The toll of higher freight costs and other inputs is pushing many companies to announce price increases, including Guilty Pleasure company Hershey Co. We’ve seen this in the past from the company behind the Almond Bar, Kisses, Kit-Kat and Twizzlers, but in our collective memory, we haven’t seen a price decrease. Maybe some specials here and there, but the net of it is candy prices have climbed over the last several years. Why? Because of the inelastic demand dynamics for most consumers, which means a sect of consumers will buy no matter what the price much the way there are consumers of tobacco that will buy a pack of smokes even as they continue to climb in price.
At the margin, there are likely some Middle-class Squeeze customers that will downshift to lower quality and store brand candy from Hershey as the company continues to contend with repositioning its business in response to our Clean Living investing theme.
Hershey Co. has revealed that it will raise its prices on chocolate to offset costs.
Higher freight prices boosted Hershey’s cost in the third quarter and the issue will most likely persist into 2019, Chief Executive Michele Buck said Thursday (October 25).
Many consumer product companies have raised prices lately because of freight costs, Buck said in an interview, according to the Wall Street Journal. “Based on what we know from our experience and what we’ve heard, it seems to be going okay. Retailers understand that when costs go up, something has to give.”
With Halloween and the holidays approaching, Hershey’s expects sales to be stronger from new candy offerings such as hot cocoa-flavored Kisses, and next year, it is releasing a thinner Reese’s Peanut Butter Cup. The company is also looking beyond sweets. In January it acquired the owner of SkinnyPop popcorn and snacks, Amplify Snack Brands, for $1.6 billion including debt, its largest deal. And in September, Hershey’s agreed to buy the maker of Pirate’s Booty for $420 million.