Hershey follows Nestlé with price hike
The announcement came three months after Nestlé increased its confectionery prices in response to mounting commodity costs.
Hershey’s price hike affects its instant consumables, multi-pack, packaged candy and grocery lines in the US, Puerto Rico and export markets.
The firm said the decision was taken to counter rising input costs from raw materials as well as packaging, fuel, utilities and transportation.
Cocoa, dairy and nut prices
Michele G. Buck, North America president at Hershey, said: “Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year. Given these trends, we expect significant commodity cost increases in 2015.”
Cocoa prices reached a monthly average of $3,173 per metric ton (MT) in June, 39% higher than the same period last year.
According to Euromonitor International, cocoa accounted for 14% of manufacturing costs for a 100 g chocolate bar in May 2014, with the bulk of costs coming from processing.
Mars recently told this site that it would not raise prices in response to increasing commodity costs as pricing decisions were made independently of ingredients costs.
Buck said that the benefits from her firm’s price hike would take effect in next year’s financials.
Hershey has offered direct buying customers a chance to purchase at price points prior to the price increase up until 12 August.
The company will release its second quarter results on 24 July. It said in its release that it expects net sales for the quarter to rise 4.5%
This falls just short of Hershey’s full-year 2014 target of net sales growth between 5-7%. Hershey predicted full year net sales would be at the low end of its target.
It also said adjusted earnings per share-diluted growth would be at low end of its 9 to 11% target, partly due to rising input costs.