What does this potential Barry Callebaut cocoa split mean? Summary
- Barry Callebaut considers splitting cocoa division amid extreme commodity volatility
- Separation aims to create a more profitable chocolate business with stability
- Cocoa unit faces capital intensity while chocolate unit offers stronger margins
- Split could enhance financing options by aligning risk profiles across businesses
- Industry shift includes reformulation trends and growing interest in cocoa alternatives
2025 was a year defined by major shocks in confectionery.
Nestlé kicked things off by sacking its CEO Laurent Freixe, after it was discovered he’d been conducting an “undisclosed romantic relationship with a direct subordinate”.
But that wasn’t all. The world’s biggest CPG swiftly followed it up with the announcement it’s to cut 16,000 jobs worldwide.
Meanwhile The Ferrero Group took a step outside of the sector by acquiring cereal brand WK Kellogg Co, highlighting the industry’s new focus on diversification.
Similarly Mars, Inc. snapped up snack brand Kellanova, in an industry-changing deal worth $36bn (€31bn).
Then, as the world was winding down for the Holidays, rumours began to swirl that the world’s biggest chocolate maker Barry Callebaut is in the early stages of a planned separation from it global cocoa unit.
So, what’s behind this potentially industry changing decision? Will it go ahead? And what could it mean for the confectionery and snacking industries?
Why separate cocoa from chocolate at Barry Callebaut?
“The cocoa business is very volatile and capital intensive,” says Jon Cox, head of Swiss equities at financial services firm Kepler Cheuvreux. “Removing it from the rest of the business would leave a more stable, profitable and less capital intensive operation.”
Key benefits to a cocoa split include:
1. Reduce exposure to commodity volatility
Cocoa prices have been unstable since 2022, hitting record highs in January 2025. A point emphasised by CEO Peter Feld during the company’s full year earnings announcement in November. “The past fiscal year was marked by exceptional and unprecedented volatility in the cocoa and chocolate markets, impacting both Barry Callebaut and our customers,” he told investors.
He followed on by saying, “we are preparing Barry Callebaut to get back to growth”. Was this rumoured split part of those preparations?
By separating the cocoa business, Barry Callebaut would carve out the most commodity-exposed part of its portfolio, leaving the core chocolate business insulated from these raw‑material shocks.
2. Create a more stable business
Barry Callebaut’s chocolate division, which includes contract manufacturing for major manufacturers including, Nestlé, Mondelēz International, The Hershey Company, and Tony’s Chocolonely, operates at much higher margins and is far less capital‑intensive compared to the cocoa processing unit.
By spinning off cocoa, the remaining chocolate business would appear financially cleaner:
- More predictable earnings
- Stronger margin profile
- Lower capital requirements
- Improved investor appeal
3. Enhance financing efficiency by separating risk
The cocoa and chocolate divisions have fundamentally different risk/return dynamics. A split would allow Barry Callebaut to optimise financing, because each business would be able to seek capital appropriate to its risk profile.
Investors who want exposure to commodity processing could back the cocoa entity, while those preferring stable, branded food production could invest in the chocolate arm.
4. Improve strategic flexibility
A separation unlocks the following options:
- Sell a minority stake
- Form a joint venture
- Merge the cocoa division
- Divest it completely
All of which are said to be up for consideration at the Swiss-Belgian giant’s headquarters in Zürich.
5. Respond to industry shifts
The cocoa sector is not only volatile, it’s undergoing a huge structural transformation.
Manufacturers are increasingly reformulating products to use less cocoa, investing in cocoa‑free alternatives, and reassessing long‑term supply chain exposure.
A standalone cocoa business may be better positioned to navigate these structural pressures independently.
Separation in action
While a potential spin-off of its cocoa business offers significant benefits to Barry Callebaut, it wouldn’t be without challenges.
“The bulk of the cocoa unit’s sales goes to the chocolate business and there is a symbiotic relationship between them,” says Kepler Cheuvreux’s Cox.
In other words, the cocoa and chocolate divisions function as two halves of the same whole, with the cocoa business effectively acting as an in‑house supplier, providing the raw materials needed to produce finished chocolate for major global brands such as KitKat and Magnum. This creates a two‑way dependency - the chocolate division relies on the cocoa unit for stable, high‑quality supply at scale, while the cocoa unit depends on the chocolate arm as its primary and most predictable customer, with around two‑thirds of its gross sales generated internally rather than on the open market.
Added to this, “some of the factories are integrated,“ says Cox.
But that doesn’t mean a successful separation isn’t possible.
“I don’t think this would be insurmountable,” he says. “There could be a long term supply deal between the two entities and the factories can be separated or at least dividers put in place.”
Most likely move
While no one can say for certain what Barry Callebaut will do next - sell minority stake, form a joint venture, merge the cocoa division, divest, or make no change at all - Kepler Cheuvreux’s Cox believes a full divestment to be the most strategic option. “It would leave the remaining business more profitable with predictable cash flows and better return on invested capital,” he explains.
Whether Barry Callebaut ultimately pulls the trigger on a separation remains uncertain. But, if it does go ahead then it’ll mark one of the most significant restructurings the sector has seen in decades.
For the wider confectionery and snacking industries, the implications would be far‑reaching. A standalone cocoa business could accelerate the shift already underway towards alternative cocoa ingredients, new sourcing models and greater supply‑chain transparency.
Meanwhile, a leaner, more margin‑focused Barry Callebaut would likely double down on innovation, contract manufacturing, and premium chocolate development - areas that directly shape the portfolios of confectionery giants and emerging snack brands alike.
We’ll continue tracking developments as they emerge.
