Cocoa prices are hovering at historical highs, and Mondelez (MDLZ.US) warns that chocolate prices may increase by 50%.

The top management teams of the two global chocolate snack giants, Hershey Company (HSY.US) and Mondelez International, Inc. Class A (MDLZ.US), both stated that with the continuous rise in the price of cocoa, a major commodity, in recent years, chocolate manufacturers may further increase the prices of related snack products in the future. Cocoa prices have been soaring since 2024, currently hovering near historic highs, and Mondelez management expects the prices of chocolate snack products to rise by as much as 50%. Although the prices of chocolate snack products will unavoidably increase significantly along with cocoa prices, both chocolate giants anticipate that sales volumes will remain stable. At the same time, the rising cocoa prices have put immense pressure on the stock prices of both companies. Since 2024, both companies' stock prices have consistently underperformed the broader U.S. market - the S&P 500 index, but market expectations of price increases have led to a short-term rebound in stock prices. "We have taken and are taking proactive measures to address the current raw material price environment," said Hershey Company Chief Financial Officer Steve Voskuil during a speech at a consumer analyst conference in New York on Tuesday local time. Voskuil pointed out that with inflation remaining high, most of the candy products sold by the company in the U.S. market last year saw "double-digit growth in prices." Although the company traditionally does not comment on future price increases, he stated in the speech, "You can imagine, as we look ahead and monitor commodity trends, pricing will be very important to us." In another important speech at the same event, Mondelez International, Inc. Class A CEO Dirk Van de Put stated that as the manufacturer of Milka and Toblerone chocolate snack products, Mondelez is closely monitoring demand levels and preparing to implement decisions for "significant price increases". Van de Put added in his speech, "Consumers need to get used to chocolate snack products being 30%, 40%, or even 50% more expensive than in the past." He expressed that even with a substantial price increase, he expects sales volumes to remain stable. The pricing of chocolate snack products contrasts sharply with prices of other consumer goods. Under inflationary pressures, consumer resistance to price hikes has forced many retailers to stop raising prices or even offer discounts to clear overstocked inventory. However, with the price of cocoa in commodity markets nearly tripling over the past year, this has put significant pressure on companies like Mondelez and Hershey. Over the past six months, Mondelez's stock price has fallen by nearly 14%, while Hershey's stock price has dropped by about 17%. Boosted by expectations of price increases, as of Tuesday's U.S. market close, Hershey Company's stock price rose by 3.2%, reaching its highest level in over a month. Mondelez's stock price rose by about 0.6% on Tuesday. In 2024, Hershey Company's stock price fell by 6.5%, while Mondelez's stock price dropped by 15%, both significantly underperforming the S&P 500 index's increase of 24% during the same period. In 2024, the price of cocoa has outstripped all major commodities globally, surpassing even the gains in the U.S. stock market and Bitcoin. Due to decreased production in West Africa (the world's largest cocoa-growing region), there has been a massive supply shortage, causing prices to almost double and briefly reach a historic high of $12,000 per ton. The rapid increase in cocoa prices is driven by several factors. Firstly, adverse weather conditions and crop diseases in major production countries such as Ivory Coast and Ghana (which account for nearly 70% of global production) have constrained overall output. Additionally, low global stocks, soaring shipping costs, and years of underinvestment in cocoa cultivation have further exacerbated supply shortages. In the 2023-2024 cocoa season, the supply gap reached 478,000 tons, the largest shortfall in over 60 years. This marks the third consecutive year of a deficit in the global cocoa market, adding pressure to the supply chain. As we move into 2025, there is little indication that the supply tightness and fragile trading environment, which have led to the almost vertical trajectory of cocoa prices, will be quickly rectified. Record warm ocean temperatures globally have "further compounded the already fragile situation of West African cocoa crops, which have been impacted by two years of extreme weather."