Chocolate Industry

Investing in Chocolate Stocks | The motley fool

Chocolate is one of the most popular sweet treats on the planet. Global annual sales approach $ 150 billion. As consumers in developing countries gain more wealth, chocolate consumption increases with it. Some estimates indicate that sales of cocoa products will reach $ 200 billion per year by the end of the 2020s, representing an average annual growth of around 5%.

Chocolate is also a favorite for many investors. The industry is dominated by a handful of snack food conglomerates, however, and the average growth of these companies is moderate. But if slower but more stable growth coupled with dividend income is what you’re looking for, chocolate stocks are worth checking out right now.

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Invest in chocolate stocks

The production and sale of chocolate and related sweets is largely controlled by a few large multinationals. The largest producer of chocolate products, Mars (responsible for world famous candies such as Snickers and M & Ms), is owned by the Mars family. When it comes to publicly traded companies, here are the top stocks in the chocolate industry that we’ll be looking at.

Society

Market capitalization

The description

Nestle (OTC: NSRGY)

340 billion dollars

One of the largest food companies in the world, with several brands of chocolate and baked goods.

Mondelez International (NASDAQ: MDLZ)

$ 85 billion

Former subsidiary of Kraft Foods responsible for timeless brands such as Oreo and Cadbury.

Hershey (NYSE: HSY)

$ 36 billion

Beyond its namesake chocolates, Hershey also has many well-known candy brands.

Lindt & Sprungli (OTC: LDSVF)

$ 28 billion

This Swiss-based company is known for premium Lindt, Ghirardelli and Russell Stover chocolates.

Data source: YCharts. Market capitalization as of September 16, 2021.

1. Nestlé

Nestlé is a sprawling empire of basic food and household products, as well as a great chocolate maker. The Swiss company sells a lot of candy under the Nestlé name and owns the rights outside the United States to various candy bars such as Butterfinger, Milky Way and KitKat.

In 2018, Nestlé sold the US rights to its candy and chocolate bar business (which also included Baby Ruth, 100 Grand and Crunch bars) to private group Ferrero for $ 2.8 billion.

Nestlé is a leading brand for investing in consumer staples, and it still has a significant presence in chocolate even after divesting its US business on this front. The company won’t provide much in terms of growth, but its food is essential in everyday life for millions of homes around the world. Nestlé stock also pays a decent dividend along the way and has a long history of gradually increasing its payouts to shareholders over time.

2. Mondelez International

Mondelez is another snack giant and on the chocolate side you know the company by its ownership of brands like Oreo, Cadbury, Chips Ahoy !, Milka, etc. Mondelez was derived from Kraft Foods (now Kraft Heinz (NASDAQ: KHC)) in 2012.

This snack specialist is another slow growing one, but it has tightened spending and increased profitability over the past decade. Mondelez has also expanded its presence in the healthy food segment as the global awareness of healthy eating grows. It also pays a dividend, which it has steadily increased since becoming an independent company.

3. Hershey

The American chocolatier is responsible for some of the most popular candies. In addition to the various products bearing its name, the company also manufactures Reese’s, Almond Joy, Heath, Milk Duds, York mint patties and more, as well as an extensive portfolio of baked goods.

Although Switzerland claims dominance in premium chocolate, Hershey is one of the fastest growing companies on this list. Total sales have grown almost 50% over the past decade as its candy and snack brands have remained at the top of the North American list and expanded into new markets internationally. Coupled with the growth offered by this company, Hershey is also paying a dividend which it has increased almost every year for decades.

4. Lindt & Sprungli

We will complete this list with a leader in premium chocolate: Lindt & Sprungli, based in Switzerland. It is the smallest stock listed here, but also one of the fastest growing large confectionery companies. The holding company owns Lindt, Ghirardelli, Russell Stover, Caffarel and Hofbauer and Küfferle.

Lindt distributes its chocolates around the world through retail partners, but its own store base is a notable differentiator and attracts consumers to tourist and shopping areas with heavy foot traffic. Since 2014 (when Lindt acquired Russell Stover and became the first premium chocolate maker in the United States), total sales have grown by 50%. The company isn’t paying a lot of dividends at the moment, but the higher growth rate more than makes up for that.

Are chocolate stocks a good investment?

As part of the consumer staples sector of the stock market, chocolate is not the fastest growing investment theme. However, the demand for chocolate and other sweets is not going to go away any time soon. In fact, chocolate sales continue to increase as consumers in developing markets join the middle class and previously inaccessible products such as chocolate become a more regular part of the grocery list.

If you’re looking for gradual growth with dividend income, these chocolatey stocks might be right for you.