Mondelez, Hershey, Nestle stocks retreat as cocoa prices surge

By:
on Mar 29, 2024
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  • Cocoa price has surged to over $10,000, its all-time high.
  • It has jumped by more than 340% from its lowest point in 2022.
  • Mondelez, Hershey, and Nestle stocks have retreated recently.

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Mondelez, Hershey, and Nestle stock prices have retreated as concerns about the cocoa market intensified. Nestle, the giant Swiss giant, retreated to CHF 95.55 on Thursday, 18% below its highest level in 2023. It has become one of the worst-performing companies in the Swiss Market Index.

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Similarly, Mondelez stock has crashed by over 8.85% from its highest point this year. Hershey’s share price has dived by over 28% from its 2023 high, meaning that it has moved into a deep bear market.

Nestle vs Mondelez vs Hershey stocks

Cocoa price is surging

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These three firms are some of the biggest cocoa buyers in the world. Hershey makes chocolate products like Lilly’s and KitKat while Mondelez manufactures the likes of Cadbury, Alpen Gold, and Freia. 

Nestle, the biggest food company in the world, is also a big player in the chocolate market. Its chocolate division generated over 6.2 billion CHF in 2023, making it the biggest part of its confectionery division. 

Therefore, there is a likelihood that these companies will be affected as the price of cocoa goes parabolic. Cocoa surged to over $10,000 this week, its highest level on record. This is a remarkable surge considering that cocoa was trading at $2,182 in 2022. It has soared by over 350% from its September 2022 low.

Cocoa price is surging because of the ongoing supply concerns in key Western African companies like Ghana and Ivory Coast. These countries are seeing substantial supply challenges because of weather and disease-related woes. Also, most cacao trees are old, which is reducing their yield.

The challenge for cocoa is that, unlike other agricultural commodities, cacao plants take a long time to mature. It can take up to six years for a newly planted cacao tree to start producing these beans.

Chocolate prices to go up

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Further, as I wrote in my article on coffee, there are concerns that cocoa will be affected by the recently passed European laws. Basically, Europe wants to ban agricultural products that are sourced from countries with deforestation rates.

Therefore, there is a likelihood that these three companies will see thinner margins in the next few quarters as cocoa prices rise. They will likely offset this price increase by rising prices for their products. In the recent earnings statement, Mondelez said:

“So the first one would certainly be the cocoa prices and our need to price as needed. We are well covered for the year, but we need to, mainly in Europe, get those prices agreed.”

Hershey shared this sentiment in its last financial results. In a note, Michele Buck, the Chairman and CEO said:

“So given where Cocoa prices are, we will be using every tool in our toolbox, including pricing as a way to manage the business.”

These companies are still contending with higher sugar and coffee prices. The most recent data shows that the price of sugar has remained at an elevated level. The same is true with coffee, which is contending with drought in Vietnam and EU regulations.

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