Carmit: What Really Happened to Chocolate Margins After the Cocoa Shock
The main article already showed that Carmit's 2025 improvement was broader than chocolate alone. This follow-up explains why the core segment still has not regained 2023 margin quality: cocoa prices eased, but volumes barely moved, suppliers tightened terms, and CBE is still more of a defensive tool than full normalization.
What This Follow-Up Is Isolating
The main article argued that Carmit's 2025 improvement was real, but that credit still determined the quality of the outcome. This follow-up isolates only the chocolate segment, because that is where the most misleading gap in the year sits. On the surface, the cocoa shock eased somewhat: exchange-traded cocoa prices fell by about 9% in 2025 after a roughly 150% jump in 2024. In practice, chocolate margins barely moved.
Chocolate-segment revenue rose to 218.2 million shekels, up about 11%, but gross margin slipped slightly to 18.2% from 18.5% in 2024, and remained far below the 22.5% level of 2023. The company also states explicitly that there was no material change in sales volumes. That is the core of the story. 2025 repaired the top line of chocolate, but it did not yet restore the pre-shock quality of the segment’s economics.
Cocoa Eased, But The Old Economics Did Not Come Back
A reader looking only at the cocoa chart could conclude that pressure should have eased faster. That is incomplete. Even after the commodity pullback in 2025, cocoa products still represented about 54% of the company’s raw-material consumption cost, versus about 56% in 2024. So even after some relief, cocoa remained the single biggest input-cost bucket.
There is also a base-effect issue here. A 9% decline after a 150% spike is not full normalization. It is partial relief. That is why Carmit still had to work on several fronts at once: selling-price adjustments, forward purchases, operating-efficiency measures, and recipe review with substitutes. The investor presentation itself frames those four levers as the main 2025 response. When a company still needs all of them simultaneously, the message is that the commodity is calmer, but the model is not yet breathing freely again.
| What improved | What did not get fixed |
|---|---|
| Cocoa exchange prices fell by about 9% in 2025 | Chocolate gross margin stayed at 18.2%, with almost no recovery versus 2024 |
| Cocoa products fell from 56% to 54% of raw-material consumption cost | Cocoa still accounts for more than half of raw-material cost |
| Chocolate revenue rose by 10.6% | The company says there was no material change in sales volumes |
What matters here is the gap between revenue and margin. If revenue growth comes mainly through price rather than volume, margins remain much more exposed to commercial pressure and purchasing terms. That makes 2025 a successful stabilization year, not a full return to normal.
The Pressure Shifted From Cocoa Prices To Trade Terms
The easy part to miss is that the problem no longer sits only in the cocoa quote itself. Carmit says its cocoa supplier continued to demand additional collateral on geopolitical-risk grounds and also accelerated the company’s payment terms. That matters because it means a softer commodity price does not automatically turn into a full economic release.
The broader raw-material picture reinforces the point. Roughly half of the group’s raw materials and packaging are bought from overseas suppliers, and lead times for imported products can stretch to about five months. So even when the commodity price eases, Carmit still has to carry inventory, manage credit, and absorb foreign-exchange exposure in a heavy supply environment. That is why chocolate margins were not driven only by the cocoa cost per unit. They were also shaped by the price of availability, collateral, and time.
That is also why the gap versus 2023 matters more than the small move between 2024 and 2025. In 2024 the segment suffered a sharp hit. In 2025 it avoided another step down, but it still did not post a real recovery. This now looks less like a one-variable commodity problem and more like a cost structure that has not yet fully reset.
CBE Is A Smart Response, But Not Proof That The Shock Is Over
The most interesting chocolate move in 2025 was not another price increase. It was a change in the input architecture. During the year Carmit began to incorporate Cocoa Butter Equivalent, CBE, into some of its recipes under a purchase-and-distribution agreement with a foreign producer, and it also became the exclusive distributor of that product in Israel. The presentation frames CBE as an innovative solution, recognized under European regulation and already used in the chocolate industry.
That is a sensible move because it does two things at once. First, it can reduce part of the direct dependence on cocoa in some products. Second, it turns Carmit into a supplier of an ingredient solution to its own customers. In other words, this is not just an internal substitute. It is also a new product layer for the industrial channel.
But the move needs to be read correctly. The company refers to CBE in only some recipes, not as a full replacement. So for now CBE is a defensive flexibility tool, not proof that chocolate economics have returned to their 2023 form. The existence of the move is itself a signal that management is still looking for ways around an input structure that remains too heavy.
The presentation adds another useful clue here: in 2025 Carmit launched Creation Lab, a central development lab for chocolate and confectionery products meant to support all market channels. That could improve the company’s proposition over time for professional and industrial customers. For now it is still an option layer. The 2025 margin does not yet show that it has changed the economics.
Industrial-Customer Economics Explain Why Recovery Is Lagging
The superficial read of the segment is simple: Carmit sold more chocolate. The more accurate read is that it sold more chocolate into markets where commercial terms matter at least as much as the cocoa chart. Within the segment, the company has one customer whose revenue equals 10% of Carmit’s consolidated sales, and that customer belongs to the industrial market. Carmit also says explicitly that the industrial market provides the highest contribution to operating profit.
That detail is critical. When the main profit engine sits in the industrial market, Carmit’s chocolate is not just a shelf product. It is part of the customer’s production process. The presentation makes that point directly when it describes Carmit as an integral part of customer manufacturing. That means cocoa relief does not have to flow straight into margin. It is filtered through commercial terms with customers for whom chocolate is an ingredient, not just a finished consumer product.
The revenue mix supports the same conclusion. In 2025, molded chocolate sales reached 149.2 million shekels, equal to 49% of total company revenue, while liquid chocolate reached 58.2 million shekels, another 19% of revenue. So most of the segment sits very close to ingredient economics and industrial applications. At the same time, the company says it has no material order backlog because orders are generally short-term.
That chart explains why the margin recovery is still incomplete. Even after a good nominal growth year, capacity utilization rose only from 45% to 49%, which means the plant still ran at roughly half capacity. In other words, Carmit improved revenue without a real jump in volume and without a full fixed-cost absorption benefit. So even if price realization improved, margin quality did not yet come back.
What Has To Happen For Margin Quality To Return
For Carmit’s chocolate segment to regain something like its 2023 margin quality, another quarter of high revenue will not be enough. Four things need to happen together:
- gross margin in chocolate needs to move materially above the 2024 level, not just stay near 18%;
- supplier pressure needs to ease, or CBE and purchasing actions need to prove they can really offset part of the burden;
- volume growth needs to lift utilization above the current near-half-capacity range and improve fixed-cost absorption;
- Creation Lab and the company’s industrial and professional customer push need to improve sales quality, not just protect revenue.
Until then, it is more accurate to read 2025 as a chocolate stabilization year than as the year when the segment fully recovered.
Conclusion
The cocoa shock was no longer hitting in 2025 with the same force it did in 2024, but that still did not translate into a return to the old quality of chocolate margins. Carmit managed to protect revenue, raise prices, use purchasing and substitution levers, and start building tools such as CBE and Creation Lab. But suppliers still tightened terms, volumes barely moved, and utilization remained around half of capacity.
Bottom line: 2025 proved Carmit can defend its chocolate engine during a shock. It still has not proved that the engine has returned to pre-shock profitability quality.
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