Mondelez Battles Cocoa Inflation: Will Margin Pressure Ease in 2026?

Mondelez International, Inc. MDLZ entered the third quarter of 2025 with cocoa costs sitting at record highs, and the impact on profitability was obvious. The adjusted gross profit dropped by $796 million at constant currency, and the adjusted gross profit margin narrowed sharply to 30.4 percent, down 1,010 basis points. 

These drops were mainly due to higher raw material and transportation costs, along with an unfavorable product mix. The company described the third quarter as the peak of cocoa inflation for the year and noted that cocoa prices have recently begun to moderate, helped by signs of a stronger crop. Mondelez also uses coverage strategies that help soften cost swings and allow it to benefit if cocoa prices continue to decline. 

That said, lower cocoa prices will not automatically repair margins. Earlier price hikes, especially in Europe, where chocolate prices rose by about 30 percent, made shoppers more sensitive. Mondelez observed elasticity rising to roughly 0.7 to 0.8 compared with a more typical 0.4 to 0.5. To fix this, the company is adjusting pack sizes and resetting price points to make products feel more reasonable to consumers again.

Promotions are another challenge. Mondelez stated that some promotional efforts did not perform as expected, and retailer margin pressure plus shifts in where consumers shop added to the strain. Apart from this, the company stressed the importance of productivity. Cost savings in manufacturing and overhead helped soften the blow in the third quarter, and continued progress here will be crucial in 2026. 

Though easing cocoa costs are likely to help, stronger margins will still depend on steady execution and ongoing efficiency gains for Mondelez.

MDLZ’s Zacks Rank & Share Price Performance

Shares of this Zacks Rank #4 (Sell) company have tumbled 8.2% over the past three months compared with the industry’s decline of 7.6%. Mondelez also trailed the broader Consumer Staples sector’s drop of 5% and the S&P 500’s increase of 7.9% in the same time frame.

MDLZ’s Valuation Picture

Mondelez currently trades at a forward 12-month P/E ratio of 17.9, which is above the industry average of 14.66. Given the uncertain pace of margin recovery, and ongoing cost and promotional pressures, this elevated multiple appears difficult to justify in the near term. A Value Score of D underscores the concerns.

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