Sky-high cocoa prices are beginning to leave a bad taste in investors’ mouths, with confectionary giants Mondelez (MDLZ) and Hershey (HSY) hit by an analyst downgrade and Swiss chocolate maker Barry Callebaut cutting guidance for 2025.
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Barry Callebaut said Wednesday, January 22nd, that its sales volume fell 2.7% to 565,000 tons in its Fiscal first quarter of 2025, which ended on November 30th. The was below analyst forecasts for 568,000 tons.
As such, management said they expect the annual sales volume to fall by a low single-digit percentage, having previously forecast flat cocoa sales volume for the year.
Nevertheless, the company reaffirmed its target for double-digit growth in recurring operating profit as it reported sales grew 63.1% as it passed through the bulk of the 70% rise in cocoa prices. Shares of Barry Callebaut, which supplies Unilever and Nestle (NSRGY) among others, fell more than 6% in Switzerland.
HSY, MDLZ Downgraded
U.S. companies have also been affected by the surge in cocoa prices putting pressure on cocoa processors and chocolate makers.
Jefferies lowered its price target on HSY to $134 from $150 and kept an Underperform rating on the shares. The firm believes another supply deficit year would keep cocoa prices elevated for longer. HSY stock has fallen 16% in the last year.
The firm also downgraded MDLZ, which owns the Cadbury brand, from Buy to Hold, as it cited persistent challenges in cocoa production, particularly in West Africa, keeping prices higher for longer. Shares have already fallen 19% in the last year amid the surge in cocoa prices.
Bad weather and disease hit production in Ghana and Ivory Coast, which are said to have faced a shortfall of approximately 675,000 tons compared to the previous season.
The analysts warned that “another deficit year would keep cocoa prices elevated for longer.”
Lindt last week said it would hike prices again in 2025 to pass on record high cocoa prices to customers.
Is MDLZ a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on MDLZ, based on 14 Buys and five Holds.The average MDLZ price target of $73.76 implies around 28% from current levels, with the shares down 19% in the last 12 months.
