You would think that the highest cocoa prices in history would be beneficial to the world’s biggest chocolate manufacturer Barry Callebaut. If only it was that simple. The company has to pre-finance purchases and then store more expensive inventory, which increases working capital needs. This, in turn, leads to reduced operating cash flows and more debt.
Barry Callebaut produces 20% of the world’s industrial chocolate for brands like Nestle, Hershey and Mars. But as cocoa prices surged seven-fold between 2022 and 2024, the company’s accounts payables tripled and net debt increased by almost two billion Swiss francs. Free cash flow went from over CHF 350 million in 2021 to minus CHF 2.3B last year. No wonder that by April 2025, the stock was down 70% from its all-time high.
On the bright side, the price of cocoa is down almost 50% from its late-2024 record and Barry Callebaut stock seems to have found a bottom just above CHF 700 per share. Can investors expect that recovery to continue? The weekly Elliott Wave chart below seems to support such a conclusion.
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It visualizes both the recent 70% crash and the preceding uptrend. Together, they can easily be seen as the two phases of a textbook Elliott Wave cycle. The motive phase is a five-wave impulse, marked (1)-(2)-(3)-(4)-(5) in wave I, where the five sub-waves of wave (3) are also visible. The corrective phase, on the other hand, is a simple (a)-(b)-(c) zigzag in wave II. The impulsive structure of both waves (a) and (c) is at display, as well.
According to the theory, once a correction is over, the preceding trend resumes. If this count is correct, we can expect Barry Callebaut to continue to the upside in wave III. New all-time highs above CHF 2400 per share make sense in the long term. From CHF 1050 as of this writing, the stock can more than double in the years ahead.
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