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As severe weather in West Africa continues to impact the global cocoa supply, cocoa prices reached a historic high this week, and chocolate makers are starting to feel the crunch.
Hershey CEO Michele Buck said Thursday during the company’s Q4 and full year 2023 earnings call that the company expects “several points of price realization” in 2024 to combat rising cocoa costs, which have surpassed the 1977 peak of $5,379 per ton and could keep surging, according to Bloomberg.
“Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business,” Buck noted. As its input costs rise and it looks to boost prices, CFO Steve Voskuil said it will require “enormous collaboration between us and retailers.”
While it expects a hit to its earnings growth and profit margin, particularly in its Confection division, Hershey still anticipates maintaining margins above pre-Covid levels, Buck noted.
Oreo maker Mondelez last month also noted rising cocoa costs on its Q4 earnings call, which it anticipated could impact pricing, particularly in Europe. Chocolate supplier Barry Callebaut, used by Hershey and other CPGs like Unilever, said last month it saw sales volumes rise slightly in its fiscal Q1 despite the rising costs.
In season: Beyond cocoa pricing, Hershey noted several bright spots over the previous quarter, and forecast net sales growth of 2% to 3% for the full year. The candy and snacks maker performed well in previous candy-gifting holidays, with Halloween candy sales up 7.6% and holiday up 3.3% YoY. “This seasonal strength helped us to return to share growth within the chocolate category,” Buck said.
- Hershey chocolate’s sales growth also outpaced the category in Q4, up 2.9%.
The company’s “everyday chocolate” category also grew, thanks to its Reese’s Caramel Big Cup, a product it’s highlighting with its new Super Bowl commercial narrated by actor Will Arnett, and there’s more “sweets innovation” to come in the second half the year, Buck said.