Chocolate giants like Hershey and Cadbury are gearing up for more price hikes as cocoa prices soar to unprecedented levels, despite facing challenges from inflation-weary consumers and potential profit declines.
Over the past year, cocoa prices have skyrocketed, doubling and reaching record highs due to dwindling supplies. While chocolate makers have previously managed to pass on increased costs to consumers without significant impact on demand, recent trends indicate a shift.
Reports from recent quarterly earnings calls reveal that consumers are now scaling back their purchases more noticeably, posing challenges for companies like Hershey and Mondelez, the maker of Cadbury chocolates. This decline in consumer spending has led to a bleak sales outlook for these companies. With sales volumes of popular products like Kisses and Reese’s cups declining by 6.6% in the last quarter, Hershey is also resorting to cost-cutting measures such as job reductions.
To offset the impact of rising cocoa prices, Hershey recently implemented a price increase, with a 10.8-ounce bag of Kisses now selling for $4.84 on Walmart.com. Additionally, the company plans to introduce new products like the Reese’s Caramel Big Cup to stimulate consumer demand.
Similarly, Mondelez, the producer of Milka and Cadbury chocolates, is also considering price hikes to counter cocoa inflation. However, executives anticipate potential resistance from retailers in Europe, which could lead to reduced sales in the region.
Last year, Mondelez witnessed price increases of 12% to 15% in its chocolate products in Europe, its largest market. CEO Dirk Van de Put highlighted the company’s efforts to adapt to market dynamics by introducing new offerings such as Tiny Toblerone mini chocolate bars in the US and Toblerone Truffles in Europe.
The evolving landscape of cocoa prices and consumer behavior necessitates innovative strategies and pricing adjustments from chocolate manufacturers to sustain profitability amidst challenging market conditions.
