Cocoa Prices Stabilize, but Earnings Recovery Delayed by High-Cost Contracts
South Korean confectionery giants Lotte Wellfood and Orion both experienced record-high sales in 2025 thanks to strong overseas demand. However, their profitability diverged significantly, largely due to the fluctuating price of cocoa.
Lotte Wellfood reported record annual sales of 4.22 trillion won ($2.9 billion), a 4.2 percent increase year-over-year. Despite this, operating profit decreased by 30.3 percent to 109.5 billion won, impacting profit margins.
While combined revenue from exports and overseas operations rose by 14.4 percent to 1.2 trillion won, Lotte Wellfood’s reliance on chocolate-based products like Ghana chocolate and Pepero exposed the company to cocoa price volatility.
Climate disruptions and crop disease in West Africa have made cocoa one of the most volatile commodities in recent years. Cocoa prices, typically between $2,000 and $3,000 per metric ton, peaked at over $12,000 in December 2024, causing raw material costs to skyrocket across the confectionery industry. Prices have since dropped below $4,000, but industry experts warn that earnings improvements will take time to reflect these lower costs.
“Raw materials are purchased in advance through supply contracts, so current products on shelves are still made with higher-priced ingredients. The cost burden from last year’s surge is still impacting businesses,” said an industry official.
Lotte raised prices twice in the past two years, by an average of 12 percent and 9.5 percent, respectively. However, these price increases did not fully compensate for the cost shock, especially as Korean consumers reduced spending due to persistent inflation.
Orion, in contrast, saw operating profit increase by 2.7 percent to 558.2 billion won on sales of 3.33 trillion won. Orion’s operating margin, close to 17 percent, contrasted sharply with Lotte Wellfood’s lower returns.
Product mix played a crucial role. Besides its flagship Choco Pie, Orion is less dependent on chocolate-heavy products. When input costs rose in late 2024, the company quickly phased out cocoa-intensive lines, including its To You chocolate bar.
Instead, Orion focused on higher-margin and channel-exclusive products that gained significant traction in overseas markets, which now account for approximately 65 percent of its revenue.
Russia and India, in particular, experienced strong growth, with revenue increasing by 47.2 percent and 30.3 percent, respectively, supported by a broader product lineup including jellies and dessert-style snacks like custard.
Despite its success, Orion remains cautious, as cocoa prices are still higher than they were 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 stated.
