Popular snack brand may have very bad news for candy lovers

For the many Americans who pay close attention to the grocery store prices, it may feel like you have to guard your wallet a little closer during those weekly runs these days. 

The monthly Consumer Price Index for January 2024 is due out later this week. Analysts expect a decent adjustment from the same period in 2023, likely showing that inflation continues to cool as we enter a new year after many months of difficult price increases across everything from the cost of eggs and produce to new or used vehicles. 

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The most recent data from December 2023 saw some surprising price fluctuations.

Here are the numbers for December 2023 as it compares to the prior month. 

• Food: increase 0.3%
• Energy: increase 0.4%
• New vehicles: increase 0.3%
• Used vehicles: increase 0.5%
• Apparel: increase increase 0.1%
• Medical care commodities: decrease 0.1%
• Shelter: increase 0.4%
• Transportation services: increase 0.1%
• Medical care services: increase 0.7%

CEOs of consumer-facing companies that sell things such as food and consumer staples are especially sensitive to price hikes, as discerning customers routinely seek the best deals and quantities for their budget. 

And in recent quarters, leadership has resorted to getting ahead of price increases by warning investors and customers alike that increases in goods and foodstuff are more than a faint possibility.

Popular snack brand warns of possible price hike

One such company has taken this exact tack, telling investors and analysts in its recent Q4 2023 earnings report that an increase in product pricing may be an inevitability. 

Hershey  (HSY)  CEO Michele Buck warned that historically high cocoa prices, one of the key ingredients – used in everything from Hershey's classic milk chocolate bars to its jarred fudge made for ice cream sundaes and Reese's cups – might affect its retail sales soon. 

"We continue to operate in a dynamic environment, but we are encouraged by the resilience of seasonal traditions and the consumer response to innovation within our categories," Buck said. "While historic cocoa prices are expected to limit earnings growth this year, we believe our strong marketing plans, innovation and brand investments will drive top-line growth and meet consumers' evolving needs. We are elevating our focus on productivity and transformation to strengthen our business and deliver peer leading performance over the long-term." 

Things have been harder than usual for Hershey, which reported Q4 and fiscal 2023 earnings on Feb. 8. It saw a 6.6% decrease in sales for the quarter ended Dec. 31, usually its busier season among holidays and increased consumer gatherings. 

Cocoa is selling for higher than usual right now thanks to El Nino, which causes seasonally dry conditions in places like West Africa where approximately 75% of cocoa is procured. Prices are about 40% higher now than they were at the start at January. As it stands currently, the cost of cocoa is at a 47-year high. The cost of sugar and labor are also contributing factors. 

But Hershey won't comment on where prices might go – or how high they could get.

“We can’t talk about future pricing,” Buck told analysts on the call. “Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business."

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