Mondelez calls for delay in EU deforestation law amid soaring cocoa prices – FT

Mondelez International is lobbying for a delay to the EU's deforestation law, effective late 2025, citing record-high cocoa prices and existing supply chain shocks that threaten the €70 billion chocolate industry's competitiveness. While Mondelez had previously supported the legislation, U.S. peers like Mars and Hershey have also withheld support, partly influenced by U.S. President Donald Trump’s opposition to environmental regulations. Conversely, European chocolate makers, including Nestlé and Ferrero, warn that any delays would significantly weaken key EU environmental policies, as cocoa prices, though off peaks, remain historically elevated after tripling.

Analysis

A significant schism is emerging within the global chocolate industry over the EU's impending deforestation law, scheduled for late 2025. Mondelez International (MDLZ) has reversed its previous support for the legislation and is now lobbying for a delay, citing immense pressure on the €70 billion industry from record-high cocoa prices, which have more than tripled due to supply shocks in West Africa. This positions Mondelez alongside other U.S. confectioners like Hershey (HSY) and Mars, who have also withheld support, a stance reportedly influenced by U.S. political sentiment against environmental regulations. In direct opposition, European manufacturers including Nestlé (NESN) and Ferrero are urging the EU to maintain the timeline, warning that a delay would severely weaken a key environmental policy. This conflict highlights a fundamental tension between immediate financial pressures driven by commodity inflation and long-term ESG compliance, creating significant regulatory and reputational uncertainty for companies on both sides of the Atlantic.

Key Decisions for Investors

• Investors should recognize the heightened margin risk across the entire chocolate sector, as historically high cocoa prices are the primary catalyst for this industry-wide stress and lobbying effort.
• The diverging stances on the EU law create a distinct ESG risk profile; U.S. firms like Mondelez could face negative scrutiny from ESG-mandated investors, while European peers like Nestlé may attract capital for their pro-regulation stance.
• Monitor the EU's response to the lobbying, as a delay would provide short-term cost relief for Mondelez and its U.S. peers but prolong regulatory uncertainty, whereas enforcement would accelerate compliance costs.
• Consider that companies publicly supporting the law, such as Nestlé, may have already invested in compliant supply chains, potentially giving them a competitive advantage if the regulation proceeds as planned.