Mondelez International faces profit squeeze as soaring cocoa prices impact 2025 earnings outlook

Mondelez International (NASDAQ: MDLZ), the global snack food leader behind Oreo and Cadbury, reported lower-than-expected fourth-quarter earnings and warned of a 10% decline in adjusted earnings for 2025. The company cited cocoa cost inflation as a major headwind, with prices for the key ingredient surging to historic levels. While Mondelez International has implemented chocolate price increases to offset these rising costs, its leadership acknowledges the challenges ahead as price-sensitive consumers react to higher product prices.

With shares dropping 5% to $53.70 in after-hours trading following the announcement, investors remain cautious about the company’s ability to maintain profitability in a volatile economic environment. Over the past year, Mondelez International’s stock has fallen approximately 25%, reflecting broader concerns about inflationary pressures in the food industry.

Why did Mondelez International miss Q4 earnings expectations?

Mondelez International reported a fourth-quarter net profit of $1.75 billion, or $1.30 per share, a significant increase from the $950 million, or $0.70 per share, posted in the same period last year. However, adjusted earnings per share (EPS), which exclude one-time costs, stood at $0.65—falling short of analyst forecasts of $0.66, according to FactSet.

On a constant currency basis, adjusted earnings declined by 16%, largely due to weaker operating results and lower equity method investment earnings. This shortfall, combined with mounting cocoa cost inflation, underscores the challenges Mondelez International faces in maintaining its profit margins.

Despite these setbacks, Mondelez International reported total revenue growth of 3%, reaching $9.60 billion, just shy of the $9.64 billion forecast by analysts. The company remains optimistic about organic net revenue growth, projecting a 5% increase in 2025, even as higher raw material costs continue to put pressure on profitability.

How is Mondelez International navigating cocoa cost inflation?

With cocoa prices reaching record highs, Mondelez International faces increasing pressure to raise chocolate prices while ensuring that demand remains stable. The company has acknowledged that these price adjustments may lead to some consumer resistance, particularly as shoppers continue to grapple with post-pandemic inflation.

CEO Dirk Van de Put stated that the company is executing its chocolate business strategy to manage rising input costs while sustaining long-term growth. “We are navigating unprecedented cocoa cost inflation while remaining committed to our growth strategy,” he said.

The company previously confirmed that chocolate price increases would be necessary in 2024 to counter escalating cocoa costs. However, with many consumers still highly price-sensitive, Mondelez International anticipates a potential dip in volume sales, which could impact overall revenue performance.

Will Mondelez International’s 2025 earnings recover?

Looking ahead, Mondelez International expects a 10% decline in adjusted earnings for 2025, primarily due to cocoa cost inflation. The company also forecasts that currency translation will reduce net revenue growth by approximately 2.5%, with a projected $0.12 impact on adjusted EPS.

Despite these challenges, Mondelez International remains confident in its ability to drive long-term value. The company has consistently demonstrated resilience in managing inflationary pressures and adjusting pricing strategies across different markets.

Industry experts note that while the company’s chocolate price increases may create short-term demand fluctuations, the strength of Mondelez International’s global brand portfolio—including Oreo, Cadbury, and Toblerone—positions it well for future recovery.

According to food industry analysts, Mondelez International’s diversification strategy and continued investments in innovation could help mitigate the financial strain caused by cocoa cost inflation. “While cocoa price volatility remains a risk, Mondelez International has a strong track record of adjusting to changing market conditions,” one analyst said.

What does this mean for investors?

Mondelez International’s latest earnings report highlights the impact of commodity price volatility on the food and snack sector. With cocoa cost inflation at unprecedented levels, the company’s near-term profitability remains under pressure, leading to cautious investor sentiment.

As Mondelez International implements chocolate price increases and adjusts its cost structure, market watchers will be closely monitoring whether these efforts can sustain revenue growth without significantly impacting consumer demand.

While the company faces short-term challenges, its long-term fundamentals remain strong, backed by a portfolio of globally recognized brands and strategic pricing initiatives. Investors will be watching Mondelez International’s upcoming quarterly reports for further insights into whether cocoa cost inflation will continue to weigh on margins or if strategic adjustments will help the company regain profitability.