Cocoa prices have surged, causing Hershey to issue a warning about its profit growth for 2024. The company is grappling with the significant increase in cocoa costs, which are ultimately driving up the prices of chocolate.
Over the past year, cocoa futures prices have doubled. In fact, they reached an all-time high of $5,874 per metric ton this past Friday. Experts attribute this surge to adverse weather conditions in West Africa, which have damaged crop yields and subsequently led to higher cocoa prices.
Analyst Thomas Palmer from Citi described the recent price increases as “unprecedented in magnitude and pace.”
Just days away from Valentine’s Day, chocolate is at the forefront of many consumers’ minds. However, with inflation concerns prevailing, shoppers are becoming increasingly cautious about rising food prices and scaling back their spending on chocolates.
Hershey’s CEO Michele Buck strives to alleviate consumer concerns by affirming the company’s commitment to managing its business effectively. Buck stated during the quarterly earnings conference call that Hershey will utilize every tool available, including pricing adjustments, to navigate the current cocoa price situation.
Due to the surge in cocoa and sugar costs, Hershey Co. anticipates that its full-year earnings per share will remain relatively stagnant. This rise in costs may also exert some pressure on margins.
Chief Financial Officer Steven Voskuil mentioned during the call that the impact on margins will be most evident in the confection business due to cocoa.
Following these developments, Hershey’s stock closed down 3.4% on Friday.