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- The increase in sugar and cocoa prices is affecting the margins of large confectioners
Major confectionery companies may see investors spooked after posting negative returns so far in 2024, with many no doubt hoping for a Halloween boost to get them back on track.
Despite hoping for a much-needed seasonal rebound later in the year, Etoro’s candy basket has fallen two percent so far this year, compared to 21 percent growth in the S&P 500 over the same period. .
The Etoro Candy Basket is an equally weighted index of the top eight candy producers by sales.
Seasonal boost: Pastry chefs are betting on a sales boost starting with Halloween and Christmas
Over the past five years, candy makers have returned just five percent on average, according to Etoro data.
This lags far behind the 95 percent return achieved by the S&P 500 over the same period and the 72 percent growth of the MSCI World Index.
In the last 12 months alone, these companies have fared even worse, falling four percent, while the S&P 500 rose 34 percent in comparison.
Sam North, market analyst at Etoro, said: ‘Confectionery stocks face a challenging period. Rising cocoa and sugar prices have squeezed profit margins, while supply chain disruptions have led to increased production and distribution expenses.
‘Inflation and the rising cost of living have also affected consumers’ purchasing power, making it more difficult for people to spend money on non-essential items such as chocolates and bars.
“Market saturation has also made it difficult for companies to maintain growth and profitability.”
However, contrary to an otherwise worrying trend, some companies have delivered more positive returns and, in turn, have contributed to improving figures for the sector as a whole.
Mondelez, producer of Cadbury, Milka and Toblerone, has experienced a fairly muted period recently, returning three per cent in the last twelve months, but has enjoyed growth of 28 per cent over a five-year period.
Sweets: Mondelez has invested heavily in developing low-calorie product options
Similarly, American chocolate maker Hershey has grown 22 percent in five years, but has also suffered more recently. While it lost four percent over the past year, the brand has regained three of those percentage points since January.
Swiss brand Lindt is the biggest long-term winner, having gained 30 percent over the past five years and four percent this year so far.
However, the outlook has been bleaker for Swiss giant Nestlé. The company is down about 14 percent this year so far and 22 percent over the past five years.
The company’s nine-month underlying sales rose just two percent and below expectations, leaving its full-year forecast sales up just two percent, its “lowest rate since the turn of the century.”
| Country | Stock | Brands | Returns to date | Returns 1 year | Returns 3 years | Returns 5 years |
|---|---|---|---|---|---|---|
| US | mondelez | Cadbury, Oreo, Milka, Toblerone, Trident, Chips Ahoy!, Sour Patch Kids, Halls | 1% | 3% | 23% | 28% |
| US | Hershey | Hershey’s, Reese’s, Kit Kat (US), Twizzlers, Jolly Rancher, York, Almond Joy | 3% | -4% | 12% | 22% |
| Swiss | Be protected | Smarties, Aero, Rolo, Kit Kat (outside US), Lion, Toffo, Milkybar, Quality Street | -14% | -19% | -25% | -22% |
| Swiss | lindt | Lindt Excellence, Lindor, Lindt Creation, Lindt Gold Bunny, Lindt Nuxor | 4% | 6% | -2% | 30% |
| Japan | Meiji Holdings | Meiji Milk Chocolate, Kinoko no Yama, Takenoko no Sato, Apollo, Chocorooms | 10% | -1% | 3% | -5% |
| Japan | Ezaki Glico | Pocky, Pretz, Giant Pocky, Chocolate Almond, Collon, Caplico, Bisco, Cheeza | 7% | 8% | 8% | -1% |
| South Korean | Orion | Choco Pie, Orion Custard, Market O, Goraebab, Jelly Turtle Chips, My Gummy | -17% | -25% | -17% | -4% |
| US | Tootsie Roll | Tootsie Roll, Tootsie Pops, Dots, Crows, Junior Mints, Charleston Chew | -8% | 3% | 6% | -6% |
| Source: Etoro | ||||||
In August, Nestlé CEO Mark Schneider resigned after continued poor performance.
The decline among many chocolate makers comes as consumers increasingly avoid unhealthy foods. Some companies, such as Mondelez, have invested heavily in creating alternative product options to take advantage of this change in attitude.
North said: ‘The shift towards a healthier lifestyle is another pressing concern for this industry. As more people opt for snacks with lower sugar content and natural ingredients, companies have had to innovate their product lines.
“Some examples include low-calorie versions of Mondelez’s flagship products, the organic and non-GMO product line launched by Hershey, and the high-protein, whole-grain, fortified snacks developed by Nestlé.”
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