Cocoa Prices (CC=F) have been on the rise due to problems with cultivators in West Africa, climate change, and complexities involving futures markets in regards to supply and demand.
Master Chocolatier and Jacques Torres Chocolate Founder and CEO Jacques Torres joins Yahoo Finance to break down the situation with cocoa prices and what can be done to remedy the situation.
Torres elaborates on how he is coping with the high prices, saying, "We might put a little bit more inclusion into the chocolate," so adding extra nuts, for example, to offset the use of less chocolate. "If your almonds are a little less expensive than your chocolate, you're going to a little bit more almonds," he says.
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JULIE HYMAN: Cocoa prices are soaring to record levels amid supply constraints. The price surge placing cost pressures on chocolate makers. To take an inside look at the sweet and sour aspects of the world of confectionery, we have master chocolatier, Jacques Torres, founder and CEO of Jacques Torres Chocolate. Thank you so much for being here. Really appreciate it.
JULIE HYMAN: So everyone has been talking about these big increases in cocoa Prices and here on Yahoo Finance we have talked about it sort of from the commodity and from the market perspective, but obviously this is something that we may all have to deal with from the eating perspective as well if we're treating ourselves. How is this playing into your business? Have you had to raise prices as you've seen these costs go up?
JACQUES TORRES: OK. So first, thank you for having me. And thank you, Julie, to be able to talk to you. It's very worrisome, because we don't know where that's going we don't know if the price is going to go down. My belief is that $3,000, maybe even $4,000 a ton is not enough for the farmers. So if we have a correction and if the price go up, I'm not against it. That will make the farmer happier. And hopefully, they will not stop to grow cacao.
The problem with cacao is you have only to harvest a year. And there is some crops where you can harvest all year and maybe make more money. That's why some of the farmer will cut some trees to go to somewhere to something else. Cacao, especially in Ivory Coast and Ghana, are very sensitive to too much-- if you get too much water, you're going to get some disease that's going to develop into the tree. Or if you don't get enough water, that's what's going on now, first, they get hit by disease. And then no enough water, and we don't have enough cacao.
It look like we're going to miss between 20% and 25% of cacao this year. So it's very worrisome, because if we don't have enough cacao, of course, the price is going to go up. And it's going to be difficult to find supply. So I don't know-- yes, again very, very worrisome.
JOSH LIPTON: And Jack I mean you raising prices could be one lever. You could pull you could also, Jack, you could reduce the size of your product, you know, you could make smaller chocolates. Would that ever be a possibility?
JACQUES TORRES: What we do when we have a problem like that, we might put a little bit more inclusion into the chocolate. So let's say that you make a chocolate bar with almonds, with hazelnuts, with pistachios, with peanuts, with whatever you're going to put into this chocolate bar. You might add a little bit more almonds. So the weight of your chocolate bar will be exactly the same, but it will be more inclusion, IT will be more almonds, so whatever you're going to add into the chocolates.
We can do the same with the little bonbon in a box of chocolates. We can put a little bit more filling. It-- again, it's a question of balance, but it's also a question of economic. If your almonds are less expensive than your chocolates, you're going to put a little bit more almonds. So you're going to try to find a way to not cut the size of your product, but maybe change a little bit the composition to make the customer happy.
JULIE HYMAN: And Jack, I also wonder since your product is a more premium product, right, are you less vulnerable than some of the more mass market chocolate makers?
JACQUES TORRES: I think this is a very good question. We use a lot of chocolate from the America, so we will go to Central and South America to buy our cacao beans. It might be a little bit less volatile. But remember, if the bottom line chocolateS, the one from Africa, price rise, we're going to see the chocolate from the Americas arise also. The price will rise there also.
I buy my chocolates more than the future in Africa, because the beans that we use are more high end. It's just that there is less volatility, and we know a little bit more before we buy the price of the cocoa. And again, having only to harvest one big harvest and one smaller harvest in the world of cacao make-- doesn't make things easy. And I am for paying the farmer more, so they will keep growing cacao and we will be able-- we will be able to buy a good cacao on the market.
JULIE HYMAN: And then finally, Jack, outside of chocolate and cacao, I'm curious-- I mean, you've been at this game for a long time. Are there any new trends in ingredients that you're finding or methods that you're finding particularly exciting right now?
JACQUES TORRES: Look, I love to definitely to work with chocolates. And I love to pair chocolate with different things. I love the freeze dried fruits. They have a lot of flavor. I do love to work with candied fruits like candied oranges and candied ginger, products like that, which have a lot of flavor. And we can pair that with good quality chocolates. So that's something that I really love to do.
And again, we're going to have to find a way to pair chocolates with product that can make the price of the chocolates acceptable. Look, you don't have to eat chocolates every day. So if our chocolates become too expensive, we will sell a lot less. So we have to find a way to make the chocolates more affordable and keep with quality. I think that's the secrets be successful.
JULIE HYMAN: Well, whatever solution you come up with, I am now craving a treat. Jacques Torres, thank you so much. Really appreciate it.