop at the North York plant Friday. Wolfgang uses long-term planning "to avoid passing increased
Chocolates are displayed at the Wolfgang Candy Co. shop at the North York plant Friday. Wolfgang uses long-term planning "to avoid passing increased costs onto consumers," says CEO Ben McGlaughlin. (Bill Kalina photo)

Increasing consumer demand is making it a sweet time to sell chocolate.

But that increased demand is driving up costs, leaving consumers with a higher price to pay for their fix.

During the past 12 months, retail chocolate prices have increased 7 percent in the U.S., according to the National Confectioners' Association.

At the same time, the cost of ingredients to make that chocolate have increased. For example, prices for cocoa butter, which gives chocolate its smooth texture, have increased 70 percent during the last year, according to the National Confectioners' Association.

That spike is driven by the higher cost of cocoa.

"If I were to buy (cocoa) today, I'd pay 15 to 20 percent more," said Wolfgang Candy CEO Ben McGlaughlin.

Margaret Mirks of Manchester Township separates chocolate-covered marshallows on the Wolfgang Candy Co. production line Friday at the plant.
Margaret Mirks of Manchester Township separates chocolate-covered marshallows on the Wolfgang Candy Co. production line Friday at the plant. (Bill Kalina photo)

Prices are climbing because of a shortage of cocoa beans, and market experts predict supply won't meet demand this year.

Driving the shortage are dry weather conditions in West Africa, where most cocoa beans are grown, as well as growing demand in emerging markets, such as

Asia, Brazil and India, according to the National Confectioners' Association.

Though that shortage is driving the cost of ingredients, manufacturers are trying to spare consumers, according to the International Cocoa Organization.

The impact: Shoppers won't see shocking price tags while shopping for their Halloween candy, according to a Hershey Co. spokesman.

"This does not necessarily mean increased prices in finished chocolate products and certainly does not impact Halloween as those products have already been manufactured and distributed to stores," said Hershey spokesman Jeff Beckman.

Seasonal orders and wholesale pricing are typically set at least six months in advance, he said.

A lot goes into the cost of the finished product -- the price of ingredients, manufacturing, packaging and transportation. An increase in just one of those doesn't necessarily indicate an imminent price hike on a chocolate bar, Beckman said.

"To assume the current higher spot market price of cocoa automatically and immediately translates into a higher-priced finished product is inaccurate and would be misleading," he said.

Instead of simply increasing prices, the industry will have to either use less cocoa in their chocolate or reduce the size of their products, according to the International Cocoa Organization.

How long manufacturers can avoid passing on the full costs to consumers is unclear.

Demand continues to increase in North America. During the third quarter, cocoa grinding jumped 8.25 percent, according to statistics released Thursday by the association.

That growth follows increases all year, including an 11.77 percent gain during the second quarter.

The National Confectioners Association is predicting double-digit increases during the fourth quarter, when most Americans will be buying chocolate during the holidays.

'Unusual': "There have always been increases and decreases in the cocoa market, but something like a 20 percent increase is unusual," Wolfgang's McGlaughlin said.

Cocoa prices increased 21 percent during the third quarter, according to the U.S. Commodity Futures Trading Commission.

In the short term, it doesn't have as great an impact at Wolfgang.

"We buy well in advance," McGlaughlin said. "We look at things from a long-term perspective and use that to avoid passing increased costs onto consumers."

Even if it does get passed on, consumers seem willing to pay. Statistics show the largest growth is reported in more expensive categories, including luxury chocolate, dark chocolate and natural or organic products.

"Consumers are definitely buying more of the better-for-you varieties," McGlaughlin said.

At Hershey: Hershey has also noticed the trend and expanded its lineup to include dark-chocolate versions of Kit-Kat and Reese's Peanut Butter Cups. The candy maker has also added gourmet brands to its roster.

Earlier this month, Hershey announced it will build a $250 million manufacturing plant in Malaysia to meet growing demand for its products in its fastest-growing region.

"China in particular is growing faster than any other market," said Terence O'Day, senior vice president and chief supply chain officer for Hershey.

Once the new plant is complete in 2015, Hershey will have easy distribution access to more than 25 markets across Asia, he said.

The Asian market is expected to have double-digit growth in 2014, adding to the supply-demand deficit, according to the International Cocoa Organization.

But market analysis firm Euromonitor International credited dark chocolate lovers in the U.S. with the biggest demand.

It takes more cocoa beans to make dark chocolate than milk chocolate, the firm said in a press release.

Euromonitor analysts predicted 2 pounds of chocolate will cost $12.25 by the end of the year -- a 45 percent increase since 2007.

The firm estimates the global confectionery market is worth $110 billion and will grow more than 6 percent this year.

-- Reach Candy Wood all at cwoodall@yorkdispatch.com.