Cocoa looks likely to again dominate Mondelez’s strategy, and that of its chocolate peers in the new year, but with a twist – how to navigate retreating prices in the context of competitive dynamics?
The Cadbury maker has guided to a conservative organic sales print well below last year’s actual growth with cocoa the key determinant.
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At the same time, the stretched and value-seeking consumer, especially in the US, along with geopolitical risks and expected tough price negotiations in Europe, have set the scene for flat to 2% organic growth in fiscal 2026.
Mondelez achieved 4.3% in organic net revenue growth last year – as reported late yesterday (3 February) – but that was overshadowed by an across-the-board decline in volume/mix on a geographic market basis. A group pricing increase of eight percentage points no doubt hurt consumer wallets.
One month into the new year, the Oreo biscuit brand owner has been caught off guard, as such, by a sharp drop in cocoa prices, which was not incorporated into its 2026 hedging strategy to determine costs on shelf.
Mondelez is unlikely to be alone, however, as a watch-and-see competitor reaction to the shift in cocoa is likely to play out to guard market share and consumer loyalty with appropriately positioned price points.
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By GlobalDataAt the same time, some price recovery may still be warranted. While prices of the commodity have come off the late 2024 record highs of $12,000-plus per tonne, current contracts around $4,281 still remain elevated from say levels of about $2,500 in 2021.
Chairman and CEO Dirk Van de Put emphasised the point on a call with analysts, saying the drop off in cocoa may give Mondelez “some unexpected competitive reactions” given most are hedged for 2026 at pre-new year levels.
“We want to build in some flexibility in our guidance because we don’t quite know how that is going to play out in the market,” he added. “We see our chocolate business in 2027 increase its margin in a considerable way.”
Transitional year
CFO Luca Zaramella, who also took on the additional COO role this week, set the scene for cocoa-linked pricing in the context price recovery was not fully implemented against the commodity last year.
“At this level, we are not going to price cocoa further necessarily. But it is also important to know that our profit took quite a material hit in 2025. And albeit the pipeline cost is coming down in 2026, we need to keep a level of pricing that is pretty much the same as we had in 2025.”
Van de Put added that Mondelez’s price-pack-architecture strategy as an alternative to cocoa-related pricing hasn’t always worked.
“We have learned that certain price points are very important. And so we have adjusted already to put our products at the right price point. Some of the PPA worked, others didn’t. Penetration hasn’t gone down, but the frequency and the quantity of consumption did.”
Analysts at Stifel, led by Matthew Smith, gave their reaction.
“We view 2026 as a transitional year, with a below algorithm outlook driven by cocoa-cost-related headwinds that we expect will not only abate but likely provide a tailwind in 2027, and a range that we believe provides Mondelez with flexibility to reinvest and address competitive responses to falling cocoa prices,” they wrote in a research note.
“If cocoa costs remain at similar levels, we believe Mondelez is well-positioned to grow above algorithm in 2027 incorporating a healthy level of reinvestment to maintain top-line momentum.”
“Normalised levels”
In yesterday’s accompanying prepared remarks, the Mondelez team said $3,000 per tonne for cocoa is a “fairer representation of longer-term supply and demand dynamics”.
They added: “At these more normalised levels, we expect a volume rebound and a profit pool that is more in-line with historical norms for our chocolate category than what we saw in 2025 and what we are projecting in 2026 due to higher pipeline costs.”
Also incorporated into the 2026 guidance is investment behind Mondelez’s brands amid cocoa and other market challenges, with a more upbeat outlook for adjusted EPS – flat to 5% growth compared to the 14.6% decline in 2025.
“As we enter 2026, we continue to expect a challenging backdrop on several fronts, including soft consumer sentiment, volatility in certain commodities, and continued tensions in the geopolitical environment,” the team said in the prepared remarks.
“This earnings per share outlook incorporates our plans for substantial reinvestment to drive improved volume trends and select price investments in key market segments.
“Organic revenue and EPS outcomes and ranges are dependent upon where cocoa will eventually stabilise for 2026, as well as possible competitive reaction that might require some price reinvestments ahead of our actual pipeline costs, which are higher than current spot.”
TD Cowen analyst Robert Moskow headed up a note saying the reserved outlook “assumes subdued growth due to risk of competition in chocolate”.
He wrote: “As a result, management does not expect to benefit meaningfully from lower cocoa prices until 2027. While disappointing, we view the guidance as conservative and poised for a strong 2027 when cocoa costs fully reset lower.”
“Prudent” outlook
Mondelez noted the volume pressures last year were driven by “continued consumer cost-of-living pressures and value-seeking behaviours, coupled with elasticity from significant cocoa-led pricing on our chocolate range, as well as the impact of revamped price-pack architecture”.
Some of those factors are expected to persist in 2026, especially a “soft” US biscuits category and as consumers in that market “increasingly are choosing premium indulgence options alongside better-for-you snacks – particularly those featuring protein”.
Zaramella explained: “The guiding principle of the guidance was to be prudent, particularly as we see some short-term pressure points like in the US. The biscuits category is still subdued and the plan is that it will continue like that for the first half at least, with some marginal improvements in the second half.
“In Europe, we have planned for a chocolate category that is stable after the meaningful prices that were taken but we also planned for some disruption due to the usual customer negotiation process that takes place in the first part of the year.”
Market pressures
Factors that have weighed on food manufacturers’ volumes of late seem stubbornly persistent as Van de Put demonstrated with his remarks to analysts yesterday, with some strong words with respect to the US market.
“Consumer confidence is near a historic low. They’re worried about overall affordability. They are fed up with the price increases. They don’t feel good about their personal economic outlook,” the Mondelez chief said.
“What we are seeing is that the average shopping basket of the consumer in the US, whether you’re in the higher or in the lower social economic classes, has not increased for the last two-three years. Within that basket, they’ve spent more money on the basics: milk, meat, bread, and so on. And as a consequence, snacking is being affected.”
Turning to Europe, he added: “Consumer confidence remains fragile due to economic uncertainty, with snacking growth projected to be steady, led by e-commerce, convenience and discount channels, with shoppers increasingly focused on affordability and functional ingredients.”
On the functionality side, the challenge of the rising use of the GLP-1 weight-loss drugs, and this year’s introduction of the pill variant, was thrown into yesterday’s analyst chat for good measure.
“We do not see a short-term impact on our business because there is a very modest adoption rate right now. And also, the calorie reduction is relatively benign that we see,” Van de Put claimed.
“If we expand ten years and we take an adoption rate in the US, which would be somewhere between 10% and 20%, even then we do not see a significant effect on our overall business. We believe that over that period of time, it could have a 0.5%-1.5% effect on our overall volumes.
“So at this stage, I can’t say that we feel that it is having a major impact on our business.”
