Key takeaways:
- Cocoa reformulation is a technical challenge because the ingredient contributes flavour, colour, texture, viscosity and overall eating quality.
- Watching cocoa futures alone no longer provides manufacturers with an accurate picture of ingredient costs, as processing, currency and regulatory factors all influence pricing.
- The lessons learned from cocoa could soon apply to coffee, vanilla and nuts as climate, regulation and supply chain pressures continue to reshape ingredient markets.
Cocoa prices may have fallen from the record peaks reached in 2024, when futures briefly traded above $12,000 per tonne after spending years below $4,000, but few manufacturers believe the crisis is over. Climate pressures, geopolitical uncertainty, evolving regulations and fragile supply chains continue to create uncertainty around one of the food industry’s most important ingredients.
Manufacturers have spent the past two years making difficult decisions. Some absorbed unprecedented ingredient costs while others explored reformulation, alternative ingredients or new flavour strategies. Almost all discovered that reducing cocoa is far more complicated than simply removing an ingredient from a recipe.
The challenge stretches far beyond flavour. Cocoa contributes colour, texture, viscosity, aroma and overall eating quality. Even relatively small formulation changes can trigger new labelling requirements, particularly for businesses selling across multiple international markets. As a result, what initially appears to be a procurement problem can quickly become an R&D, regulatory and commercial challenge.
Cocoa isn’t just another commodity
According to Muriel Acat, president of French flavour company Prova, manufacturers need to rethink reformulation as a technical challenge rather than simply a procurement exercise.
She says one of the industry’s biggest misconceptions is that cocoa bean prices tell manufacturers everything they need to know about future ingredient costs.
“Many manufacturers struggle to understand the decorrelation between the cocoa bean price, which they can track on commodity markets, and the actual price of cocoa-derived ingredients,” she explains.
“The two do not move in tandem. Processing costs, currency exposure, origin premiums, and now the traceability obligations introduced by the EU Deforestation Regulation all mean that even when bean prices ease, ingredient costs may not follow at the same pace or in the same direction.”
Tracking cocoa futures alone won’t tell manufacturers what they’ll actually pay for cocoa-derived ingredients. Processing costs, currency movements, origin premiums and regulatory requirements all influence the final price.
“Manufacturers who build their procurement strategy solely around the bean price will consistently be caught off guard,” says Acat. “Building resilience means understanding the full value chain.”
Despite sustained inflation and genuine supply shortages, Acat believes the industry’s response has been remarkably resilient. “Despite an extended period of record-high prices and genuine supply scarcity, we did not see the widespread removal of chocolate products from shelves that many had predicted. Manufacturers absorbed pressure, adapted quietly and largely held their ranges intact, which is a testament to the importance of cocoa to both their portfolios and their consumers.”
Cocoa does more than deliver flavour
The crisis also accelerated experimentation with compound coatings, partial substitution strategies and flavour-led reformulations, although success varied considerably. Much of that came down to cocoa’s role within a formulation. “It contributes flavour and aroma, yes, but also colour and texture,” adds Acat. “The manufacturers who have come out strongest are those who used this period to build a more flexible formulation strategy, rather than simply waiting for the market to recover.”
Some bakery categories have proved considerably more difficult to reformulate than others.
According to Acat, compound coatings and bakery applications containing high levels of cocoa have presented the greatest technical challenges because cocoa performs a structural role within the finished product.
“These are high-cocoa-content formats where the ingredient plays a central structural role not just in flavour, but in viscosity, coating behaviour and finished product appearance,” she explains. “The reformulation challenge is therefore both technical and economic.”
An often-overlooked complication is labelling. Even relatively modest ingredient changes may require packaging updates or regulatory reviews, particularly for manufacturers supplying multiple export markets.
“Any meaningful change in formulation, even a partial substitution, can trigger a labelling review. For many clients, especially those operating across multiple markets with different regulatory frameworks, this is a significant constraint.”
According to Acat, that additional layer of complexity has slowed reformulation projects and increased development costs, even where technically viable alternatives exist.
She argues that successful reformulation isn’t simply about reducing cocoa usage. Instead, manufacturers should consider how flavour technologies can help optimise formulations while maintaining the overall eating experience. Cocoa-derived flavour solutions can reduce cocoa powder inclusion while preserving a product’s sensory profile and, in some applications, improve functionality by reducing dryness in bakery products, improving heat resistance during baking and enhancing solubility in beverages.
“The key message is that this is not simply a cost-reduction exercise. Done well, it is a genuine quality improvement and one that can be achieved without any consumer-perceptible change to the product they already know and trust.”
Demand for cocoa extracts has remained strong despite the market disruption. “What we hear consistently from manufacturers is that they value cocoa extracts not just for their cost positioning but for the depth, complexity and authenticity of the cocoa character they deliver.”
The next ingredient squeeze
Although cocoa has dominated industry attention, Acat believes manufacturers should already be preparing for broader ingredient volatility.
Coffee prices have climbed sharply, vanilla continues to face climate-related production risks, and nut markets remain vulnerable to harvest variability and geopolitical disruption.
“The broader volatility across all key raw material categories is currently being underestimated,” she says, adding that many of the lessons learned during the cocoa crisis can now be applied elsewhere.
“In coffee and nuts, the formulation logic is similar. Manufacturers can use flavour solutions derived from the raw material to optimise inclusion levels, manage cost and improve the sensory consistency of finished products.”
Vanilla presents its own challenges, particularly given continued climate pressures in Madagascar and the ingredient’s well-established seasonal price fluctuations.
Acat argues that resilience needs to be designed into product development long before markets come under pressure. “The industry needs to treat raw material resilience as a strategic priority, not a procurement problem to be solved reactively,” she emphasises.
Understanding every function an ingredient performs gives manufacturers more options when markets become volatile. The cocoa crisis has shown just how valuable that flexibility can be.
