Investing.com — Jefferies downgraded Mondelez (NASDAQ:) International from Buy to Hold, citing growing concerns over cocoa supply constraints that could weigh on the company’s future earnings.
Analysts have highlighted persistent challenges in cocoa production, particularly in West Africa, as a major risk factor.
According to Jefferies, the 2023/2024 cocoa season was marked by extreme weather conditions that led to disease, destroying up to 25% of cocoa trees in key regions such as Ivory Coast and Ghana.
These countries, which represent a significant share of global cocoa production, would face a deficit of around 675,000 tonnes compared to the previous campaign.
Analysts warn: “Another deficit year would keep cocoa prices high for longer,” emphasizing the importance of recovery in these regions to stabilize global cocoa stocks.
The surge in cocoa futures prices has added to the uncertainty. Jefferies noted that while Mondelez and other industry players like Hershey may have hedged some of their cocoa needs for 2025, the current futures market suggests prices could remain high through 2026, potentially reaching $7,400 per ton.
This poses a risk to Mondelez’s profit projections for 2025 and 2026, as Jefferies previously assumed a lower price of $5,000 per tonne.
Despite Mondelez’s strengths, including its exposure to emerging markets and a strong balance sheet, Jefferies has expressed concerns about its ability to achieve its organic growth targets.
The company now values Mondelez at 18 times its 2026 earnings estimate, down from previous averages, due to the structural imbalance between cocoa supply and demand.
In contrast, European demand for chocolate has shown more resilience, with Mondelez planning to introduce tiered pricing to keep the price affordable for consumers. Jefferies remains cautious, however, highlighting the broader risks the company faces in the near term.