The US chocolatier Hershey has warned on profits and sales after a sharp increase in the cost of cocoa to record levels pushed up the price of chocolate, hitting cash-strapped consumers in the pocket.
Global cocoa prices hit a new peak of $5,874 (£4,655) a ton on Thursday in New York as dry weather continued to affect crops in west Africa, with poor harvests driving up prices in the region, which produces the majority of global supply.
In London, cocoa prices rose 7.3% to a record £4,660 a ton, more than double the £2,023 a ton a year ago.
Hershey, one of the world’s biggest chocolate companies and the maker of products including Reese’s Peanut Butter Cups, warned that cocoa prices were expected to limit earnings growth this year.
The chief executive of Hershey, which reported a 6.6% fall in sales in the fourth quarter as consumers cut back on spending, indicated that soaring costs could mean price rises on products.
“Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage our business,” Michele Buck said.
The company, which forecast profits and sales for this year below analyst expectations, announced a two-year restructuring programme that it said would save $300m annually and affect less than 5% of its 21,000 global workforce.
Last month, the Cadbury owner Mondelēz said significant increases in the cost of cocoa and sugar would be one of its biggest challenges this year.
In a post on X, a Cadbury UK spokesperson said last month that it was increasing prices as a “last resort” to manage costs.
Hi Rowena, making changes to the price of our products is always a last resort, however, costs across our supply chain have risen steeply. Core ingredients we heavily rely on, like cocoa and sugar are a lot more expensive, while the cost (cont) https://t.co/6rlnKWZqNE
— Cadbury UK (@CadburyUK) January 19, 2024
The price increase on Cadbury products followed a report from the consumer watchdog Which? that found the price of popular festive chocolates had risen by more than 50% from Christmas 2022 to 2023.
Overall inflation for UK supermarket food and drink dropped to 8.3%. However, the price increase in chocolate was significantly higher at 15.3%.
