Hi All, just want to clarify that all the biggies – likes of Mondelez, Nestle, Mars are able to hedge the price of cocoa given the sheer volumes they sell globally. They have a centralised source for sourcing cocoa and own acres and acres of farms in countries like Ghana. So they enjoy economies of scale and hedging benefits and even though price of cocoa has increased by 3x they are still relatively insulated which is why price of dairy milk silk has only gone up by 10% in last 6 months while that of Amul chocolates has gone up by 30%. Beyond a point domestic players like Amul will not be able to pass on the price hike to the consumer and will begin to lose market share to the global giants which will mean that either Lotus’s topline will crash or its margins. The lower the price of cocoa the better it is for smaller players to thrive or it’s the end of the road. All small chocolate D2C brands have shut shop because core ingredient – cocoa – which contributes to 50% of COGS is now unaffordable.
Disc : not invested
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