Chocolate demand shows signs of recovery after inflation shock

What happened

Barry Callebaut reported sales volumes rose 5.7% in its third quarter (March–May), marking the first increase in two years. Over the nine-month period ending May, total volumes fell 2.8% to 1.5 million tonnes, with turnover down 12.7% to 9.5 billion Swiss francs. The company cited replenishing customer stocks and increased cocoa powder demand as key drivers. Regional performance varied sharply: Asia, the Middle East, and Africa showed growth, while North America declined 7.6% and Western Europe fell 2.5%.

Why the stock moved

The return to volume growth in Q3 suggests chocolate demand may be stabilizing following a prolonged slump caused by inflation and soaring cocoa prices. Barry Callebaut's role as a supplier to major brands like Hershey, Mondelez, and Nestlé means its performance reflects broader industry trends. Investors likely responded to signs that consumers are coming back after chocolate prices surged up to 50% in some markets, though the company warned any recovery would be gradual.

Bigger picture

Cocoa prices have swung wildly in recent years, peaking at $12,931 per tonne in December 2024 before falling to $2,846 and then rebounding to $4,613 recently. These fluctuations stemmed from poor harvests, geopolitical tensions affecting fertilizer supplies, and El Niño weather patterns. For chocolate manufacturers, such volatility complicates pricing and supply planning. The sector now faces a balancing act: rebuilding consumer demand after inflation-driven price hikes while managing unpredictable input costs. Barry Callebaut's improving volumes suggest the worst may be over, but regional weakness in developed markets shows recovery is uneven.

What investors watch

Key metrics include whether volume growth continues in Western Europe and North America, which remain weak despite the Q3 rebound. Watch for stabilization in cocoa prices and how manufacturers pass costs to consumers without stalling demand. Barry Callebaut's full-year guidance of roughly 1% volume decline will be a benchmark for industry health. Investors should also monitor customer restocking patterns and whether major brands resume normal ordering levels as cocoa price volatility settles.