CHICAGO — Amid the ever louder noise around record costs for cocoa ingredients, chocolate volume continues to grow, said Dirk Van de Put, chairman and chief executive officer of Mondelez International, Inc.

In a call with investment analysts April 30 in connection with Mondelez’s first-quarter financial results, Van de Put devoted nearly half of his comments to his perspectives on the cocoa market and why Mondelez is well positioned to weather the current market disruptions. The dynamics of the cocoa market and the company’s expectations for a break in prices in the second half of 2024 also were the subject of considerable discussion between executives and analysts during the call.

“We’re playing for the long term in chocolate because it is fundamentally a great category, with very high brand loyalty and low private label penetration,” he said. “And within this great category, our business is strong and agile.”

While record highs in cash and futures prices “are generating substantial discussion,” Mondelez is confident in its prospects because of its commodity purchasing strategies, its approach to pricing, the company’s supply chain and it strong brands, Van de Put said.

Discussing the topics one at a time, Van de Put said Mondelez is fully covered for 2024 and is “well protected heading into 2025.”

“Our teams continue to monitor the market very closely to put ourselves in the best position possible,” he said. “While poor weather and other factors on the supply and demand side have driven prices to unprecedented levels, we believe there will eventually be a market adjustment. We are confident that our teams are putting in place the right strategies to provide future flexibility.”

Amid higher costs, Mondelez employs “sound pricing strategies,” Van de Put said, with a focus both on “headline pricing” and revenue growth management. The company carefully balances its needs to capture rising costs with a need to “maintain solid volume dynamics.”

“We are especially focused on protecting critical price points, including low unit price and other key threshold prices,” he said.

With regard to supply chain, “continuity remains our top priority,” Van de Put said, expressing confidence in the company’s supply chain team as well as its external partners.

Against this backdrop, Van de Put said Mondelez’s brand lineup includes “some of the strongest, most iconic chocolate brands in the world.” These include Cadbury, Dairy Milk, Milka, Côte d'Or, Marabou, Freia and Lacta.

“These brands already are the leaders in numerous key markets, and we are well positioned to accelerate growth in emerging markets,” he said.

Meanwhile, research shows consumers remain very loyal to the Mondelez brands, in part because the role of chocolate in their lives is more than incidental, Van de Put said.

“In our annual State of Snacking survey conducted in partnership with The Harris Poll, 72% of consumers across 12 countries said that a world without chocolate would be a world without joy,” he said. “Nearly 60% said that they would rather give up social media for a month than give up chocolate.”

Analysts asked further questions about the cocoa market, including whether Mondelez will hold off rather than taking further coverage at current inflated deferred prices.

“We truly believe that current cocoa prices are the results of a series of accidental circumstances that over time, we believe, should go away,” Luca Zaramella, executive vice president and chief financial officer, said. “I think you all know that the main crop last year was problematic. But as you might have read from multiple sources, the mid-crop is already looking much better. But also on the other side, on the demand side, the industry went a little bit shorter than usual on coverage and now, out of necessity to replenish minimum stocks, is really providing support to the current high prices.

“I think in this context, we truly believe that the current market structure does not warrant the current market prices. And so the question becomes when is the correction going to take place? And most likely, the answer is in September, October as the data for the new crop becomes available. We cannot stay still until then. We will have to protect ourselves, but our implementation strategy for 2025 is around flexibility.”

He said the company has purchased call options at “very affordable” prices.

Should a correction happen, Mondelez will be ready to take advantage of lower prices, Zaramella said.

Even with this bearish perspective, no one should expect cocoa inflation in 2025 will be averted, he cautioned.

“The reality is, in 2024, we are covered at materially better prices than the current market,” he said.

Asked whether the company has a contingency plan if current cocoa prices were to be sustained, Zaramella said it was “absolutely critical for us to get ready for cocoa staying at these levels.”

He noted, though, that forward cocoa market prices are inverted relative to the spot market.

“Even today, we could potentially get physical coverage into 2025 but at cheaper prices than the current spot price that we see today,” he said. “But rest assured that as a company, we are looking at all possible scenarios.”