COCOA prices are climbing fast, and Hershey Co may continue raising prices to keep up.
Prices for the all-important ingredient are reaching “historic” levels, chief executive officer Michele Buck said in the company’s earnings statement on Thursday (Feb 8). While the company said its marketing plans, innovation and productivity efforts will help soften the blow, the higher costs are “expected to limit earnings growth this year”, she said.
New York cocoa futures hit a record on Thursday morning, after a year that saw prices double as West African growers got hit with extreme weather.
The Reese’s maker said its fourth-quarter confectionery sales in North America increased 2.1 per cent, with prices up but volumes down. It expects net sales to grow 2 to 3 per cent in 2024, mostly driven by higher prices the company has already planned. And prices could go up still more.
Commodities are seeing low-double-digit percentage inflation, chief financial officer Steve Voskuil said on the call with analysts, with cocoa and sugar as the most inflationary. Non-commodity inflation, he said, is much lower, at mid-single digits, putting the average inflation rate for the company at high single digits.
“We can’t talk about future pricing,” Buck said, but added, “given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.” If prices do go up, the company will see that benefit in the second half of 2024 and into 2025, she said.
Hershey shares rose as much as 5.5 per cent in New York trading, the most since July 2020. The stock is up 4.2 per cent this year through Wednesday, outpacing the 2.7 per cent gain of the S&P 500 consumer-staples index. BLOOMBERG
