Sweet Easter baskets may come at a higher price this year as the cost of cocoa skyrockets to record levels. Cocoa futures have doubled since the beginning of 2024 due to adverse weather conditions in West Africa, which is a major producer of cocoa, accounting for over 70% of the global supply.
Additionally, sugar prices have also been on the rise, with sugar futures increasing by about 8% in 2024 after a 2.7% rise in 2023. Major chocolate companies like Hershey's and Mondelez, the maker of Cadbury, have been passing these increased costs on to consumers, resulting in higher prices for chocolate products.
Both Hershey's and Mondelez have seen improvements in their net profit margins, with Hershey's reporting an increase to 16.7% in 2023 from 15.8% in 2022, and Mondelez experiencing a jump to 13.8% in 2023 from 8.6% in 2022. However, these companies have also witnessed a decline in sales volumes as consumers resist paying higher prices.
The National Retail Federation anticipates a decrease in Easter spending this year, with consumers expected to spend $3.1 billion on candy, down from $3.3 billion in the previous year. This translates to an average spending of $24.78 per person compared to $26.31 per person in the previous year.
Mondelez has resorted to implementing price hikes to offset the surge in cocoa prices, with the company aiming for revenue growth of up to 5% in 2024. Hershey's, on the other hand, raised prices on chocolate products last year and expects sales growth of up to 3% in the current year.
Overall, the cost of candy and sweets rose by 5.8% in February compared to the previous year, reflecting the ongoing trend of price increases. While inflation has been moderating, concerns remain about its impact on consumer spending and economic growth, particularly in the context of high interest rates.
