How to Invest in the Chocolate Business Companies and Stocks - Investing in Free Radicals

There are free radicals destroying your health and your wealth. Investing in the chocolate business is a novel way to take charge of both free radicals. In these days of European debt crisis and 1000 point Dow Jones falls investing can be a perilous business. You have decisions to make about whether you should invest in mutual funds in a global financial crisis. Should you hide you money under a bed rather than put it in a bank with their trillion dollar plus losses? It is important to stay calm and not get caught up in the Pygmalion effect of fear about the latest conspiracy theory that impacts your very well being. 

Lets combine some investing that may put a smile on your face. If you love chocolates can you combine that passion with investing? The health benefits from chocolate flavanols have become more accepted and as such chocolate manufacturers are looking to cash in. Researchers say cocoa rich dark chocolate tastes good, helps blood pressure, reduce free radicals, stalls aging and protects from strokes. Some may reason you love the product; it’s good for you so if the stock price falls I guess two out of three isn’t bad. There may be worthwhile companies in the chocolate business to keep an eye on for opportunities if the stock becomes attractive enough. Free radicals, investing in the chocolate business. Just remember you can’t chew on the stock certificate. 

If you are looking to invest in the chocolate business it is important to understand the pressures on a chocolate company’s business.

1. Volume growth will be affected by continuing weakness in the economies of Western Europe and North America and the global financial crisis improves for the better.
2. Chocolate companies’ gross margin’s will be affected by higher cocoa pricing. Cocoa prices pulled back in the first quarter of 2010. The ICE futures contract for cocoa, CCc1 hit a 30-year high of 3,510 dollars a tonne during December 2009. We have traded back below 3,000 dollars since.
3. Currently we are seeing lower prices for cocoa butter which would the help balance here. This relationship is called the combined cocoa ratio. This ratio is the combined sales price for cocoa butter and cocoa powder relative to the cocoa bean price.Barry Callebaut recently said in a statement, "For the second half of the fiscal year we expect the global chocolate market to continue to slowly recover and the combined cocoa ratio to improve,”
4. Given the number of large Swiss chocolate business the strength of the Swiss Franc may impact those companies’ sales. Conversely this should impact non-Swiss companies.
5. The chocolate industry is heavily fragmented with the top seven companies accounting for less than 60% of the total market. This means takeover activity is ever present in the chocolate industry.

Here are four American company you can invest in that are in the chocolate business.

Hershey Co.

Hershey Co. trades on the NYSE with the symbol HYE. Hershey has a sentimental spot for most Americans, as it is the largest chocolate manufacturer in North America. Hershey was founded in 1894 with its favored Hershey's Kisses invented back in 1901.

In 1988 Hershey's acquired the chocolate business from Cadbury's from the Peter Paul merger of 1978. Cadbury group's chocolate products have been sold in the US since 1988 under the Cadbury name. However the chocolate has been manufactured by Hershey's and can be found in Hershey's chocolate stores next to Hershey branded chocolates.

Key Stock Information for HYE as of May 31, 2010

• Last Price: 46.84
• 52wk high: 48.75
• 52wk low: 33.70
• EPS: 2.21
• PE: 21.20
• Dividend: 1.28
• Yield: 2.735
• Market Cap: 7.79 b

Kraft Foods Inc.

Kraft Food Inc. trades on the NYSE with the symbol KFT. Kraft Foods became a significant global player in the world’s chocolate market when after taking over Cadbury PLC. Cadbury approved a revised offer from Kraft Foods On January 19, 2010. The deal valued Cadbury’s confectionery business at £11.5 billion ($19.5 billion US).

Cadbury plc was a quintessential British company. The London based confectionery and Beverage Company was founded in 1783. Before the takeover Cadbury was the second-largest confectionary company globally behind the combined Mars-Wrigley.

Some of Cadbury’s leading brands include;

• Cadbury drinking chocolate,
• Cadbury Dairy Milk,
• Cadbury Crème Egg
• Clorets.

Key Stock Information for KFT as of May 31, 2010

• Last Price: 28.61
• 52wk high:. 31.09
• 52wk low: 24.80
• EPS: 2.74
• PE: 10.40
• Dividend: 1.16
• Yield: 4.0559
• Market Cap: 49.86 b

Tootsie Roll Industries

Tootsie Roll Industries trades on the NYSE with the symbol TR. Tootsie Roll Industries is the manufacturer of an American icon, the Tootsie roll. Some of Tootsie Roll Industries favorite chocolate brands include;

• Tootsie Rolls and Tootsie Pops
• Andes Chocolate Mints
• Sugar Daddy and Sugar Babies caramels
• Cella's chocolate-covered cherries

Key Stock Information for TR as of May 31, 2010

• Last Price: 25.04
• 52wk high: 28.49
• 52wk low: 21.19
• EPS: 0.46
• PE: 54.30
• Dividend: 0.32
• Yield: 1.278
• Market Cap: 922.93 m

Rocky Mountain Chocolate Factory Inc.

