Chocolate Industry Faces Uncertain Future Amid Soaring Cocoa Costs
Barry Callebaut, a leading chocolate maker and cocoa processor, has reported a disappointing first quarter, with sales volume falling 2.7% to 565,000 tonnes. This decline was largely attributed to delayed orders as clients renegotiate product prices with retailers, amidst record high cocoa costs.
Cocoa Prices Reach Unprecedented Levels
The cost of cocoa, a crucial raw material for chocolate production, has skyrocketed to around 9,240 pounds ($11,379) per metric ton in London. Analysts predict that this trend will continue, leading to further price hikes of up to 10% or more. This increase is expected to have a significant impact on the chocolate industry, making 2025 a challenging year.
Barry Callebaut’s Shares Take a Hit
As a result of the disappointing sales volume, Barry Callebaut’s shares plummeted 4.3% to the bottom of Europe’s benchmark STOXX 600 index. Vontobel analyst Jean-Philippe Bertschy described the situation as “continued challenging” for the company.
Company Responds to High Costs with Bond Issue
To address the high costs and ensure liquidity, Barry Callebaut is issuing a bond worth 300 million Swiss francs ($331 million). Despite this, the company has reaffirmed its target for double-digit growth in recurring operating profit on a constant currency basis.
Industry Experts Weigh In
Analysts at Baader Helvea believe that the effects of the cocoa price increases are starting to show in Barry Callebaut’s results. They suggest that the category may not be as resilient as previously thought, and that investors may begin to question the long-term metrics of the business model.
Outlook Remains Uncertain
Barry Callebaut has revised its annual sales volume forecast, expecting a low single-digit percentage decline. While the company remains committed to its growth targets, the uncertain future of the chocolate industry looms large. As cocoa prices continue to soar, it remains to be seen how Barry Callebaut and its peers will adapt to this new reality.
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