Orion and Lotte Wellfood posted sharply different profitability results last year. Both companies were hit by surging raw material prices, but the one with greater dependence on chocolate was more negatively affected.

Industry officials said on Feb. 13 that both Orion and Lotte Wellfood increased consolidated sales last year from a year earlier, but their operating profit performance diverged. Orion’s operating profit rose 2.7 percent, while Lotte Wellfood’s operating profit fell 30.3 percent over the same period.

Both companies were affected by higher raw material prices last year, especially a surge in cocoa prices. Orion said the burden of manufacturing costs increased due to higher prices of key raw materials such as cocoa, fats and oils, and nuts caused by poor harvests, along with the impact of a weak won. Lotte Wellfood also said the cocoa price surge that began in 2024 continued through last year and caused its profit decline.

Cocoa prices surged globally last year due to poor harvests. Harvests plunged due to drought and pest damage in West Africa, including Ivory Coast and Ghana, the producing regions. The International Cocoa Organization said cocoa prices in 2024, when the surge was strongest amid the largest supply shortfall in 60 years, rose from about $4,200 per ton in January to about $12,000 per ton in December.

Cocoa prices gradually stabilised to $5,800 per ton at the end of the year, but were still influenced by the 2024 surge, including reaching $11,200 per ton in the first half. Industry officials said cocoa prices were trending lower last month to about $4,970 per ton.

Orion succeeded in protecting profitability because snacks, biscuits and pies are its main products, while Lotte Wellfood, whose key products include ice cream and chocolate, took a direct hit from the burden of raw material costs.

Orion’s key products include snacks such as Poca Chip and Squid Peanut, biscuits such as Dr. You Bar and Yegam, and pies such as Choco Pie and Custard. The electronic disclosure system shows that in the third quarter last year, Orion’s sales mix was 31.7 percent, 26.7 percent and 20.1 percent, respectively. It has chocolate products such as Choco Pie, but its overall reliance on chocolate is relatively low.

Orion was also affected by cocoa prices because Choco Pie is a strong-selling product, with annual sales of 580 billion won in Korea and 90 billion won globally. In Russia, known as a popular market for Choco Pie, the utilisation rate of 5 Choco Pie production lines exceeded 140 percent and supply fell short, prompting the company last month to begin construction of a new plant building in Tver with double the existing production capacity.

Orion is therefore focusing on snacks such as Poca Chip, which have the largest sales, as well as products such as jelly. Overseas, products other than pies are also becoming more popular. In Vietnam, it is operating new production lines for snacks and candy and is working to expand sales of rice crackers, which posted 68 billion won in sales last year, as products outside chocolate are becoming popular items.

An Orion official said the company plans to increase sales of locally tailored products, such as pies filled with jam and cream and jellies, in Russia and India, in addition to pies that have already gained popularity overseas.

Lotte Wellfood, by contrast, said it was more heavily affected by profit deterioration from higher cocoa prices because chocolate products contribute significantly to revenue. Most of its flagship products are chocolate items, including Ghana, Pepero, Mon Cher, Crunky and ABC Chocolate. That is why it is paying attention to chocolate ingredients, including by newly operating cocoa bean processing equipment on the cocoa mass production line at its Yangsan plant in South Gyeongsang Province on Feb. 11.

The company said new investment in chocolate-related facilities is intended to improve chocolate quality and has little effect on cutting raw material costs.

A Lotte Wellfood official said cocoa ingredient prices remain a heavy burden at about twice the average level before the surge, so chocolate production costs are being significantly affected. The official added that processing imported cocoa beans in-house through facilities such as new production lines could provide some help against extreme fluctuations in raw material prices.