What Happens When Easter Clashes with Soaring Cocoa Prices?

Welcome back to another week of trading! This week, we’re gearing up for Easter festivities with a closer look at the chocolate industry. What’s the current commodity situation and which stocks might come out on top? After that, we’ll go over the top fundamental events for your trading calendar this week. Chocs away!

Cocoa at its peak

If ever we’ve seen a bull market, it’s cocoa over the last 12 months. Talk about crazy performance. If you’d invested 1,000 USD in Cocoa a year ago, it’d be worth 3,070 USD today. Just look at this chart…

Cocoa

12-month performance: +5,968 USD (+207.78%)

Cocoa (USD/T)

Source: Trading Economics

Cocoa, the primary ingredient in chocolate has long been a globally traded commodity, but you’d be hard-pressed to find a better time to trade the brown stuff. Prices are double the highest previous peak and that was back in 1979!

What’s driving this huge price hike? It’s mainly due to future supply fears because of tricky weather conditions in supplier nations.

But those fears have also already come true in regions of West Africa, like the Ivory Coast and Ghana. Farmers in those two countries produce about 60% of the world’s beans. Poor weather is affecting supply and that’s driven up prices.

Throw in the Easter Bunny and things get a little more interesting. How will demand respond to rocketing prices at what is the busiest time of the year? It’s going to be interesting…

Easter: The Champion of Choc

Easter reigns supreme as the chocolate industry’s main holiday. Statistics suggest that the period gobbles up as much as 75% of annual chocolate spending! That’s enough to make Willy Wonka blush.

This seasonal surge translates to big bucks for publicly traded chocolate companies (usually). However, the hike in cocoa prices has sent the price of our seasonal staples soaring.

The expectation (hope?) is that people will take the hit and continue to buy chocolate this Easter. So, if you’re a stock market enthusiast with a sweet tooth, here are a few of the big players to keep an eye on.

#1 Hershey Company (HSY)

Current price: 197.99 USD

Price (YTD): +6.66 USD

Price (1-year): -44.05 USD

YTD performance: +3.47%

HSY stock, YTD

Source: Google

An American giant, Hershey’s practically owns Easter in the US with their iconic Kisses and Reese’s Peanut Butter Eggs.

Over the last two decades, HSY shares have outpaced the broader markets, rising close to 657% after adjusting for dividends. Wow. To put that into perspective, in the same time period, the S&P 500 Index ($SPX) has returned less than 550%. It’s staggering.

In Q4 of 2024, Hershey reported sales of $2.66 billion, an increase of 0.2% year over year. This was lower than Wall Street projected sales to grow by (2% year over year). While sales fell below estimates, Hershey reported earnings of $2.02 per share in Q4, which was higher than estimates of $1.95 per share.

#2 Lindt & Sprüngli (LISN.SW)

Current price: 10,890 CHF

Price (YTD): +840 CHF

Price (1-year): +390 CHF

YTD performance: +8.36%

LISN stock, YTD

Source: Google

This Swiss chocolatier is synonymous with luxury, and their Easter offerings are no exception. Think beautifully crafted bunnies and exquisitely flavoured eggs.

Lindt & Sprungli reported a rise in annual profit earlier in March, as the Swiss chocolate maker managed to pass on higher ingredients costs to customers while maintaining volumes. Nice move!

Lindt, which makes Lindor balls, reported a 17.9% rise in net income to 671.4 million Swiss francs ($758 million) for the year to December. 31. In January, the company reported a 10.3% rise in organic sales for the year, as the post-COVID recovery in travel generated demand for higher-value products such as pralines.

#3 Mondelez International (MDLZ)

Current price: 72.40 USD

Price (YTD): -1.44 USD

Price (1-year): +3.36 USD

YTD performance: -1.95%

MDLZ stock, YTD

Source: Google

Mondelez is a multinational behemoth with a basketful of chocolate brands, including Cadbury, Milka, and Toblerone. Easter is a windfall for their diverse portfolio and it looks like it’s come at exactly the right time.

MDLZ stock has seen modest losses in 2024 so far but has been in a generally flat condition for the last year or so. For the fiscal year ending December 2024, Mondelez is expected to earn $3.51 per share, which is a change of 10% from the number reported a year ago.

Your turn!

How do you think consumers will behave during Easter 2024? Will they still reach for their favourite choccy treats, despite rocketing cocoa prices? Which of these companies will come out on top? We’re waiting for your prediction over on X at @_contentworks.

Top fundamental events week commencing 25/03

Here’s what’s coming up in a relatively quiet week this week.

Monday

No major events are planned.

Tuesday

● AUD — Westpac Consumer Confidence Change

● EUR — German GfK Consumer Confidence

● USD — Durable Goods Orders; CB Consumer Confidence

Wednesday

No major events are planned.

Thursday

● USD — GDP Growth Rate QoQ Final; UoM Consumer Sentiment Index

Friday

● EUR — French Inflation Rate YoY Prel

● USD — Personal Income; Personal Spending MoM; Core PCE Price Index MoM; Fed Chair Powell Speech

Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.

Speak soon!

The Contentworks team