Nov 30, 2022 16:29
When it comes to desserts, chocolate is a universal favorite. Annual global sales are nearing $150 billion, and people in underdeveloped countries eat more chocolate as their income rises. The global market for cocoa products is expected to increase at a rate of about 5% per year through the end of the 2020s when it is expected to be worth more than $200 billion annually.
Many bankers enjoy chocolate as well. However, a small number of snack food corporations control the vast majority of the industry despite a lackluster growth rate. However, chocolate stocks are currently worth a look if you're looking for slower but more predictable growth together with dividend income.
Rapid change has occurred in the chocolate business due to consumers' evolving tastes. The demand for dark, high-priced chocolates dominates the U.S. chocolate market. American companies dominate the global chocolate industry, including Kraft Heinz, Mondelez, Hershey's, Mars, and General Mills. People keep coming back for more because of the unique products and luxurious experiences they offer. Increased chocolate demand correlates with the westward diffusion of consumer tastes in the Asia-Pacific region. Grand View Research predicts a 30% increase in global cocoa demand by 2020, driven by a surge in chocolate consumption.
Chocolate with natural ingredients and reduced sugar content is becoming increasingly popular. There is a new variety of Mars Wrigley Confectionery's low-calorie, single-serving bars for 2019. These bars have more protein and less sugar than their predecessors. Also, the gift-giving market has significantly benefited from the increasingly creative chocolate packaging. Ferrero Rocher chocolate from the Ferrero Group is presented in tin gold foil, giving it an elegant look and making it a popular gift.
The increased popularity of giving dark chocolate as presents, as well as the health benefits of eating dark chocolate with a high cocoa content. The expansion of marketing campaigns and stricter regulation of seasonal chocolates by producers are two examples of recent trends in the business. The chocolate market has grown alongside our improved understanding of its many health benefits. Several well-known companies, Mondelez included, have developed novel and delicious products in response to the rising demand for chocolate.
The Nestle company is a global leader in the confectionery industry and a significant player in the food and household goods sectors. The Swiss conglomerate sells sweets under the Nestle name and has exclusive rights to sell candy bars worldwide.
Ferrero Group, a private company, paid $2.8 billion to acquire Nestle's U.S. confectionery and candy bar business in 2018, which included the Baby Ruth, 100 Grand, and Crunch bars.
Even though it sold its U.S. chocolate business, Nestle is still a significant player in the sector because of its focus on investing in consumer staples. The food manufacturer has few expansion opportunities, but its products are essential for millions of households worldwide. In addition, Nestle stock has rewarded investors with rising dividends over a long period.
About $5 billion of the U.S.'s $25 billion domestic chocolate business is dominated by Hershey (HSY). Over 80 brands, such as Reese's, Kisses, Cadbury, and KitKat, are part of the company's inventory (for the last two, the company owns the U.S. license). Although the company's candies are sold in over 80 countries, most of its income is in the United States. Only around 15% of the company's overall income comes from sales made outside the United States.
Hershey's dominates a 45% portion of the American chocolate market, and investment research firm Morningstar estimates that the company has a 30%+ share of the U.S. candy market.
This indicates that consumers and merchants continue to put their faith in Hershey's products even though their business model is predicated on providing opulent deals at the expense of taste.
The candy company has simplified its domestic brand portfolio while increasing funding for essential domestic brands. Utilizing these methods should boost financial success. Hershey's brand intangible assets that back our wide-moat rating should benefit from these initiatives adds Lash, who recently raised the stock's fair value from US$126 to US$129 due to improved cash generation.
Hershey is releasing a slew of innovative new products to set itself apart from rivals. According to Lash, the company has increased profitability by increasing the prices of chocolate bars and candies while also expanding into new, popular product categories.
Another giant in the snack food industry is Mondelez, which produces a wide variety of chocolate products under well-known brand names like Oreo, Cadbury, Chips Ahoy!, and Milka. In 2012, Kraft Foods (formerly Kraft Heinz (NASDAQ: KHC)) separated into Mondelez International.
This snack manufacturer is another example of a slow-growing company that has yet to manage to cut costs and boost profits over the past decade. Aware of the growing interest in healthy eating around the world, Mondelez has likewise increased its presence in the health food industry. Since it went public, it has also increased its dividend payments to shareholders yearly.
Finally, the Swiss chocolate powerhouse Lindt & Sprungli will close out our list. This stock is mentioned only in passing, despite being one of the largest and fastest-growing candy manufacturers. The conglomerate owns several chocolate companies, including Lindt, Ghirardelli, Russell Stover, Caffarel, Hofbauer, and Küfferle.
Lindt's chocolates are sold through a network of retail partners worldwide, but the company's stores are a vital differentiator and draw customers in areas with heavy foot and tourist traffic. Sales had climbed by 50 percent since 2014 when Lindt acquired Russell Stover to become the largest producer of luxury chocolate in the United States. Currently, the corporation needs to pay out a particularly substantial dividend, but the quicker growth rate more than makes up for this.
Warren Buffett, an American business entrepreneur, founded and runs Berkshire Hathaway. It has a reputation for solid long-term financial performance and holds stock in many of the most successful businesses in the United States. Since it is the parent company of See's Candies, it is included here. Since its founding 101 years ago, See Candies has provided customers with a wide selection of chocolates, gift boxes, and other sweets.
