Chocolate sales fall as prices rise to fight inflation

Diving Brief:

  • U.S. chocolate retail volumes have been “shifted” by 2% to 3% in recent months, while prices have risen in the “high single digit, low double digit” range. Melissa Poole, vice president of investors at Hershey reports, told Reuters. Other chocolatiers have reported a similar trend.
  • The news service noted that Hershey, as well as its snacking competitor Mondelēz International, have reduced the weight of some of their products while maintaining prices.
  • Higher ingredient costs, supply chain disruptions and labor shortages have prompted many CPGs to look for ways to recoup their expenses, with consumers having to pay more for many foods they buy.

Overview of the dive:

As inflation creeps into the US economy, nearly every sector of the food space has been impacted, and candy is no exception. The Department of Labor noted Wednesday that consumer prices for candy and gum rose 6.9% over the past year. The ministry also noted that prices rose 0.7% from May to June.

Rising candy costs go hand in hand with higher prices for everything from milk and fruit to coffee and butter, hitting the shopper’s pocketbook. Factor in the volatility of gas prices and it’s no surprise that people are looking for ways to cut spending after being impacted in so many different areas of their daily lives. This is likely to continue for the foreseeable future, which companies including Hershey have recently warned about.

“We expect that over the course of the year … we will see a slight decline in volume,” Poole told Reuters. Until the recent drop, “consumers haven’t really cut back much.”

In an email, IRI, a Chicago-based market research firm, noted that the volume sold of chocolate products in the United States was down 1.5% from a year ago. in the 13 weeks ended June 12, while prices were up 8.2% from a year earlier. Meanwhile, sales volumes of private label items, which make up a small part of the chocolate category, have risen 8% over the past six months, Reuters noted, citing IRI data. .

The overall decline in chocolate sales comes after the CPG food sector, including candies, benefited from consumers spending more time at home during the COVID-19 pandemic, with continued demand for snacks and a desire to have fun.

So far, it seems consumers have been reluctantly tolerating food price increases, but the longer the current climate continues, the more consumers may decide to cut back on spending or switch to cheaper options. Reuters noted that chocolate companies are seeing consumers switch to less expensive products, for example buying individual chocolate bars rather than a multipack.

“Today the instant stuff is really good and the price increases have passed and compared to the trend we had before really had no effect. Now is it going to last? I wish I could tell you, but I don’t. [[ missing word? ]] Dirk Van de Put, CEO of Mondelēz, told Deutsche Bank in mid-June. “What I do know is that we are doing everything in our power to prepare for potentially a consumer who reacts.”

by Mondelēz wallet includes Cadbury and Milka chocolates, but is largely made up of well-known snack brands like Ritz, Triscuit and Oreo.

In some cases, companies kept prices the same, but reduced the amount of product in each package — a term known as shrinkage. Hershey and Mondelēz aren’t the only companies using this practice. PepsiCo said this week it is considering smaller sizes in its variety packs and may choose to reduce the number of chips in a bag rather than increase prices.

Comments are closed.