Price hikes are being planned by the makers of Hershey and Cadbury chocolate amidst rising cocoa prices.
Hershey and Mondelez – the makers of Cadbury – are considering the hikes despite customers curbing chocolate purchases due to inflation.
Rising Cocoa Prices
Cocoa prices have roughly doubled in the past year, hitting a series of highs in recent weeks due to a strain on supplies.
Last week it was reported that cocoa prices had reached a record high due to low supply.
So far, chocolate companies have been passing rising costs to consumers without losing much demand.
But shoppers are cutting back more than they did last year, Hershey and Mondelez disclosed in a recent quarterly earnings call.
Hershey chief executive Michele Buck said last week that “given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.”
Hershey’s sales volumes were down 6.6% in the quarter ending 31 December, a trend that executives forecast will continue this year. The company is cutting jobs in an attempt to control costs.
The American chocolate brand has already raised prices on their Hershey’s kisses. Buck has said they will lean on new products, such as its Reese’s Caramel Big Cup, to stoke customer demand.
Push Back
Mondelez executives warned that retailers in Europe may push back against their planned price hikes, leading to lower sales in the region.
This comes after Carrefour stopped selling PepsiCo products in early January due to price increases.
The price of Mondelez chocolate in Europe, its biggest market, rose 12% to 15% last year, chief executive Dirk Van de Put said in a call with Wall Street analysts.
Despite cocoa prices rising for some time, its continued ascent is putting pressure on companies to increase their margins.
“Last year chocolate companies were fairly well hedged,” said Rabobank cocoa analyst Paul Joules.
“They had some stockpiled cheap cocoa as well, but this rally has been going on for well over a year so a lot of these companies are beginning to be fully exposed to these higher cocoa prices.”
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