Chocolate Lovers To Get A Sticker Shock With Rise In Hershey Co. Prices
Image credit: hersheys.com
Hold steady chocolate lovers! You’re about to see a price hike in your candy and other foods. The number one U.S. candy producer Hershey Co. is raising its chocolate prices in response to a rising price cocoa market that’s starting to hit the company’s profits.
It’s the first increase in three years.
The company said it is raising prices roughly eight percent to tackle the increase in commodity costs.
The Ice Breakers, Kit Kat and Reese’s candy maker said it believes its 2014 sales growth will be on the lower end of it five to seven percent long-term target. The company said it expects a weakened growth in its altered earnings per share to sit at the lower end of the nine to 11 percent target.
Michele Buck, North America head for Hershey’s, said commodity spot prices for dairy, nuts and cocoa have seen a modest increase since the start of the year. These increases in price, which will affect candy and other grocery products, won’t start having an effect on its bottom line until next year.
Customers who purchase from the company itself can continue to buy at the pre-increase levels until Aug. 12.
According to analysts, the announcement for the price increase will lead its rivals – Kraft Foods Group Inc. and Nestle SA – to make similar announcements. Analysts said price increases are generally done without much fuss.
Hershey increased its wholesale prices back in 2011 by nearly 10 percent in the U.S., again the company announced the price hikes in both 2008 and 2011.
Senior Equity Analyst for Morningstar, Inc. Erin Lash said competitors tend to follow their lead and announce their price increases too.
Hershey is also the owner of Cadbury for the U.S. but there was no specification if the prices for it would be affected.
Since late 2013, the price of cocoa butter, which is the cocoa bean’s byproduct and gives chocolate the melt-in-the-mouth texture, has been extremely high. The ratio for cocoa butter over the bean price is 2.65 times, with the price exceeding $8,200 per ton for nearby needs.
Analysts said this is the key reason for the hike in prices.
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