Financial Data and Key Metrics Changes - The company reported a significant focus on the chocolate category, which has shown resilience despite price volatility in 2025 [6][9] - Cocoa prices have recently declined unexpectedly, which may lead to short-term pressures for the industry [8][9] - The company aims to increase margins in the chocolate business significantly by 2027 due to improved cocoa pricing [9] Business Line Data and Key Metrics Changes - The chocolate strategy has been effective, with successful execution in major markets like India, Brazil, and Australia, while adjustments are needed in northern European markets due to higher elasticity [6][7] - The company plans to invest more in brand marketing and innovation, particularly with successful collaborations like Biscoff [8][9] Market Data and Key Metrics Changes - Emerging markets have shown strong momentum, with expectations for continued growth in high single digits, while developed markets are expected to see declines in the low to mid-single digits [36][38] - The North American market is facing challenges, with consumer confidence at historic lows and a decline in the biscuit category [25][28] Company Strategy and Development Direction - The company is focusing on brand investments and innovation to drive volume growth, particularly in North America and Europe [29][30] - There is a strategic emphasis on adapting to consumer behavior changes, with a focus on value-seeking consumers [25][28] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the 2026 guidance, highlighting the need for flexibility due to recent cocoa price dynamics [12][13] - The company anticipates a gradual improvement in volume and revenue throughout 2026, with a focus on maintaining pricing strategies [22][24] Other Important Information - The company is investing in cocoa-growing regions outside of West Africa to diversify supply and reduce risks associated with crop diseases [69][70] - There is an ongoing exploration of lab-grown cocoa as a sustainable alternative, which may gain regulatory approval in the future [70][71] Q&A Session Summary Question: What is the outlook for the chocolate strategy given cocoa price changes? - Management noted that the chocolate category has shown resilience and that adjustments will be made to pricing strategies in response to cocoa price fluctuations [6][7] Question: How does the company plan to address cost phasing in 2026? - The company will face a one-time inventory adjustment impacting costs, with expectations for sequential improvements in volume and revenue throughout the year [22][24] Question: What is the strategy for North America amidst weak volume trends? - Management highlighted the need for increased investments to drive consumer awareness and adapt to changing shopping behaviors, focusing on value and promotions [25][28] Question: How will emerging markets perform in 2026? - Emerging markets are expected to continue growing, with Brazil and Mexico showing strong performance, while Argentina's economic issues are impacting overall regional results [44][45] Question: What are the expectations for profitability recovery in European chocolate? - The company aims to return to pre-2025 profitability levels by investing in brand marketing and adjusting pricing strategies as cocoa prices stabilize [60][61]

Core Insights - Cocoa prices surged last year but are now declining rapidly, yet chocolate prices in stores are expected to remain high for the foreseeable future due to previous high cocoa purchases and recipe changes by manufacturers [1][3][14] Cocoa Market Dynamics - Cocoa futures reached nearly $13,000 per ton last year due to crop damage from diseases and adverse weather in major producing countries like Ivory Coast and Ghana, which account for over half of global cocoa supply [3][10] - This year, cocoa prices have dropped by approximately 50% to around $6,000 per ton due to improved harvests, reduced demand, and diminished concerns about shortages [3][13] Impact on Chocolate Manufacturers - Many chocolate companies, including Lambertz, have incurred significant costs from purchasing cocoa at elevated prices, with Lambertz reporting an additional €150 million ($176 million) in costs, representing about 20% of its revenue last year [4][16] - Chocolate makers are cautious about adjusting retail prices due to ongoing market instability, with some experts suggesting that relief in pricing may not be seen until 2026 [5][16] Recipe Adjustments - To manage costs, chocolate manufacturers are altering recipes by reducing cocoa content or producing smaller bars, leading to some products no longer being classified as "chocolate" [9][13] - These changes are difficult to reverse, indicating that high retail prices are likely to persist despite falling cocoa prices [9][14] Supply Chain Challenges - Cocoa farming in West Africa faces long-term structural challenges, including a lack of investment, inadequate farming tools, and disease-resistant plants, which continue to threaten supply stability [8][11] - Governments in Ghana and Ivory Coast are now supporting farmers with better pricing and farming practices, which has improved farmer incomes and allowed for better agricultural inputs [12][16]

