“We expect peak cocoa pricing to be reflected in the first half of 2025 while chocolate margins should improve sequentially versus Q4 2024.”

In context

“ed a replacement cost. Thus, profit growth has been quite good. On the other side, Q4 is a bit of an anomaly as we booked your cocoa for Q4 close to peak, if not at peak prices, while at the same time, we will not yet have the benefits of either additional pricing or planned cocoa savings initiatives in Q4. While next year cocoa will be significantly higher than the average of 2024, it is projected to be lower than Q4 2024. Most of our other key assumptions remain consistent with what we shared with you on our last call, with the exception of interest expenses, which is now estimated at $250 million for the year. Although it is premature to get into specifics around our ‘25 outlook, I would note a couple of items. The majority of our business, which is not chocolate, will be on algorithm. We expect peak cocoa pricing to be reflected in the first half of 2025 while chocolate margins should improve sequentially versus Q4 2024. Our plans around pricing, RGM and cost management are expected to be significant and help provide room for reinvestment. However, where we sit today, it is tough to see a path to earning growth in 2025 unless cocoa is just down from the current future curve and/or elasticities are much more benign than our current planning assumptions, [ergo] (ph) there will be additional pricing. But as we said a few times, we believe cocoa in 2026 is going to normalize and we would have a meaningful rebound of our chocolate profit to allow for us to get back on track with our algorithm. Clearly, we do not control cocoa prices. But in the unlikely event that they would not normalize by 2026, our gradual approach to pricing seems still to be the best approach to take. Overall, we feel good about the funda”