Strauss Group: Why Snacks And Confectionery Did Not Recover Even As Cocoa Eased

The main article argued that Strauss's 2025 recovery still leaned heavily on coffee and Brazil. The Israel segment that did not come back with the same force was Snacks & Confectionery. That is not simply a story of one expensive commodity. It is a story of how slowly relief reaches the P&L, how much of inflation can actually be passed through to price, and how much real margin is left in the segment once the cocoa noise is stripped out.

The first number that matters is the gap between sales and profit. Snacks & Confectionery lifted sales by 10.3% to NIS 1.395 billion, yet operating profit fell 72.4% to just NIS 12 million. Cost of sales rose 18.3% to NIS 1.052 billion, far faster than revenue. That pushed gross profit down from NIS 374 million to NIS 343 million, and gross margin down from 29.6% to 24.6%.

This is not just an accounting accident. Cocoa and cocoa derivatives account for more than 52% of the segment's raw-material and packaging purchases, and two main suppliers together account for roughly 63% of segment purchase cost. At the same time, Strauss explicitly says the impact of raw-material price changes on its actual material cost is gradual because of procurement processes and hedging policy. In other words, even if Bloomberg has already calmed down, the filings do not have to calm down with it.

There is also a third layer. Even after excluding the NIS 49 million cocoa-derivative loss realized in Q1-25, adjusted operating profit for Snacks & Confectionery would have been only NIS 61 million, down from NIS 89 million in 2024. Adjusted margin fell from 7.0% to 4.4%. That is the core of this follow-up: cocoa explains a lot, but not all of the gap.

Where The Margin Actually Broke

The right way to read the segment in 2025 is not through the revenue line but through the chain from sales to profit. Price moved up, volumes did not collapse, yet the margin pool was squeezed in the middle.

What matters here is that the gap between gross profit and operating profit barely moved. It was NIS 330 million in 2024 and NIS 331 million in 2025. That means most of the EBIT damage came from gross-profit erosion, not from some dramatic blowout in the segment's cost base. This is primarily a partial pass-through story, not an overhead story.

Cocoa Eased, But Not In Time For The Filing

On paper, 2025 should already have looked better. Average cocoa prices were down 9% versus 2024. In Q4, the average price was down 39%, and the year-end spot price was down 52% from end-2024. If one looks only at the commodity screen, the segment should have been through the worst of it.

But Strauss explains why that is not how the P&L works. Raw materials are bought in advance, parts of the exposure are hedged, and the profit or loss from commodity hedging is recognized in the management accounts mainly when inventory is sold to outside parties or when the derivative is realized. So there is a built-in lag between the cocoa chart and the reported result.

That lag is not theoretical. In 2024, Strauss Israel built up a roughly NIS 94 million loss from cocoa-derivative positions. About NIS 45 million was realized in 2024, and the remaining NIS 49 million was realized in Q1-25 and ran through cost of sales. So 2025 carried not only 2025 cocoa economics, but also the tail of the previous year's hedging decisions.

This is where the distinction between relief and recovery matters. Q4 did improve: sales rose 8.3% to NIS 335 million, cost of sales rose only 6.4% to NIS 238 million, and operating profit climbed from NIS 5 million to NIS 12 million. The presentation attributes that Q4 improvement to a slight decline in cost of goods sold. So the easing did begin to flow through. It simply did not erase the annual damage.

Pricing Went Through, But Only Partly

If cocoa were the whole story, the answer after adjusting out derivative noise would have looked much cleaner. It did not. That is where pass-through quality becomes the real question.

On one hand, Snacks & Confectionery still has real commercial power. In 2025 the group held 55.2% market share in chocolate tablets, 41.7% in sweet snacks, and 40.0% in salty snacks. The franchise clearly still works. Segment volumes were up 1%, and up 4% excluding sweet spreads, while the relevant food-market categories in Israel declined 1.3% in volume. So some pass-through did happen, and demand did not break.

On the other hand, this is far from a quiet market. Strauss describes a category with significant imports, no tariffs or quotas, major international brands such as Kinder, Mars, Oreo, Milka, Lindt and Orbit, plus private label and parallel imports. In that kind of market, prices can move higher, but not always fast enough or far enough to offset a steep cocoa shock. Revenue can still grow while margin keeps shrinking.

That is exactly what 2025 shows. Price was updated, sales grew, gross profit fell, and EBIT almost disappeared. If this were only a temporary accounting distortion, adjusted margin would not have dropped from 7.0% to 4.4%. If this were only a demand problem, sales and volumes would not have stayed positive. The more convincing read is that Strauss recovered only part of the inflation through pricing, while giving up a meaningful portion of the segment's gross-profit cushion.

Why This Is Not Only About Cocoa

This segment is not just chocolate. It also includes salty snacks, wafers, cookies, candy, gum, and other categories. That matters, because weak margin even after adjusting out cocoa-derivative losses says something broader about the segment's earnings quality.

The filings do not let us decompose the gap precisely by category, mix, commercial terms, and operating friction. But they do give three strong clues. First, cocoa and cocoa derivatives still make up more than half of the segment's raw-material and packaging spend. Second, supplier concentration is unusually high, which means the story is not only the quoted commodity price but also supply terms and bargaining power. Third, even when cocoa eased in Q4, management still described only a slight decline in material cost, not a return to a normal margin structure.

That is the difference between relief and recovery. Relief means the pressure stops getting worse. Recovery means the margin returns to a level that fits the segment's brand strength and sales scale. By the end of 2025, Snacks & Confectionery was still not there.

What Needs To Happen Next

The first checkpoint is that cocoa relief has to show up not only on the commodity chart but in the ratio between sales and cost of sales. If the Q4 pattern continues, gross margin should rebuild.

The second checkpoint is that adjusted operating margin has to move back toward pre-crisis levels. As long as the segment stays around 4% to 5% even without derivative noise, the market will have trouble calling this repaired.

The third checkpoint is pass-through quality. If sales keep growing mainly through price while margin does not improve alongside it, the implication will be that Strauss is preserving the top line by giving away economics. That is not the same thing as recovery.

The bottom line is straightforward: Snacks & Confectionery did not suffer only because cocoa was expensive, and it will not recover only because cocoa eased. The combination of an unusually heavy cocoa input base, high supplier concentration, a built-in lag between commodity screens and reported cost, and competition that limits full pricing power left Strauss with a segment that sold more but earned much less. Until adjusted margin starts widening again, the group's recovery will remain narrower than the 2025 headline suggests.