Cocoa, like coffee or sugar, has been on the rise for months. An evolution that is taking profits from multinational food companies because, although they have skyrocketed their prices, they have ended up assuming that their customers’ pockets can no longer support any further increases. In addition, this situation is compounded by the growing trend towards healthier eating and the appearance of medications that reduce appetite, such as Ozempic and Wegovy. In this mix of factors, multinationals specializing in chocolate are choosing to merge. That is, because they are larger to absorb the blows better.
The next move could come from Mondelez International. The company behind brands such as Milka or Toblerone is analyzing the purchase of the American Hershey, according to the American agency. Bloombergalthough Hershey would not be up for the job, at least for the moment.
These are two business giants, although they are not widely known by name. Mondelez is worth more than 84 billion dollars on the stock market (almost 80 billion euros at the current exchange rate); and Hershey, after the negotiations broke out and its stock soared by nearly 20%, is close to 36 billion.
If they were together, Mondelez’s joint sales with Hershey would reach the equivalent of 47 billion euros. As a reference, Inditex – the Spanish multinational with the most value on the stock market – had a turnover of close to 36 billion last year.
At the moment, this operation is not closed, but if it is completed it would leave in their hands about 20% of the global chocolate market, according to calculations made by the US agency. Furthermore, it is not the first time that Mondelez has attempted this purchase, because it already tried to close it in 2016, although for much less money than Hershey is now worth, because, at that time, it offered close to $23 billion. Those negotiations failed because Hershey also did not agree with the terms of the proposal and preferred to continue alone.
Now, however, it seems that there is more swell in that company because, just a few hours after the negotiations broke out, Hershey announced the departure of the head of its business in the United States, Michael Del Pozzo, who had only been there for three months. the company and that it will return to another food giant, Pepsico.
If these two chocolate companies join together, they will star in one of the largest corporate operations of the year. There was already another millionaire in the sector, because a few months ago Mars, owner of the M&M’s and Snickers chocolate bars, closed the purchase of Kellanova, a spin-off of the Kellogg’s group, which in addition to cereals and bars was the owner of Pringles. In that case, the acquisition was close to $36 billion.
When that purchase closed, in the middle of summer, the president of Mars, Poul Weihrauch, stated in an interview with the agency Reuters that the reason for this union was to try to be a “bigger and stronger company” to “be able to absorb more costs and alleviate the problems” that the company has experienced “in an inflationary environment.”
As for the chocolate giants in Europe, steps are also being taken. A year ago, the Swiss group Nestlé closed the purchase of a Brazilian company specialized in “high-end” chocolates, the most expensive and those with the highest margin. With the purchase of the CRM group, it also gained control of a network of almost 1,000 stores.
A cocoa at its highest
Companies want to be bigger to better face the spiral of rising prices of cocoa that has been under tension for some time. Last spring, cocoa reached the highest price in its history, due to the drop in supply from the main producing countries, including Ghana and the Ivory Coast. In April, it reached $12,000 per ton.
Since then, it took a break and fell below $7,000 in October, but it has returned to the same upward path and is now above $10,000. A situation that leads one to think that it is not something specific, due to a bad year, but that the drop in production can be sustained over time.
The International Cocoa Organization assumes that both the 2023 and 2024 campaigns “have been affected by supply problems,” as explained in its latest report, which covers until the month of November. “World cocoa bean production” for this year’s campaign has concluded with “a significant reduction due to adverse weather conditions, diseases and pests that affected the main producing countries in West Africa.” Its latest estimate places production at 4,382 million tons, down from 5,000 the previous year, which was already one of the worst in decades.
This evolution of raw materials is also seen in the results of local companies. The Valor group, owner of the Huesitos and Tokke chocolate bars, has just published its evolution during the first half of fiscal year 2024. Between January and June, its income grew by 17% and stood at 165 million euros. However, its profit fell 11%, to 6.4 million. Valor recognizes that the fall “responds to the extra cost experienced in the acquisition of cocoa and derivatives, whose price reached historical highs of up to 300% in a few months” and affirms that “it has avoided passing on this increase in its entirety to consumers. Also, that “the tension in the cocoa market remains.”
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