Chocolate Sales Slump? Cocoa Processors Bet on "Non-Confectionery" Sectors as Baking and Beverages Become New Battlegrounds

Persistently high cocoa prices are reshaping the business logic of the global cocoa processing industry. Facing the dual pressure of sluggish confectionery consumption and rising raw material costs, processors are repositioning cocoa as a cross-category ingredient, actively expanding into beverages, ice cream, and baked goods. They are betting that while consumers may forego expensive chocolate, they remain willing to pay for everyday cocoa-flavored products.

This transformation is already evident among industry leaders. Barry Callebaut AG, the world’s largest cocoa processor, reported its first sales growth in over two years last month, attributing the performance to an expanded presence in businesses beyond confectionery. Meanwhile, although Hershey Co. and Mondelez International Inc. recorded declines in chocolate sales, their other food categories performed relatively robustly.

Market data further confirms this structural divergence. According to NielsenIQ data, U.S. chocolate confectionery unit sales fell by approximately 4% year-over-year in the 12 months ended July 4; in contrast, sales of dietary and nutritional products, represented by chocolate-flavored nutritional shakes and protein powders, rose by 9%. This "scissors difference" is driving capital and R&D resources to accelerate their shift toward non-confectionery channels.

Industry Leaders Prioritize Diversification as Core Strategy

Hein Schumacher, CEO of Barry Callebaut, stated during an earnings call that "chocolate remains highly relevant to consumers overall," noting that whether as an ingredient in ice cream, fillings, or baked goods, chocolate continues to be one of consumers' favorite flavors. He explicitly identified expansion into markets beyond confectionery as a key pillar of the company's growth strategy.

This assessment aligns with the experience of Kelly Go, founder of the Philippine premium chocolate brand Auro Chocolate.

When Go founded the company a decade ago, the large volume of cocoa powder generated from grinding cocoa beans had nowhere to go and was often discarded. She subsequently expanded into the beverage market, selling cocoa powder to beverage companies seeking low-cost "chocolate-flavored" ingredients. Today, Auro’s cocoa beverages are available in major retail channels such as 7-Eleven.

Go believes that this change stems from differences in consumption scenarios: in the Philippines, chocolate is often viewed as a gift or seasonal item, whereas beverages are considered an "everyday luxury," making it easier to form high-frequency consumption habits.

Baking and Protein Nutrition Products Emerge as New Growth Engines

Both analysts and companies point out that protein bars and snacks combining chocolate with healthy ingredients and low-sugar formulas are becoming one of the most attractive growth directions.

In the baking sector, California-based Guittard Chocolate Co. stated that its premium business has outperformed the mass market. The company recently upgraded its chocolate bar products, launching formulations with higher cocoa content to meet the needs of pastry chefs using them in baked goods like croissants. "Consumers are increasingly inclined to buy desserts at bakeries to enjoy with their morning coffee," said Amy Guittard, the company’s Chief Marketing Officer.

As a lower-cost byproduct of cocoa processing, cocoa powder—which primarily provides color and flavor rather than texture—has significantly outperformed cocoa butter, which mainly provides texture, in terms of price performance. According to data from commodity risk analysis firm KnowledgeCharts, cocoa powder prices have markedly outperformed cocoa butter over the past two years, providing processors with a more favorable cost basis for expanding non-confectionery businesses.

High Prices and Substitute Threats Pose Dual Risks

However, this transformation is not without risks. For processors, the greatest risk lies in the fact that when chocolate serves merely as one of several ingredients, customers are more likely to reduce its proportion in response to rising raw material costs. During the period in 2024 when cocoa futures hit record highs, Hershey adjusted the formulas for some products under its Reese’s brand, reducing the amount of cocoa used.

Daniel Corpuz, a New York pastry chef, noted that the surge in cocoa prices has prompted more practitioners in the pastry and confectionery industries to substitute high-end, cocoa-butter-rich chocolate with lower-cost alternatives.

Currently, price pressures have not eased. This year’s El Niño phenomenon may bring abnormal weather to West Africa, the main cocoa-producing region, where the supply chain is already vulnerable due to an industry structure dominated by smallholder farmers. Volatility in the New York cocoa market has risen to its highest level since 2024 this summer, with prices remaining significantly above historical averages.

Cost pressures have even prompted processors to begin "diluting" their own products. Schumacher revealed that ChoViva, Barry Callebaut’s cocoa alternative made from sunflower seeds, has achieved "significant" growth. Analyst Judy Ganes bluntly stated: "Demand for chocolate flavor remains strong, but this no longer means synchronous growth in cocoa demand. Consumers think they are enjoying chocolate, but they are actually consuming less and less cocoa."

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