Cocoa prices seem settled but earnings recovery will take time under high-cost contracts

A shopper browses chocolate products at a Seoul supermarket on Monday. (Newsis)
A shopper browses chocolate products at a Seoul supermarket on Monday. (Newsis)

South Korea’s confectionery giants — Lotte Wellfood and Orion — seemed to thrive on paper last year, as brisk overseas demand pushed sales to record highs. Yet their earnings fortunes ultimately diverged due to a single ingredient: cocoa.

Lotte Wellfood posted all-time high annual sales of 4.22 trillion won ($2.9 billion) in 2025, up 4.2 percent from a year earlier, while operating profit fell 30.3 percent to 109.5 billion won, putting margins under strain.

Although combined revenue from exports and overseas operations rose 14.4 percent to 1.2 trillion won, many of Lotte Wellfood’s best-known products, such as Ghana chocolate and Pepero sticks, remain heavily chocolate-based, leaving the company exposed to cocoa price volatility.

Battered by climate disruptions and crop disease in West Africa, cocoa has become one of the world’s most volatile commodities in recent years. Cocoa prices, usually hovering around $2,000 to $3,000 per metric ton, surged past $12,000 at their peak in December 2024, sending raw material costs soaring across the confectionery sector. Prices have since fallen below $4,000 as of press time, but industry officials caution that it will take time for lower input costs to be reflected in improved earnings.

“Raw materials are bought in advance under supply contracts, so products now on shelves are still being made with higher-priced ingredients, meaning the cost burden from last year’s surge is still lingering,” said one industry official.

Lotte raised prices twice over the past two years, by an average of 12 percent and 9.5 percent, respectively, but higher sticker prices failed to fully offset the cost shock, especially as Korean consumers tightened spending amid persistent inflation.

Orion, on the other hand, followed a different script, with operating profit edging up 2.7 percent to 558.2 billion won on sales of 3.33 trillion won. Orion’s operating margin, near 17 percent, stood in stark contrast to Lotte Wellfood’s much slimmer returns.

Product mix played a big role; aside from its flagship Choco Pie, Orion relies less on chocolate-heavy products. As input costs climbed in late 2024, the company swiftly phased out cocoa-intensive lines, including its To You chocolate bar.

Instead, it shifted focus to higher-margin and channel-exclusive products that found strong traction in overseas markets, which now account for about 65 percent of its revenue.

Russia and India, in particular, delivered robust growth, with revenue rising 47.2 percent and 30.3 percent, respectively, supported by a broader product lineup, including jellies and dessert-style snacks such as custard.

Orion, however, remains cautious, given that cocoa prices are still higher than a few years ago and cost pressures persist due to contracts signed during the price surge. “The company is working to minimize further cost increases,” a company official said.


minmin@heraldcorp.com