I’m Not Buying Either But This Cocoa Trade Is Still Interesting
Cocoa prices have dropped sharply after last year’s historic spike, but chocolate stocks aren’t moving in sync. The Hershey Company ($HSY) has rebounded, while Mondelez ($MDLZ) remains under pressure. Here’s the possible explanation: it’s all about timing.
Why Hershey Is Moving First
Hershey is closer to benefiting from lower cocoa costs. Like most food companies, it hedges its inputs, but its cost base appears to be adjusting sooner.
At the same time it raised prices aggressively during the spike and those prices are largely holding. As a result investors expect near-term margin expansion, and the stock is reacting accordingly.
Why Mondelez Is Still Stuck
Mondelez is still tied to higher-cost cocoa hedges. CEO Van de Put said recently: “We’re already covered for ’26; there’s not a lot we can do anymore. But ’27 certainly will benefit from this. So we see our chocolate business in ’27 increase its margin in a considerable way.“
That means falling cocoa prices aren’t helping yet, Margins remain under pressure. As a consequence the guidance looks weaker in the short term.
The Opportunity: A Delayed Upside
This is where things get interesting. Once hedges roll off Margins could expand meaningfully and Earnings could inflect. The Sentiment could shift. Like Hershey was the early winner Mondelez could deliver a delayed payoff.
Bottom Line And My Take
The market is rewarding what’s visible today and discounting what comes later. If cocoa prices stay low, Mondelez may be the more interesting play for investors willing to wait for the cycle to turn.
I’m not invested in either of the two companies. While they offer clear defensive qualities, I see limited upside and expect them to continue lagging the broader market.
That said, for dividend-focused investors seeking steady cash flow, the story might look very different.
