Trick or treat: Halloween horror show for confectionery giants, which only return five percent within five years
- Rising sugar and cocoa prices are putting pressure on the margins of major confectioners
Leading confectionery companies may see investors spooked after posting negative returns so far in 2024, with many no doubt hoping for a Halloween boost to get them back on track.
Despite looking for a much-needed seasonal rebound later this year, Etoro’s confectionery basket is down two percent this year, compared to 21 percent growth in the S&P 500 over the same period.
The Etoro confectionery basket is an equal weight index of the eight largest sweet producers based on turnover.
Seasonal boost: Confectioners are betting on a sales boost from Halloween and Christmas
According to data from Etoro, sweet treat manufacturers have only recouped an average of five percent over the past five years.
This lags far behind the 95 percent returns of the S&P 500 over the same period, and the 72 percent growth of the MSCI World Index.
In the past twelve months alone, these companies have done even worse, falling four percent while the S&P 500 grew 34 percent in comparison.
Sam North, market analyst at Etoro, said: ‘The confectionery stocks are facing a challenging period. Rising cocoa and sugar prices have put pressure on profit margins, while supply chain disruptions have led to higher production and distribution costs.
‘Inflation and the rising cost of living have also eroded consumer purchasing power, making it harder for people to spend money on non-essential items such as chocolate and snack bars.
“Market saturation has also made it difficult for companies to maintain growth and profitability.”
However, bucking the otherwise worrying trend, some companies have delivered more positive returns, which in turn has helped improve broader sector figures.
Cadbury, Milka and Toblerone maker Mondelez has had a fairly quiet period of late, returning three per cent over the last twelve months, but has seen growth of 28 per cent over five years.
Sweet treats: Mondelez has invested heavily in developing lower calorie product options
Similarly, US chocolate maker Hershey has grown 22 percent in five years, but has also suffered recently. Although the brand lost four percent last year, the brand has regained three of those percentage points since January.
Swiss brand Lindt is the biggest long-term winner, with a 30 percent gain in the past five years and a four percent increase so far this year.
For fellow Swiss giant Nestlé, however, the picture was bleaker. The company is down about 14 percent so far this year, and 22 percent over the past five years.
The company’s nine-month underlying sales rose just two percent and were below expectations, leaving forecast full-year sales up just two percent, the “lowest figure since the turn of the century.”
| Country | Stock | To notice | Returns YTD | Returns 1 year | Returns 3 years | Returns 5 years |
|---|---|---|---|---|---|---|
| US | Mondelez | Cadbury, Oreo, Milka, Toblerone, Trident, Chips Ahoy!, Sour Patch Kids, Halls | 1% | 3% | 23% | 28% |
| US | Hershey | Hershey’s, Reese’s, Kit Kat (USA), Twizzlers, Jolly Rancher, York, Almond Joy | 3% | -4% | 12% | 22% |
| Switzerland | Nesting | Smarties, Aero, Rolo, Kit Kat (outside the US), Lion, Toffo, Milkybar, Quality Street | -14% | -19% | -25% | -22% |
| Switzerland | Lindt | Lindt Excellence, Lindor, Lindt Creation, Lindt Gold Bunny, Lindt Nuxor | 4% | 6% | -2% | 30% |
| Japan | Meiji Holdings | Meiji Milk Chocolate, Kinoko no Yama, Takenoko no Sato, Apollo, Chocorooms | 10% | -1% | 3% | -5% |
| Japan | Ezaki Glico | Pocky, Pretz, Giant Pocky, Almond chocolate, Collon, Caplico, Bisco, Cheeza | 7% | 8% | 8% | -1% |
| South Korean | Orion | Chocolate cake, Orion Custard, Market O, Goraebab, Jelly Turtle Chips, My Gummy | -17% | -25% | -17% | -4% |
| US | Tootsie roll | Tootsie Roll, Tootsie Pops, Dots, Crows, Junior Mints, Charleston Chew | -8% | 3% | 6% | -6% |
| Source: Etoro | ||||||
In August, Nestle CEO Mark Schneider resigned after continued underperformance.
The decline of many chocolate manufacturers is due to consumers increasingly avoiding unhealthy foods. Some companies, such as Mondelez, have invested significantly in creating alternative product options to take advantage of this change in attitude.
North said: ‘The shift towards healthier lifestyles is another pressing concern for this sector. As more people opt for snacks with lower sugar content and natural ingredients, companies have had to innovate their product lines.
“Some examples of this include the low-calorie versions of Mondelez’s flagship products, the organic and non-GMO product line launched by Hershey, and the high-protein, whole-grain and fortified snacks developed by Nestle.”
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