Hershey, one of the leading confectionery giants, is planning to implement a significant increase in candy prices to combat the challenges posed by the high cost of cocoa. The company informed retailers about this decision recently, citing the unprecedented cost of cocoa as a major factor affecting many of its popular brands like Reese’s and Hershey’s Kisses. It is important to note that this price hike is not related to tariffs or trade policies but rather a response to the elevated cocoa costs that have persisted despite a slight decrease from their record high in December.
The chocolate industry as a whole has been grappling with the issue of high cocoa prices, prompting several food companies to raise their prices as well. Lindt & Sprungli, a Swiss chocolate giant, implemented a 15.8% price increase earlier this year, while Mondelēz International has also indicated similar actions in the near future. Michele Buck, the CEO of Hershey, acknowledged the inflationary pressures on the business and emphasized the need to pass on some of these costs to consumers.
Chocolate candy constitutes a significant portion of Hershey’s sales, comprising two-thirds of its revenue according to The Wall Street Journal. Non-chocolate candy accounts for about 12% of the company’s sales. Despite the absence of tariffs as a primary reason for the price hikes, Hershey has raised concerns about the potential impact of an escalating trade war on chocolate prices. In fact, the company sought an exemption for cocoa from tariffs in May to mitigate the risk of further price increases.
In response to the challenges posed by high cocoa prices, Hershey has been diversifying its product portfolio by expanding into other popular food categories such as wafers, peanut butter, gummies, salty snacks, and organic snacks. This strategic shift not only helps reduce the company’s reliance on cocoa but also aligns with its vision of becoming a “snacking powerhouse.” By broadening its offerings and exploring alternative ingredients, Hershey aims to navigate the volatile cocoa market while catering to evolving consumer preferences.
The high cost of cocoa has also spurred interest in alternative chocolate options, with ingredient suppliers introducing substitutes for use in baking and confectionery. However, the adoption of these alternatives faces challenges related to taste and consumer perception, hindering widespread acceptance by major consumer packaged goods companies. Despite these hurdles, Hershey remains committed to adapting to market dynamics and innovating in response to changing industry trends.
