The Cost Pass-Through in the Swedish Chocolate Industry

Abstract: There are many factors - such as manufacturing costs, margins and market demand - that play a part in setting the consumer price of chocolate. Manufacturing costs and margins are however the base for the price setting. The most important commodity in chocolate production is cocoa. Data sets of different chocolate prices were used to determine the impact of changes in commodity costs on the retail prices of chocolate. Due to unavailable data, variables had to be left out and the regressions failed to give a reliable answer to the problem. It could however be seen that cocoa cost pass-through was small and there was no evidence of a quicker response in chocolate prices to increases than to decreases in costs. The main conclusion of the study is that the cost pass-through of cocoa is rather small.