Poor cocoa harvests in Africa due bad weather impacting growing conditions were a factor in hiked cocoa prices last year and into 2024.
Consumers worldwide were frustrated by price inflation, but Europeans were more understanding and less likely to leave the category over increasing prices, Mondelēz CEO Dirk Van de Put said in an interview at the Barclays Global Consumer Staples conference this week.
There was “more optimism” around higher prices in Europe as consumers had “good wage increases” alongside easing inflation. “Overall, the consumer feeling [in Europe] is good”, he said.
A good second half to Mondelēz’s financial year was expected, with new pricing in the market rolled out a month ago already showing positive results. Additional mechanisms would also be put in place soon to deliver further sales, including the launch of “new items at different price points” rather than general line price increases.
Will Mondelēz increase chocolate prices?
Line price increases would occur, but in steps to ensure consumers reacted in the “right way”, he continued. “Most consumers don’t want to give up chocolate on a regular basis[…] it’s an affordable luxury[…] if you paid €2 and now €3 it’s still affordable.”
Cocoa prices had come down “quite a bit from most recent historical highs”, said Mondelēz CFO Luca Zaramella, who added the market believed this year’s crop in Africa was “going to be quite good”, with yields up around “20-25% from what happened last year”.
Africa’s main coco crop was evolving well, with soil moisture at ideal levels and all the indicators showing “the supply side is quite good”, said Zaramella. “But still, there’s a few weeks [to go] so we can’t declare, but all indicators are good.”
Having some cost protection for the end of 2024 would signal a “material reduction in some cocoa pricing”, Zaramella added, saying light on what the cost of cocoa would be in 2025 would likely be shed in the business’s third-quarter financial report.
No cocoa formulation changes would be made to leading products including Cadbury and Milka, he confirmed.
“The chocolate category is the most loyal and best snacking category and we will be careful with pricing so as not to lose penetration,” he said, echoing Van de Put.
Mondelēz’s ambitious growth plans
If cocoa prices stabilised it would allow for more flexibility and “2026 should be a good year if this happens”, and where the business should have been without the recent inflation pressure, Zaramella added.
Mondelēz had ambitious growth plans, including opening up and expanding into new markets, such as developing further in Brazil, China, India and Mexico.
The business was targeting millions of new stores across its target countries, adding hundreds of thousands of listings in the first half of the year alone, said Van de Put.
Other areas of growth potential included in cakes and pastries, which Van de Put said Mondelēz had a right to move into as, in Europe, this category often sat alongside biscuits and other products in its portfolio.
“It’s a natural extension of the biscuit space and a fragmented, billion dollar market globally. We have a natural right to play in this space,” he said.