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Hershey's Raises Prices After Cocoa Costs Soar

Hershey's chocolate
Hershey's chocolate
Flickr/LearningLark

Time to hoard the Reese’s Peanut Butter Cups (if you don’t already).

Hershey’s, the No. 1 candy producer in the United States, on Tuesday raised its prices 8%, and that will affect Reese’s, Kit Kat, Hershey Bar, Almond Joy, Mounds, York Peppermint Patty, Kisses and every other piece of chocolatey goodness Hershey’s manufactures, according to Agrimoney.

A year-long soaring cocoa market is to blame. "Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year," Hershey's North America head Michele Buck said in a statement. "Given these trends, we expect significant commodity cost increases in 2015."

The price increases affect packaged candy and grocery products, but customers who buy directly from the company will be able to buy at the pre-increase prices until August 12.

But there’s even more bad news: Analysts said Hershey's price increase will likely trigger a flurry of similar announcements from rivals such as Nestle SA and Kraft Foods Group Inc.

(Hershey also owns the Cadbury license in the United States, but hasn’t clarified if those prices will be affected or if any chocolate egg-laying bunnies will be laid off.) 

The cost of cocoa butter, a byproduct of the cocoa bean that gives chocolate its smooth texture, has been sky-high since late last year. Cocoa butter is now around 2.65 times the price of cocoa beans, bringing the price above $8,200 per ton. Some analysts see this as the main driver in the price hike.

The move also comes a year after cocoa futures started their rapid ascent to near-three-year highs earlier this month as traders worried that demand would outpace supply from the world's top-growing region of West Africa, despite good harvests. Unofficial data suggest a rise of about one-quarter in cocoa shipments from Ivory Coast, the top growing country. Even still, many believe that world cocoa production will fall behind demand in 2013-14 for a second successive season.

Swiss-based Lindt & Sprüngli, which owns the Ghirardelli brand and is buying Russell Stover Candies, said Monday that its North American sales had shown "double-digit organic growth" in the first half of this year.

Barry Callebaut, which produces chocolate for confectioners such as Hershey, Kraft and Nestle, earlier this month reported sales for the Americas as a whole up 6.2% by volume, according to Agrimoney.

The world simply cannot get enough chocolate — and with global warming, war erupting in the Middle East, people leaving kids in hot cars and jumbo jets being shot out of the sky, can you blame it?


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