Core Viewpoint - Cocoa prices have increased due to weather concerns in West Africa, impacting supply and quality, while global demand remains weak, creating a complex market environment [1][4][10]. Group 1: Price Movements - December ICE NY cocoa closed up +73 (+0.99%) and December ICE London cocoa closed up +68 (+1.33%) on Wednesday [1]. - Cocoa prices fell to 1.5-month lows on Tuesday due to expectations of growing supplies amid weakening demand [4]. Group 2: Supply Factors - Heavy rain in the Ivory Coast has hindered farmers' access to cocoa fields, reducing cocoa movement to ports [1]. - Tighter cocoa inventories in US ports fell to a 4-month low of 2,115,411 bags [3]. - The slowdown in cocoa exports from the Ivory Coast showed a shipment of 1.81 million metric tons (MMT) this marketing year, up +5.8% from last year but down from a larger +35% increase seen in December [7]. - Quality concerns regarding the Ivory Coast's mid-crop cocoa are supportive of prices, with an average estimate of 400,000 metric tons, down -9% from last year's 440,000 metric tons [8]. Group 3: Crop Conditions - Optimism about this year's cocoa crop harvest in West Africa is noted, with a cocoa pod count reported to be 7% above the five-year average [5]. - The past 60 days for West Africa cocoa were the driest on record since 1979, impacting cocoa pod retention before the main crop harvest [6]. - Nigeria's cocoa production is projected to fall -11% year-on-year to 305,000 metric tons for the 2025/26 crop year [9]. Group 4: Demand Dynamics - Weakness in global cocoa demand has been a bearish factor, with Q2 European cocoa grindings falling -7.2% year-on-year to 331,762 metric tons [10]. - The Cocoa Association of Asia reported a -16.3% year-on-year decline in Q2 cocoa grindings to 176,644 metric tons, the smallest amount for a Q2 in 8 years [10]. - Higher cocoa production by Ghana is seen as bearish for cocoa prices, with a projected increase of +8.3% year-on-year to 650,000 metric tons for the 2025/26 crop [11]. Group 5: Global Cocoa Deficit - The International Cocoa Organization revised its 2023/24 global cocoa deficit to -494,000 metric tons, the largest deficit in over 60 years [12]. - The 2023/24 global cocoa production is expected to fall by 13.1% year-on-year to 4.380 million metric tons [12].

Core Viewpoint - Cocoa prices have shown a recovery from 1.5-month lows due to weather concerns in West Africa, leading to short covering in cocoa futures [2] Price Movements - December ICE NY cocoa (CCZ25) increased by +161 (+2.23%) and December ICE London cocoa 7 (CAZ25) rose by +60 (+1.19%) [1] Supply and Demand Dynamics - Cocoa prices initially fell due to expectations of growing supplies amid weakening demand, with chocolate makers like Lindt & Sprüngli AG and Barry Callebaut AG lowering their sales volume guidance [3] - The European Cocoa Association reported a -7.2% year-on-year decline in Q2 European cocoa grindings, while the Cocoa Association of Asia noted a -16.3% year-on-year drop, indicating weak global demand [9] Weather Impact - Heavy rain in the Ivory Coast has hindered farmers from accessing cocoa fields, while dryness in Ghana and Nigeria has damaged crops [2] - The past 60 days have been the driest on record since 1979 for West Africa, affecting cocoa pod retention before the main harvest [5] Crop Estimates - The latest cocoa pod count in West Africa is 7% above the five-year average, indicating a potentially larger crop than last year [4] - The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT [7] - Nigeria's Cocoa Association projects an -11% year-on-year decline in cocoa production for the 2025/26 crop year [8] - Ghana's Cocoa Board anticipates an +8.3% year-on-year increase in cocoa production for the 2025/26 crop [10] Inventory Levels - ICE-monitored cocoa inventories in US ports have fallen to a 3.75-month low of 2,133,116 bags, which is supportive for prices [4] Global Cocoa Deficit - The International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT, the largest in over 60 years, with production down by 13.1% year-on-year [11]