Could you find your Golden Ticket amongst the chocolate industry?

As Hotel Chocolat (HOTC) delivers sweet growth, we take a look at which cocoa creator could be your favourite stock.

Article updated: 18 July 2019 9:00am Author: Tom Rosser

From buttons to bars, chocolate remains the go to snack of choice for those with a sweet tooth. According to reports, the global chocolate market is predicted to grow to $161.56bn in revenue by 2024 . This morning, Hotel Chocolat updated the market with a healthy update as it announced a 14% increase in revenues to £132m for the year. The British chocolatier has enjoyed annual sales growth amid new stores, with 16 opened so far this year – two of which were in the US.

We’ve looked at how you could fill your wallets by investing in the stocks of major global companies that generate revenues from the world’s chocolate lovers. Exposure to this market may provide investors with some mouth-watering returns, as well as helping their portfolio be more defensively geared as a result of the counter-cyclical nature of food producing companies.

The Hershey Company is the number one chocolate producer in North America, earning 90% of its revenues in the US through well-loved brands such as Hershey’s and Reese’s. Hershey is implementing a number of strategic initiatives to preserve its leadership in the US. Acquisitions into savoury snacks should help to diversify revenues and offset slowing category sales as consumers reduce consumption of high-calorie foods.

Mondelez International is a New York listed snack manufacturing company that owns iconic billion-dollar brands such as Cadbury and Milka. An accelerated push into the expanding healthy-snacking segment and a bigger presence in emerging markets should help to support the company’s margins and help maintain their competitive advantage in the food market.

Chocoladefabriken Lindt & Sprüngli, or Lindt to the consumer on the street, is a Swiss chocolatier and confectionary company founded in 1845. The company markets its products through its own specialty stores and boutiques, selling to customers worldwide. Higher demand for dark chocolate and strong emerging-market gains, particularly through e-commerce, should help to offset price competition in Europe and support Lindt’s premium position.

Nestle is the world’s largest food and drinks company, producing more than 2,000 brands. Despite its heavily diversified product offering, Nestle is still a major player in the chocolates market, manufacturing products such as Aero, KitKat and Smarties. The food behemoth should achieve its organic sales target in 2020 with recent mergers and acquisitions strengthening this.

Out of these companies, Mondelez looks to be most appealing due to its lower relative valuation, strong earnings growth, well supported margins and comparatively low net debt to equity in relation to the other aforementioned companies.

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All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Tom Rosser

Graduate Trainee

Tom is on our Graduate Trainee program as a junior Investment Research Analyst within our fund research team. He holds a BSc Economics degree and an MSc Investment Management degree, and is currently studying towards CFA (Level ll) after passing CFA (Level l) in summer 2018. 

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