Chocolate lovers beware, as getting your fix is about to get pricier. The Hershey Co. has reported record-high cocoa prices and expects higher sugar costs, impacting its earnings growth. In response to these rising costs, the candy giant plans on raising prices to mitigate the impact. CEO Michele Buck stated that they will be utilizing various strategies, including pricing, to manage the business during this challenging period.
Hershey has already raised candy prices for Valentine’s Day and Easter in 2022, with additional cost increases in mid-2023 and small price hikes on certain grocery and food service items in February. Similarly, Mondelez International, owner of popular brands like Chips Ahoy! and Cadbury, is also planning price hikes to offset rising cocoa prices. CFO Luca Zaramella stated that chocolate prices are expected to see significant increases in 2024, following the trend of consecutive price hikes over the past few years.
Consumers in the U.S. are responding to higher chocolate prices by looking for deals, downsizing their purchases, and opting for smaller formats. The National Confectioners Association (NCA) reported that while Americans spent more on chocolate in 2023 compared to the previous year, they bought less overall. Sales promotions are becoming more critical as consumers perceive chocolate and candy to be less affordable, according to the NCA. Major cocoa processors like Barry Callebaut and Blommer Chocolate Company are facing challenges and have been forced to shut down manufacturing plants and lay off workers.
The primary driver behind the surge in chocolate prices is the soaring cost of cocoa, which has increased by 150% over the past year due to extreme weather conditions. The majority of the world’s cocoa is sourced from West African countries like Ghana, Ivory Coast, Nigeria, and Cameroon, where production has been impacted by heavy rains and diseases. High cocoa prices are a significant concern as supply shortages from key producers continue to affect the market. The International Cocoa Organization anticipates further declines in production due to unfavorable weather conditions and diseases in top-producing countries.
Despite the record-high cocoa prices, the full impact on consumers has not been realized yet, as companies hedge prices and contract for supplies in advance. However, some shoppers have already started to notice price increases on chocolate products. The rising cost of chocolate hasn’t deterred consumers like Christy Schuth Ittel, who stated that she would still buy candy despite the higher prices. As the industry grapples with challenges related to cocoa shortages and rising costs, chocolate lovers may have to adjust their purchasing habits and expectations in the coming months.
