The producers of chocolate brands, Hershey and Cadbury, are contemplating further price adjustments to counteract an unprecedented surge in cocoa prices.
Despite facing challenges such as reduced consumer purchases and potential impacts on profits due to inflation, these chocolate makers have consistently passed on the escalating costs to their customers.
Over the past year, cocoa prices have witnessed a substantial doubling, reaching record highs recently, primarily attributed to constraints in the cocoa supply.
While chocolate makers had successfully transferred the increased costs to consumers in the past without significant declines in demand, recent quarterly earnings calls by Hershey and Cadbury’s parent company, Mondelez, revealed a shift.
Shoppers are now curbing their chocolate purchases more substantially than in the previous year, impacting the companies’ sales outlooks.
Hershey’s CEO, Michele Buck, acknowledged the challenging scenario, stating that, “given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.” The company is also exploring new products, like the Reese’s Caramel Big Cup to stimulate consumer demand.
Similarly, Mondelez, known for brands like Milka and Cadbury, is planning price hikes to mitigate the impact of cocoa inflation. Executives have expressed concerns about potential resistance from European retailers against these increases, which could lead to lower sales in the region.
As cocoa prices continue to soar, chocolate companies find themselves fully exposed to these elevated costs.
Swiss truffle maker Lindt & Sprungli is addressing rising cocoa expenses by maximizing efficiency and employing a forward-looking purchasing strategy.
However, industry experts anticipate that ongoing price hikes may prompt consumers to be more discerning in their chocolate purchases, testing the historical resilience of chocolate candy confections in times of inflation.
