NEW YORK, NY — Hershey is sounding a note of caution on its 2024 profit growth as cocoa costs surge, resulting in higher chocolate prices for consumers. Cocoa futures prices have doubled over the past year, reaching an unprecedented all-time high of $5,874 per metric ton on Friday. Adverse weather conditions in West Africa, a key cocoa-producing region, are being attributed to damaged crop yields, contributing to the upward trajectory of cocoa prices.
Citi analyst Thomas Palmer expressed concern, stating, “The magnitude and pace of recent price increases seem to be unprecedented.” With Valentine's Day just around the corner, chocolate is in high demand, but inflation worries are causing consumers to approach rising food prices more cautiously.
Hershey CEO Michele Buck acknowledges the challenges and reassures consumers, saying, “Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.” However, the company anticipates that its full-year earnings per share will remain relatively flat, citing higher cocoa and sugar costs as contributing factors.
Chief Financial Officer Steven Voskuil emphasized that the confection business will be particularly affected by the margin impact due to rising cocoa prices. On Friday, Hershey's stock saw a decline of 3.4%, reflecting the challenges posed by the current cocoa market conditions.