Chocolate maker Tony's Chocolonely says lower cocoa price offers chance to bolster supply chain

By Alexander Marrow

LONDON, Feb 3 (Reuters) - Tony's Chocolonely, a chocolate brand that's built a 240 million euro ($283 million) business with bright packaging and a pledge to act ethically, said it aims to take advantage of lower cocoa prices by investing in its supply chain to limit future price shocks.

The relatively young firm, set up in 2005 by three Dutch journalists aiming to make ethical chocolate, has battled high costs after cocoa prices shot to record highs in 2024, squeezing margins.

"Like everybody, we've been faced with this sort of cost tsunami from both cocoa and tariffs hitting the business," Tony's CEO Douglas Lamont told Reuters in London. The company has raised its prices by some 20-30% in the last 12-18 months.

TIME TO 'TAKE ADVANTAGE' OF FALLING PRICES

With price pressure easing, Lamont wants to invest in supply chain resilience through supporting farmers who can invest in crops, disease protection and yield management to guard against future shocks.

The company is also urging major chocolate producers to follow suit. Tony's volumes rose 4% in its last financial year, it said in a report on Tuesday, but larger players are not faring quite so well.

Cocoa processing behemoth Barry Callebaut's BARN.S sales volumes fell 9.9% in the quarter from September to November, even as revenues rose. KitKat maker Nestle's NESN.S confectionery unit has also seen a drop in volumes and Cadbury maker Mondelez MDLZ.O slashed its profit forecast back in October.

A global surplus has driven down cocoa prices by almost 30% so far this year after a 50% drop last year. In 2024, internationally-traded cocoa prices surged by 160%.

For Lamont, the lower prices present an opportunity for chocolate producers to support long-term supply chain resilience by investing in farmers, most of whom in West Africa earn less than $1 a day, according to the United Nations. Tony's is not planning to pass on lower cocoa prices to consumers, he said.

"The industry can now afford to (invest) without long-term industry margins being eroded because the cocoa price is coming down, so let's take advantage of this falling price," Lamont said.

Tony's, majority-owned by private equity firm Verlinvest, has seen the U.S. overtake the Netherlands as its largest market and is growing substantially this year, Lamont said.

The company sources cocoa through its Open Chain ethical sourcing initiative that retailers like Albert Heijn and Waitrose also use for their private-label chocolate.

Tony's says it pays a premium on the cocoa to "support farmers towards earning a living income". It declined to say how much higher than average their daily wages were.

($1 = 0.8477 euros)