Biting cocoa prices have left a bitter taste in the mouths of chocolate makers such as Nestlé SA and Cadbury in India ahead of the Diwali festival, when demand for confections peaks.
The price of cocoa, which accounts for more than half of the input costs for making chocolates, has surged 21.5% since March as production shrank in West Africa, squeezing the margins of chocolate makers.
To make matters worse, the prices of other raw materials such as milk have also risen.
Chocolate makers fear that raising the price may dampen demand and encourage consumers to make gifts of traditional Indian sweets and nuts—rather than chocolates—during Diwali. Chocolate sales, estimated by market researcher Mintel at Rs.6,007 crore in 2013, typically receive a boost during the festival season.
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