Dubai: Companies dealing in the sales and distribution of chocolate are finding it hard to keep the price of chocolate down after a sharp increase in the prices of its raw ingredients.

Fat'hi Khiari, director of Seville Products and Iffco, says the increase in sugar and cocoa prices has had a big impact on confectionary products.

"Sugar prices went up over 170 per cent last year and the price of cocoa increased from $800 [Dh2,938] per tonne to over $3,000 per ton in the last year.

"This has affected all our sugar confectionary products in terms of margins. So far we've been fine tuning our price increases so they are minimal; by 2 per cent to 3 per cent and we've been absorbing the loss, but we can only do this for a further six months.

"Then we'll have no choice but to increase prices significantly."

Running low

Leading industry experts announced at the sixth Dubai Sugar Conference held at the beginning of this month that after two years of surpluses, the sugar market is now in its second deficit year with stocks running low in a number of top producing countries.

The low production in Brazil and India, two of the world's top sugar producing countries, has been blamed on adverse weather.

Long-range forecasts suggest that the situation could continue at least until May, hampering harvest levels.

Expert analysis also points to huge trade flow deficits on both the raw and white sugar markets which could lead importers to a bidding war to secure limited supplies.

These deficits are expected to last until at least the fourth quarter of this year.

Indian cocoa prices on the other hand continue to surge with global prices retreating marginally from their 30-year highs reached in December.

Affected

Elias Hosh, general manager of L'Etoile chocolate based in Amman, said the increase in prices of sugar and cocoa has affected the prices of their products.

"We work on an order to order basis, but in general our prices have increased by around 6-7 per cent. I think the prices will continue increasing for the next year."

Elias Feghali, managing director of EMF Trading, the Middle East agent for Barry Callebaut which produces more than one million tonnes of chocolate and cocoa-related products each year, said product prices have increased by an average of 15 per cent.

However, he added, the price rises don't affect demand as such but the type of product customers opt for.

"In my experience it isn't the demand that drops. Instead I see customers opting for lower quality."

Khiari says despite price rises, the confectionary and chocolate industry is growing very fast.