It’s Valentine’s Day and that means – for one day only – sales of chocolates, wine and roses will increase exponentially.
Except this year, chocolate lovers may have to find another sweet treat to express their love.
The cost of chocolate is spiralling along with the price of cocoa. Even your big block of Cadbury’s is now over $8, while a 30-pack box of Ferrero Rocher is $30.
Of course, chocolate is still cheaper than a bouquet of roses, so maybe chocolate is the way to go on Valentine’s Day. The best thing to do today is to always buy what your heart tells you (bearing in mind your heart will also tell you not to overindulge on sugary foods).
Commodity rising
Now we all know Valentine’s Day has been commoditised.
Looking at chocolate, or cocoa specifically, as a commodity, the rise in chocolate prices won’t affect the stock market too much.
Global Market Insights estimated the global chocolate industry’s value at $125 billion in 2024. Between 2025 and 2034, the market is projected to expand at a compounding annual growth rate of approximately 3.3%, driven by consumer demand for indulgent products, premium offerings, and health-conscious alternatives such as dark and organic chocolate.
The US Department of Agriculture (USDA) reports that global cocoa consumption reached 5.05 billion metric tons in the 2022-2023 season, reflecting growing demand for premium chocolate products.
A few multinational corporations dominate chocolate production and distribution. Mars, the world’s largest chocolate manufacturer, remains privately owned by the Mars family and produces well-known brands such as Snickers and M&Ms.
Chocolate stocks have delivered strong returns, attracting investor interest. As of February 7, 2025, the cocoa industry posted a 12-month return of 86.69%, with gains of 56.15% over three years, 28.19% over five years, and 13.71% over a decade.
According to the World Bank, cocoa prices surged 30% in December, reaching nearly $10 per kilogram due to supply concerns. A combination of strong seasonal demand and adverse weather in West Africa contributed to the increase. Global cocoa production fell by 14% in the 2023-24 season, dropping from 4.9 million metric tons in 2022-23 to 4.2 million metric tons. Ghana and Côte d’Ivoire, which produce approximately 60% of the world’s cocoa, saw significant declines.
Supply conditions are expected to improve in the 2024-25 season, particularly in Côte d’Ivoire, where favourable weather could boost production by up to 17%. As more cocoa enters the market, prices are projected to decline by 13% in 2025 and a further 2% in 2026. However, potential weather disruptions in West Africa pose an upside risk to prices.
JP Morgan notes that supply shortages and underinvestment in cocoa farming continue to drive prices higher. While an improved crop is expected in 2024-25, cocoa prices are forecast to remain elevated, stabilising around $6,000 per tonne. This sustained increase could push up confectionery costs in 2025.
Choc stocks to watch
1. The Hershey Company (NYSE:HSY)
The Hershey Company, a renowned US-based chocolatier, is behind some of the world's most popular confections, including Reese’s, Almond Joy, Heath, Milk Duds, and York mint patties. Beyond chocolate, Hershey offers a diverse range of baked goods.
Over the past decade, Hershey’s global expansion has driven a 50% increase in total sales, supported by strong brand loyalty in North America. The company has also maintained a consistent dividend growth trajectory, making it an attractive option for income investors.
2. General Mills, Inc. (NYSE:GIS)
General Mills, known for its strong North American presence, capitalised on increased home cooking trends during the pandemic. In fiscal Q2 2025, the company reported revenue of $5.24 billion, a 2% year-on-year increase, surpassing analyst expectations by $97 million. Operating profit surged 33% to $1.1 billion, largely due to higher gross margins and the absence of a prior-year goodwill impairment charge.
On January 28, 2025, the Board declared a quarterly dividend of $0.60 per share, payable on May 1, 2025, to shareholders on record as of April 10. General Mills and its predecessor have maintained uninterrupted dividend payments for 126 years.
3. The Kraft Heinz Company (NASDAQ:KHC)
Despite challenges since its 2015 merger, Kraft Heinz is refocusing on core products. The company reported a mixed Q3 2024, with revenue declining 2.85% year-on-year to $6.38 billion, yet gross profit margin improved by 20 basis points to 34.2%. Strong cash generation remains a positive factor, with year-to-date operating cash flow rising 6.7% to $2.8 billion and free cash flow up 9.7% to $2 billion.
4. Mondelez International, Inc. (NASDAQ:MDLZ)
Mondelez, owner of brands like Oreo, Cadbury, Chips Ahoy!, and Milka, has expanded its chocolate business with acquisitions such as Hu (2021) and Mexico’s Ricolino (2022). In 2024, the company delivered a strong financial performance, with organic net revenue growth of 4.3%, adjusted gross profit growth of 5.1%, and a 13% rise in adjusted earnings per share (EPS). Mondelez also returned $4.7 billion to shareholders and generated $3.5 billion in free cash flow.
The company has made significant strides in sustainability, sourcing 90% of its cocoa through its Cocoa Life program and cutting carbon emissions by 38% since 2018. Mondelez also increased its market share across 50% of its revenue base, with notable gains for Cadbury Dairy Milk and Milka.
5. Kellanova (NYSE:K)
Kellanova, formerly Kellogg’s global snacking division, became an independent entity in October 2023. It owns major brands such as Pringles, Cheez-It, Pop-Tarts, and RXBAR. Despite currency fluctuations impacting net sales, Kellanova delivered double-digit operating profit growth in Q4 and full-year 2024, driven by margin expansion and strong sales outside North America.
The company will not provide forward-looking guidance due to its impending acquisition by Mars, Incorporated, expected to close in the first half of 2025 for approximately $36 billion.
6. Nestlé (SWX:NESN)
Nestlé is a dominant player in the global chocolate market, holding rights to Butterfinger, Milky Way, and KitKat outside the U.S. In late 2023, it acquired a majority stake in Brazilian chocolatier Grupo CRM, owner of Kopenhagen and Brazil Cacau.
Although Nestlé's growth prospects are moderate, it remains a staple in consumer goods and offers consistent dividend payouts, making it a reliable option for income-focused investors.
7. Lindt & Sprüngli (SWX:LISN)
Lindt & Sprüngli, owner of Lindt, Ghirardelli, Russell Stover, and other premium brands, stands out for its global retail presence. Since acquiring Russell Stover in 2014, Lindt has expanded its US market leadership, with total sales rising 50%. While dividends remain modest, its high-growth trajectory makes it a compelling investment in the premium chocolate sector.