Shares in two of Switzerland’s biggest chocolatiers are on markedly different courses this year as soaring cocoa prices prove a tougher obstacle for one than they do for the other.
Lindt & Spruengli AG has risen 29% to date as the Lindor maker has shown itself able to pass on higher costs to customers, helped by the launch of crowd-drawing products such as Dubai-style chocolate. By contrast, Barry Callebaut AG has fallen 29% as the world’s leading manufacturer of bulk chocolate is weighed down by a lack of pricing power.
The cost of cocoa is a challenge for both companies, with the price of the key commodity remaining stubbornly high after more than quadrupling in 2023 and 2024. Yet while Lindt plans double-digit price increases this year, Barry Callebaut’s customers — which include Nestle SA and Hershey Co. — have been pausing orders as they wait for prices to come down.
“Barry Callebaut faces a perfect storm of subdued demand and limited pricing power,” said Bloomberg Intelligence analyst Ignacio Canals Polo. By contrast, “Lindt stands out amid the current cocoa market turmoil, leveraging its premium positioning.”
Lindt, which operates in the high-end segment of the market, has been able to gain market share from competitors such as Mondelez International Inc. The introduction of its Dubai-style chocolate at the end of last year has been touted as a “blockbuster” by UBS Group AG analyst Joern Iffert, who noted that it’s one of Lindt’s “best product launches in history.”
Price increases will continue this year due to higher cocoa prices, said a spokesperson from Lindt. Still, the firm expects the trend from quantity to quality consumption of premium chocolates to continue.
Meanwhile, customers of Barry Callebaut have been reducing the chocolate content in their products, hurting margins. In April, the company cut its sales outlook for the year, sending the stock lower.
For Barry Callebaut, another pressure point is the interest of short sellers as cocoa supplies continue to tighten and West African growers hold back next season’s sales in anticipation of higher prices. Shares out on loan, an indication of short interest, were at 23% of the firm’s free float as of June 3, according to data from S&P Global Market Intelligence.
“With every cocoa price increase you have a negative impact on free cash flow,” said Damian Burkhardt, Swiss equities lead portfolio manager at EFG Asset Management. “That is the reason why short interest on the name is so high.”
The firm’s executives have struggled to navigate a difficult environment. Barry Callebaut shares have had a total negative annualized return of 30% under Chief Executive Officer Peter Feld, who took the helm in April 2023 following the sudden departure of Peter Boone. That compares with a positive return of about 14% for peers during the same period, according to data compiled by Bloomberg.
Barry Callebaut didn’t respond to a request for comment.
To be sure, average analyst price targets suggest the fortunes of the two Swiss chocolate makers, which are based about 10 kilometers apart from each other in the canton of Zurich, could reverse in the next 12 months.
Their predictions show Barry Callebaut, which fell to a 2011 low last month, rallying 31% from current levels. Meanwhile Lindt, which is hovering near a record high, could drop 12%. BNP Paribas Exane analyst Mikheil Omanadze says Lindt shares are “expensive.”
But for Morgan Stanley’s David Roux, Lindt has “stood out during the ultimate test for chocolate brands.” Even with this year’s share rally, he sees the chocolate maker’s premium to European consumer staples peers being supported.
