Pricing Agribusiness Risk

Our expertise and experience in pricing risk in agribusiness enterprises is central to our ability to advise on capital markets funding strategies.

A Tale of Two Choc Related Share Prices

BREXIT vs Mondelez/Hershey: two potentially significant events for UK Choc related share prices. In the case of Hotel Chocolat (HOTC) it seems that BREXIT fears have won out over Hershey related sector consolidation speculation, while United Cacao Ltd (CHOC), the AIM listed Peruvian cocoa plantation company, with no exposure to the UK economy, appears to have been swept upwards by the rise in the UK cocoa contract, rather than the Hershey related sharp uptick in the Hardman Agribusiness Choc Index.

Share Price Chart

While HOTC represents an obvious target for any brand consolidator in the premium segment of the chocolate confectionery sector (Lindt for example) looking for store frontage and brand quality, the BREXIT effect looks to have had the greater effect. As we see the patterns around the globe, specialist chocolate retail outlets are evolving from marketing loss leaders to winning strategies: Hotel Chocolate and Royce being good examples. Note also that both Ferrero and Lindt have been developing their retail space – Ferrero notably by acquiring UK Thorntons and its portfolio of some 250 stores in 2015. On this basis HOTC shares might have been expected to have joined in the Hershey related ‘fun’. Instead the HOTC share slide looks to have been driven by BREXIT fears for the UK economy to which HOTC is highly exposed: imported materials will be more expensive, see chart for UK contract below for London Cocoa Contract vs Hotel Chocolat share price performance.

HOTC & cocoa futures

Moreover HOTC will also be impacted by the deteriorating outlook for UK GDP growth: demand for chocolate products is linked (everywhere) to GDP growth.

GDP Cocoa Grindings

Meanwhile UCL has flipped up smartly, more likely in tandem with the London Cocoa Contract, than with the HAB Choc Index Hershey related activity.UCL & cocoa futures