Hershey and Cadbury Signal Possible Price Increases Amid Cocoa Cost Surge

With Easter approaching, chocolate lovers may face higher prices as the cost of cocoa has more than doubled since last year due to adverse weather in major cocoa-producing regions.

Rising Cocoa Costs

Executives from Hershey and Cadbury have indicated potential price hikes on their products due to soaring cocoa prices. Torrential rains in key cocoa-growing areas have significantly impacted production, driving up costs.

Statements from Executives

In a recent earnings call on February 8, Michele Buck, President and CEO of the Hershey Company, emphasized the need to manage rising costs: "Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business." Hershey has already implemented price increases on some grocery and food service items this year, with the latest hike occurring last month.

Similarly, Mondelēz International, the company behind Cadbury chocolates, mentioned potential price adjustments in their fourth-quarter earnings call in late January. CEO Dirk Van de Put highlighted rising cocoa prices as a primary concern, stating the "need to price as needed." Last year, Mondelēz increased the price of their chocolate by 12% to 15% in Europe.

Cocoa Price Surge

As of Monday, cocoa prices have soared to around $8,000 per metric ton, more than doubling from the previous year. This surge has been driven by significant declines in cocoa production due to unfavorable weather conditions and disease, as reported by the International Cocoa Organization (ICCO) in February. The ICCO's quarterly forecast predicts an 11% decline in global cocoa supply to 4.449 million tonnes and a 5% decrease in global cocoa demand to 4.779 million tonnes.

Industry Impact

The rising cost of raw materials, particularly cocoa, is likely to affect the operations of chocolate processors. Both Hershey and Cadbury are preparing to adjust their pricing strategies to cope with these increased costs, potentially leading to higher prices for consumers.

Future Outlook

As the cocoa supply struggles to meet demand, price adjustments by major chocolate brands may become more common. The industry is watching closely as companies like Hershey and Mondelēz navigate these challenges, aiming to balance cost management with consumer expectations.