Chocolate Market Enters New Phase As “Double-Digit Raw Material Deflation” Eases Costs

Cocoa prices have collapsed 75% from their 2024 peaks, and Goldman’s latest note points out that the worst of the cocoa shock for chocolate makers may finally be passing after being squeezed by soaring bean costs through 2023, 2024, and into the first half of 2025. This only suggests that lower chocolate bar prices at the supermarket could materialize later this year. Against that backdrop, Goldman reiterated Buy ratings on two confectionery stocks.

Analysts led by Sam Darbyshire said the global chocolate production costs should drop by as much as 10% in 2026 and 2027. She pointed out that weather patterns in West Africa – the mecca of global cocoa farming – have supported increased production for the upcoming harvest, leading to stabilization in global supplies.

Darbyshire pointed out that the cocoa futures curve is no longer backward-dated, with December 2027 delivery now 17% more expensive than March 2026 delivery. She said this would help top confectionery firms to commit to increased volumes.

“Double-digit raw material deflation in chocolate over the next two years is likely to drive an increasingly competitive operating environment as manufacturers strive to return to volume growth,” she wrote in the report.

Darbyshire noted that, with elevated chocolate prices, current Nielsen data show that consumer demand for chocolate remained soft in January, with elasticities worsening in Europe (consistent with Mondelez commentary). She said that private players are being more competitive on pricing, with Mars and Ferrero pricing below market.

“With weak underlying volumes and easing raw material inflation, we expect promotional activity to intensify throughout the year,” the analyst said.

Darbyshire said this new cocoa pricing regime has generated a “Buy” in Barry Callebaut and Nestle, but “Sell” in Lindt.

Why this matters is that the chocolate industry is about to transition from a period of price hikes to one of greater discounting and tougher competition.

In a separate note, Bonnie Herzog, managing director and senior consumer analyst at Goldman, highlighted in December that sliding cocoa prices could produce “tailwinds” for candy and junk food companies. Read that note here.

Professional subscribers can read the full note on the inflection point the chocolate industry is entering this year, along with many more charts via Goldman, on our new MarketDesk.ai portal. As noted above, attractive setups are emerging in several beaten-down candy stocks.