No recovery in sight for struggling cocoa market, Lindt CEO says

Cocoa prices will remain elevated despite some potential declines amid higher input and sustainability costs, confectionary company Lindt & Sprüngli’s CEO Adalbert Lechner told CNBC.

“Cocoa prices will come down,” Lechner told CNBC’s Carolin Roth on April 11, adding that he nevertheless  doesn’t believe cocoa prices “will ever come down to the levels where they have been before.”

Factors including increased input costs, sustainability programs and fair trade initiatives mean the “cocoa price has to be higher than it used to be in the past time,” he said. 

Lechner’s remarks follow a surge in cocoa prices to record highs in 2024, driven by poor weather, disease, and pest outbreaks in West Africa that caused a supply deficit. With cocoa plantation increasing and high prices destroying demand, chocolate makers are facing a double edged sword.

‘We see declining chocolate markets like in the U.S. last year, [leading to] more than 5% [of] volume decline,’ he said.

However, it’s not just supply recovery that is lowering demand, Oran van Dort, commodity analyst at Rabobank, told CNBC’s “Squawk Box Europe”.

“Higher retail prices, confectioners utilizing different methods to make chocolate which uses less cocoa, rise in weight loss drugs,” are causing “demand destruction,” he said.

Lindt & Sprüngli has shown resilience despite record volatility in cocoa markets impacting the chocolate industry. The company reported better-than-expected full-year operating profit in 2024, with sales rising by 5.1% in Swiss francs over the period.

Lechner attributed this performance to “strong premium brands with a high desirability for consumers.”

Across the industry, the prices for chocolates have been on the rise, Rabobank’s Van Dort meanwhile noted, “Many large chocolate confectioners have indeed mentioned that they’ve increased prices and have been passing them on to consumers.”

He added, “They might intend to do so more in the future.”

While Lindt & Sprüngli is “very cautious” about transferring elevated cocoa costs to consumers, Lechner acknowledged that “the magnitude of these increases in raw material forced us, also, in the last years, to pass on a certain amount to the consumers.”

Still, he said that his company “have never been competing via price” and that consumers paying “ten cents or 20 cents more doesn’t make a difference. You buy this product because you want to show the appreciation.”

Speaking before U.S. President Donald Trump’s 90-day pause on tariffs for countries including Switzerland, the CEO said he does not expect a significant impact from tariffs on Lindt’s business.

“We employ nearly 4,000 people in the U.S. We run five factories there,” he said. “So the impact of all these tariffs and of the trade war is relatively limited to us.”

The U.S. has previously signaled lenience toward foreign companies that establish local production facilities, providing incentives to encourage operations in the U.S., rather than abroad. 

However, he added that, despite the localized production “because cocoa, unfortunately, doesn’t grow in the U.S., there is a 10% tariff plan, so this would further increase the prices of chocolate in the U.S.”

“[The] increased migration costs of cocoa beans and production caused by the tariffs will mean ‘consumption and grounding [of cocoa] will suffer if reciprocal tariffs stay in place,” Van Dort told CNBC. “Tariffs will very much lead to higher prices.”

Reflecting on the global macroeconomic environment, the Lindt CEO acknowledged a softening in consumer sentiment, along with job insecurity and an uncertain inflationary environment.

“Consumers are insecure at the moment,” he said, noting that customer confidence in China has also been “relatively weak.”

However, his outlook for the future remained upbeat.

“I think that the postponement for 90 days is a very optimistic sign,” Lechner told CNBC. “It’s very positive. Obviously the U.S. government is open for negotiations, and I would say I’m optimistic that we will see less of an impact as we expected one week ago.”