Rocky Mountain Chocolate Factory Inc. trades with the symbol RMCF on the NASDAQ. Rocky Mountain Chocolate Factory’s home is in Durango, Colorado. The company is relatively new, having been founded in 1981. Rocky Mountain Chocolate Factory has over 300 franchise locations in 40 of America’s states. Internationally it has franchises in Canada and the United Arab Emirates.

The Company says it typically produces approximately 300 chocolate candies and other confectionery products. These products include many varieties of clusters, caramels, creams, mints and truffles.

Key Stock Information for RMCF as of May 31, 2010

• Last Price: 9.29
• 52wk high: 10.26
• 52wk low: 7.50
• EPS: 0.58
• PE: 15.70
• Dividend: 0.40
• Yield: 4.3956
• Market Cap: 54.88 m

Here are three European companies you can invest in that are in the chocolate business. All three selected are based in Switzerland.

Nestle

Nestle trades under the symbol NESN.VX. Nestle is a true conglomerate, with business units including Food and Beverage, Pharmaceuticals, Nestle Waters and Nestle Nutrition. Nestle is one of Switzerland’s largest companies but most of us know it for it’s chocolates. Nestle divides its products into the following;

• Powdered and liquid beverages
• Water
• Milk products and Ice cream
• Nutrition
• Prepared dishes and cooking aids
• Confectionery
• PetCare
• Pharmaceutical products

Some investors may be interested to know Warren Buffet’s Berkshire Hathaway has a significant Nestle position in it’s portfolio.

Key Stock Information for NESN.VX as of May 31, 2010

• Last Price: CHF 52.40
• 52wk high: CHF54.65
• 52wk low: CHF38.24
• EPS: 3,25
• PE: 20.40
• Dividend:
• Yield: 3.06
• Market Cap: CHF 182,279.91

Chocoladefabriken Lindt & Spruengli AG

Chocoladefabriken Lindt & Spruengli AG trades under the symbol LISP.S Chocoladefabriken Lindt & Spruengli AG is also a Swiss company; do you see a trend here? Chocoladefabriken Lindt & Spruengli AG is known for its premium chocolate. You may be familiar with the brands,

• Caffarel,
• Ghirardelli,
• Hofbauer,
• Kuefferle
• Lindt.

Premium chocolate accounts for 25% of the total chocolate market estimated at SF38bn. Lindt has strong market positions in Europe, and in North America where almost 30% of its sales originate. The Company has eight manufacturing plants worldwide, six in Europe and two in the United States. Chocoladefabriken Lindt & Spruengli AG has announced earnings expectations for the financial year 2010. They expect substantially higher growth of 5% - 7% and an operating result (EBIT) of CHF 300 million - CHF 340 million.

Key Stock Information for LISP.S as of May 31, 2010

• Last Price: CHF 2,511.00
• 52wk high: CHF 2,586.00
• 52wk low: CHF 1,906.00
• EPS: -25.56
• PE: 32.22
• Dividend: No Dividend Past Quarter
• Yield:
• Market Cap: CHF 6,225.95

Barry Callebaut AG

Barry Callebaut AG trades under the symbol BARN.S. Barry Callebaut is another Switzerland based company; it has recently made the news for it’s chocolate flavanols enhanced Chocolate bars. Barry Callebaut is the world's largest chocolate manufacturer. Barry Callebaut AG manufacturers chocolate for the likes of market leaders Nestle and Hershey.

In 2009 Barry Callebaut AG saw a declining global chocolate market affect earnings. They have seen a volume pick-up in their growth markets since. However this volume was offset by high cocoa prices and unfavorable shifts in the Swiss Franc.

Key Stock Information for BARN.S as of May 31, 2010

• Last Price: CHF 700.00
• 52wk high: CHF724.00
• 52wk low: CHF539.46
• EPS: 0.99
• PE: 55.70
• Dividend: No Dividend Past Quarter
• Yield:
• Market Cap: CHF 3,580.59

Know Your Risks In The Chocolate Business

I have chosen seven companies here that may satisfy a chocolate investment. Three of the companies are Swiss based and four American based. Though of that the Cadbury component of Kraft Foods is U.K. based. I have tried to give a brief introduction to the merits of each company and the risks of the chocolate business. However this is but a basic introduction and not a recommendation to buy or sell the stocks.

Please consult with your trusted financial advisor on any decision you make investing in the chocolate business. You need to temper the free radicals, investing in the chocolate business thoughtfully not let them control you. After all the research and you don't find a suitable investment in the chocolate business? You still always have chocolates and they come in many shapes and sizes.