UK food and drink inflation accelerated to 5.1% in August 2025, marking a fifth consecutive annual rise and the highest rate observed since January 2024. While a range of factors are driving up grocery bills—from energy costs to labour shortages—one of the most significant pressure points is the dramatic jump in cocoa prices. With consumers already reeling from higher utility bills and transport costs, the chocolate aisle is poised to feel the pinch more acutely as we head into the festive season.
Persistent food and drink price increases
Inflation in the UK’s food and drink sector has climbed steadily over the past year:
- 5.1% annual inflation in August 2025, highest since January 2024
- Previous forecast: could reach 5.7% by end of 2025
- Multiple categories affected: dairy, bakery goods, soft drinks
Part of the rise results from supply chain disruptions and energy price spikes, but the cocoa market’s turmoil is increasingly responsible for pushing confectionery and baked goods prices upward.
Cocoa’s meteoric price surge
Cocoa prices have soared from approximately £3,300 per tonne a year ago to around £5,000 today. At the end of 2024, prices peaked near £9,000, driven by severe supply constraints:
- El Niño weather events causing droughts
- Excessive rainfall in 2023 leading to pest outbreaks and pod rot
- Spread of swollen shoot virus in Ghana and Ivory Coast
These climate shocks have squeezed global production for the second consecutive year, prompting manufacturers to pass higher raw material costs on to retailers and, ultimately, shoppers.
Weather, pests and uneven harvests
The world’s top two cocoa producers, Ivory Coast and Ghana, have struggled to maintain output amid extreme conditions:
- Ivory Coast: 84% of the UK’s cocoa bean imports in 2024 (48m kg worth £135m)
- Ivory Coast harvest outlook: mixed but somewhat improved compared to 2024
- Ghana harvest outlook: less encouraging, with aging trees and slow replanting
- Climate readiness: high vulnerability in West African supplier nations
In March 2024, a record humid heatwave—exacerbated by climate change—followed by heavy rains, created ideal conditions for pests and disease, undermining pods before they could be harvested.
The backwardation effect on London markets
London’s cocoa commodity market is trading in backwardation, where spot contracts outstrip future prices. This unusual pattern reflects a tight near-term supply and heightened risk premium. By contrast, the New York cocoa market, more heavily reliant on South American beans, remains in contango, with future contracts priced above current levels.
Backwardation signals traders’ concern over immediate shortages, leading to a carry cost that accelerates price increases ahead of the next crop cycle.
Holiday shrinkflation: smaller bars, higher prices
As we approach the festive season, consumers should brace for “shrinkflation” in the confectionery aisle. Key trends include:
- Smaller pack sizes with minimal price reductions
- Retail prices maintained to shield profit margins
- Premium brands passing on significant cost hikes
Lindt & Sprüngli, for example, raised prices by 15.8% in H1 2025 to counter cocoa highs, while repositioning smaller gift boxes at unchanged price points.
Outlook for 2025–26
According to investor strategist Neil Wilson of Saxo UK, cocoa prices have cooled slightly from last year’s stratospheric levels, yet remain elevated by historical standards. Demand destruction in Europe and North America—reflected in grinding data—has improved balance somewhat, but structural issues persist:
- Farmers slow to replant aging trees
- Regulatory hurdles limiting new plantations in the EU
- Volatile weather risks keeping supply tight
With weather shocks unlikely to abate and global stocks at multi-year lows, cocoa could continue trading at £5,000–£6,000 per tonne well into 2026, sustaining food price inflation and forcing further adjustments in consumer behaviour.