The Great Trans-Atlantic Chocolate Divide --- As cocoa prices surge, Europe's chocolate habit is proving more resilient than America's

"Almost everyone loves chocolate, whether it's a Hershey's Kiss, a Toblerone or a dark Lindt bar.

But a historic surge in cocoa prices is testing just how deep that love really runs. And it turns out Europeans may be a bit more committed to chocolate than their American counterparts. That gap in loyalty has real implications for global confectionary companies.

This isn't to dismiss America's sweet tooth. The U.S. accounts for about a quarter of global chocolate sales, and many consumers have a deeply emotional connection to it -- often tied to childhood memories of biting into that Snickers bar, scooping up M&M's or unwrapping that familiar brown-and-silver Hershey's foil.

Yet Americans and Europeans tend to satisfy their sugar cravings in different ways, and Wall Street is paying close attention.

American consumers are often more impulsive, picking up a bar as a last-minute decision at the checkout line or while filling up at a gas station, notes Alexia Howard, an analyst at Bernstein.

In contrast, Europeans treat chocolate more like a daily staple. Bars with higher cocoa content are often a regular item on the family grocery list in Europe, which accounts for roughly 50% of global sales.

"They'll buy a bar and break off a few squares every day," says Darren O'Brien, chief corporate and government affairs officer at Mondelez, which owns brands like Cadbury, Toblerone and Milka. "It tends to be a chocolate moment, rather than something you munch on in your car on your way to work."

Since 2021, chocolate prices have risen more than 30% in both the U.S. and Europe, according to TD Cowen estimates based on Nielsen data.

But the impact on demand has been more pronounced in the U.S., due to key differences in price elasticity between the two markets. While companies with a strong European presence like Mondelez have been able to pass on price increases there without sacrificing volume too much, U.S.-centric manufacturers like Hershey have found North American consumers to be more fickle.

Hershey gets about 87% of its overall net sales from the U.S. Mondelez, meanwhile, gets 60% of its chocolate sales from Europe and another 35% from developing markets. Less than 5% of its chocolate business is in North America, though it does have a wider snacking business there.

For this year, Mondelez is forecasting a 10% drop in adjusted earnings per share, which is relatively mild when compared to a mid-30% estimated decline at Hershey. Over the past two years, Hershey's stock is down about 35%, while Mondelez has fallen roughly 5%.

Switzerland's Lindt & Sprungli, which caters to a wealthier consumer, has done even better -- and its stock is up nearly 20% over the same period. A Lindt & Sprungli spokesperson wrote that due to expected price increases this year "across the entire chocolate category, we would not expect to see volume progress," while adding that "Europe is likely to perform better than North America due to higher retail share and lower price elasticity."

Whether it is Nutella or a Kit Kat, chocolate products are relatively affordable indulgences most people in wealthy countries don't think twice about. But lately, the cocoa market has been in crisis, driving chocolate prices up far faster than most other foods. Cocoa prices roughly tripled over the past two years, peaking above $12,000 a metric ton last year.

Adverse weather in West Africa, which produces about 70% of the world's cocoa, negatively affected production. Farmers also have faced crop disease, including swollen shoot virus.

At first, manufacturers were able to hold off on sharp price hikes thanks to hedging strategies and the hope that the spike would be short-lived, explains Martijn Bron, a former head of cocoa trading at commodity giant Cargill. But as high prices have persisted, those companies have been forced to pass on steep price increases -- testing just how much consumers are willing to pay. Suddenly, how serious people are about chocolate has become a billion-dollar question on Wall Street.

Besides raising prices, manufacturers are increasingly trying to keep consumers happy with less. That includes developing "innovative" products -- reformulated sweets that contain less actual cocoa content -- or simply making smaller versions of the same product, a practice known as "shrinkflation" because it effectively increases the cost per unit.

Mondelez's edge over Hershey extends beyond cultural preferences. For starters, President Trump's tariffs -- while meant to favor U.S. manufacturers -- are hurting American producers more. Hershey executives have warned that the unmitigated impact of tariffs could be as high as $100 million per quarter in the third and fourth quarters of this year. They have said the company is working to secure an exemption for cocoa -- an ingredient that can't be produced at scale domestically.

Ironically, companies such as Barry Callebaut, Mondelez and Ferrero, which have large factories in Canada and Mexico serving the U.S., are at a competitive advantage, points out Raphael Felenbok, an industry expert. They are effectively able to dodge U.S. import tariffs by importing the cocoa to neighboring countries and then selling the finished product under the tariff-free U.S.-Mexico-Canada Agreement, he explains. Meanwhile companies like Hershey, Mars Wrigley and Lindt & Sprungli, which have significant U.S.-based production, are more exposed to cocoa tariffs.

Another downside of focusing on the U.S., Bernstein's Howard points out, is the significant discrepancy in GLP-1 penetration. The weight-loss and diabetes drugs have taken off in the U.S. and are known to suppress cravings for snacks and sweets. Howard is among analysts speculating that the drugs might already be affecting sales of all sorts of snacks in North America.

Love of chocolate will endure on both sides of the Atlantic. It is just a little more unconditional in Europe." [1]

 

1. EXCHANGE --- Heard on the Street: The Great Trans-Atlantic Chocolate Divide --- As cocoa prices surge, Europe's chocolate habit is proving more resilient than America's. Wainer, David.  Wall Street Journal, Eastern edition; New York, N.Y.. 31 May 2025: B11.