Chocolate Prices Are Soaring
Cocoa prices have reached a record high, and everyone is feeling the squeeze.
In the wake of a chocolate-heart-filled holiday, it would be easy to assume candy companies are rolling in profits. However, a record hike in cocoa prices has left many businesses strained, and NPR reports it will likely lead to increased chocolate prices for consumers, too.
Cocoa and chocolate prices have been on the rise for some time due to a number of factors including climate issues affecting cocoa yields and a simultaneous sugar shortage at the end of last year. Now at the start of 2024, the situation only seems to be getting worse as cocoa prices reached a 47-year high this month, Bloomberg reported.
After a heavy rainfall led to the spread of disease in cocoa crops in both Ivory Coast and Ghana, two of the largest cocoa producing countries, the areas were then hit with a dry spell and heavy winds. These extreme weather conditions have caused cocoa harvests to fall short of demand for the third year in a row.
Mondelez, a global confectionery company and owner of brands such as Cadbury and Toblerone, already announced back in November that it would be raising prices on some products because of both the chocolate and sugar shortages, as did major producer Nestlé. Now, Hershey, U.S. maker of Kit Kat, Reese's, and other chocolate treats, plans to lay off a significant number of employees as part of a multi-year productivity initiative, Food Dive reports. The company did not specify how many employees would be laid off, but as Food Dive notes, Hershey employs about 19,000 people around the world.
Although Hershey doesn't directly cite cocoa prices as the reason behind the initiative, the impact of the company raising its prices on consumers is reflected in its most recent earnings and projections. Hershey's sales increased just 0.2% in its most recent quarter, and the brand projects sales will increase 2% to 3% for the full 2024 fiscal year. The company is also looking at ways to cut spending in aspects of the business like supply chain and manufacturing.
"We can't talk about future pricing," Hershey CEO Michele Buck said on a recent earnings call. "Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business."
With the next big chocolate holiday, Easter, just around the corner, people who normally buy chocolate bunnies and eggs may want to think outside the basket this year if they want to avoid high prices.