Summer and ice cream go hand in hand.
But what if that chilled treat ends up costing more right when the heat is at its peak?
An analysis by British business consultancy Rift found that prices of ice lollies and cones in UK supermarkets rose by 7.6 per cent in May.
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With the global ice cream market valued at $81 billion in 2024, there is a growing focus on what is behind these changing prices.
So, what’s pushing ice cream prices up, and which parts of the world are behind the impact?
We answer these questions:
Why ice cream prices are rising this summer
Coconut oil is an essential ingredient in many ice cream products, and its rising cost has pushed up ice cream prices this year.
As demand continues to be higher than supply, prices are expected to go up further.
Further price gains are likely as demand continues to outpace supply.
Last week, coconut oil from the Philippines, being sold wholesale in Netherlands’ Rotterdam, crossed $2,700 per metric ton. That’s almost twice the price compared to the same time last year and roughly 200 per cent higher than the average between 2000 and 2020.
The earlier peak was in 2011, when prices touched around $2,300, as per a Bloomberg column by Javier Blas.
Coconut oil is widely used in the food industry due to its high melting point. It helps ice cream, especially gelatos and varieties with hard shells, stay solid at room temperature without changing the taste or texture.
Ice cream is a major global industry. Last year, it brought in close to $80 billion in sales.
What is driving coconut oil prices up?
Coconuts grow best in tropical climates with plenty of sunshine and rain. But over the past year, weather patterns have disrupted this balance.
The El Nino phenomenon, which causes warmer sea surface temperatures across the Pacific, brought drier conditions to Southeast Asia from June to October last year.
This has had a direct impact on coconut production in Indonesia and the Philippines, which together supply about three-quarters of the world’s coconut oil.
Because coconut trees take around a year to bear fruit, the dry spell has resulted in smaller yields in 2024, reducing the available supply.
However, this decline alone was not enough to cause the sharp spike in prices. The bigger factor lies in a different part of the coconut market: biofuels.
In the Philippines, the government requires diesel to be blended with coco methyl ester, a fuel additive made from coconut oil.
At first, this policy had little effect on overall supply. But in October last year, the blending target was raised to 3 per cent, with plans to reach 4 per cent by late 2025 and 5 per cent by the end of 2026.
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Which countries should be watched?
The Philippines is the largest producer in this market, accounting for 45 per cent of the world’s coconut oil.
As the government shifts large volumes of coconuts into biofuel production, ice cream prices in the United States and Europe are expected to rise as a result.
If current plans are followed, the Philippines will divert around 4.5 billion coconuts to produce the 500 million litres of coco methyl ester needed to meet its biodiesel targets by late 2026, according to Bloomberg.
Indonesia, the second-largest supplier, contributes 28 per cent, followed by India at 13 per cent. The rest of the supply comes from about a dozen other tropical nations, including Vietnam, Bangladesh, Sri Lanka, Mexico and Ivory Coast.
Due to poor weather in 2023 and 2024, global production is expected to fall to 3.6 million metric tons in 2024-25, a drop of nearly 10 per cent from the previous season. Early estimates suggest that production will likely remain low in 2025-26 as well.
Are chocolates adding to the problem?
To cut costs and protect profit margins, more chocolate manufacturers are replacing cocoa with cheaper alternatives like coconut oil.
Even at current high prices, coconut oil remains more affordable than cocoa.
It is a common substitute for cocoa butter, especially in vegan and dairy-free chocolates.
This growing shift in the chocolate industry is adding further demand pressure to an already strained coconut oil supply.
