Hershey, Pennsylvania – The US chocolatier Hershey is facing challenges in profits and sales due to a significant increase in the cost of cocoa, prompting the company to warn consumers of potential price hikes on their chocolate treats. Cocoa prices have surged to record levels, reaching $5,874 a ton in New York, driven by dry weather affecting crops in west Africa, the region responsible for the majority of cocoa supply globally. As a result, Hershey’s CEO, Michele Buck, indicated that the company expects limited earnings growth this year and may need to implement price increases on its products.
With global cocoa prices at an all-time high, the impact is felt not only by the US-based company but also by other chocolate producers. The owner of Cadbury, Mondelēz, also cited significant increases in the cost of cocoa and sugar as a major challenge for the company. The rising costs are forcing chocolate makers to consider price adjustments as a means of managing their businesses in the face of soaring raw material expenses.
In response to the challenging environment, Hershey has announced a two-year restructuring program aimed at saving $300 million annually, which will affect less than 5% of its 21,000 global workforce. This move comes after the company reported a 6.6% sales decline in the fourth quarter of the previous year, a clear indication of the strain caused by the rising cocoa prices on the industry.
The issue of escalating cocoa prices is not only affecting the big players in the chocolate industry, but also impacting consumers. The price of popular festive chocolates has risen by more than 50% from Christmas 2022 to 2023, according to a report from the consumer watchdog Which?. With an overall inflation rate of 8.3% for UK supermarket food and drink, the price increase in chocolate stands significantly higher at 15.3%, signifying a substantial impact on consumer spending.
As chocolate lovers are set to feel the effects of rising cocoa prices, the industry is bracing for potential changes in pricing and restructuring from major companies like Hershey, marking a significant shift in the chocolate market landscape.