Warren Buffett, one of the country's most famous stock and financial gurus, presides over the illustrious investment firm Berkshire Hathaway. Its assets, which include See's Candies, have helped it maintain its remarkable success. Shares of successful companies like Bank of America, Coca-Cola, Apple, and many more are available to investors through Berkshire Hathaway. With the purchase of Berkshire Hathaway, investors gain exposure to some of the most extensive stocks on the market today, including See's Candies, which has traditionally outperformed the market.
Kilchberg, Switzerland's Chocoladefabriken Lindt & Spruengli AG, produces and sells high-quality chocolates. Lindt, Ghirardelli, Russell Stover, Caffarel, Kufferle, and other kinds of chocolate are also available here.
Revenue for the fiscal year ended December 31, 2021, was CHF 4.95 billion, or $5.24 billion, up from CHF 4.02 billion, or USD 4.25 billion, in the previous fiscal year. The net income was $519 million (490.5 million Swiss francs), up from $340 million (321.7 million) in the 2020 fiscal year. With a market cap of $28.93 billion, Chocoladefabriken is a large company. P/E is 57.02, and the dividend yield is 1.08 percent.
Rocky Mountain Chocolate Factory produces candies and other chocolate treats. The business is organized into departments that handle manufacturing, retail, U-swirl operations, franchising, and more. A Durango, Colorado-based firm's product line includes a variety of candies, including caramels, creams, mints, toffees, and truffles.
Revenue for the three months ending in November 2021 was US$8.5 million, up 17.7 percent from the same period a year earlier when it was US$7.23 million. Comparing the third quarter of 2020 to the current quarter, the company's consolidated net loss was $1.48 million, or $0.24 per share. RMCF has a market worth of $42.58m and a price-to-earnings ratio of 29.96.
Located in the heart of London, Pladis Global is a leading producer of sweets, snacks, and other confections in the United Kingdom. United Biscuits, Godiva Chocolatier, DeMet's Candy Company, and Ulker are just a few of the food companies it has acquired since its 2016 founding as a Yildiz Holding subsidiary. About 4 billion individuals in 120 countries have access to Pladis products, produced in one of the company's 34 factories spread across 13 countries. Chocolate is a huge industry, and Pladis has become a worldwide market leader thanks to its delicious candies. Achieving an annual revenue of £3.5 billion, the corporation is now among the most important in Europe. Pladis currently employs 26,000 people across a wide range of countries.
The American multinational corporation General Mills produces popular foodstuffs for the mass market. It's widely recognized as a top chocolate manufacturer around the world. It owns 89 of the most well-known brands in the United States, including Totino's, Haagen-Dazs, Betty Crocker, Annie's Homegrown, Cheerios, Cocoa Puffs, and Lucky Charms. Statista projects that by 2020, the company's core worldwide operations sector will produce $10 billion in net sales. Since its founding more than 150 years ago, the company has established itself as a forerunner in the chocolate market. The US Meals and Baking sector was the company's most profitable in 2020, with net revenues of $4.5 billion. Cereals such as Chocolate Toast Crunch, Cocoa Puffs, Count Chocula, Cookie Crisp, etc., are among the company's most well-known chocolate products.
An American food manufacturing giant, Kraft Heinz is headquartered in Chicago, Illinois. It comes in at number six on the world's best chocolate manufacturers list. With estimated annual sales of $26 billion in 2020, the newly merged Kraft Foods and Heinz is the third-largest food and beverage firm in North America and the fifth-largest globally. Oscar Mayer, Philadelphia Cream cheese, Wattie's, and Planters are just a few brands the corporation sells. The 2018 Fortune 500 ranking of the largest companies in the United States ranked Kraft at #114, based on the company's sales. Its most well-known chocolate brands are Baker's Chocolate, Daim, Freia, Jet-Puffed, Cote D'or, Lacta, Marabou, Milka, Toblerone, Terry's, Prince Polo, and Trakinas.
Chocolate is one of many critical growth investment themes in the consumer staples segment of the market. However, demand for chocolate and other sweets is expected to remain high for the foreseeable future. The rising popularity of chocolate can be traced to the expanding middle class in developing countries, where luxuries like chocolate were formerly beyond reach. These chocolate stocks could be a good choice if you're looking for steady dividend payments and modest growth.
Because of its widespread appeal, cocoa is a valuable commodity and a popular investment. Though, like every other investment, cocoa comes with its share of perils:
An abrupt shift in these environmental variables can significantly affect crop yield and commodity supply as they are essential to cocoa's development. Pollination and plant growth are both influenced by environmental changes, which in turn affect the overall collection.
Like gold, cocoa can be a political bargaining chip to affect international decisions and conflicts. Many of the world's largest cocoa-producing countries are relatively new players in the global economy and are eager to cash in on the rising demand for cocoa.
Historically, cocoa harvesting has relied on enslaved people or child labor. The commodity's price has risen to its highest level since it was first turned from a luxury item to a basic due to a dramatic move toward fairer working conditions and salaries. There should be no hesitation in making the switch to better welfare conditions.
By 2026, the industry's market value is projected to increase to about $187 billion. One-third of the global chocolate market is sold in Western Europe, making it the enormous demand for chocolate confectionery. The stock market has been somewhat unstable recently. If you're considering putting money into the stock market, research beforehand.