Record cocoa prices ahead of Valentine’s Day are proving to be a headache for sweet king Hershey.
Hershey warns of 2024 earnings growth as the company faces rising cocoa costs that are driving up chocolate prices.
Cocoa futures prices have doubled over the past year and reached an all-time high of $5,874 per metric ton on Friday. Bad weather in West Africa is blamed for damaging crop yields, pushing up cocoa prices.
“The scale and pace of recent price increases appear to be unprecedented,” Citi analyst Thomas Palmer wrote.
With less than a week to go until Valentine’s Day, chocolate is on the minds of many consumers. But with inflation fears still front of mind, many shoppers are holding back on their spending and eyeing higher food prices with caution.
However, Hershey CEO Michel Buck is trying to calm consumers’ minds.
“Looking at cocoa prices, we will use every tool in our toolbox, including pricing, as a way to run the business,” Buck said during the company’s quarterly earnings conference call.
The Hershey Company expects full-year earnings per share to be relatively flat, partly due to higher cocoa and sugar costs.
Margins may also face some pressure.
“The confectionery industry will bear the brunt of the margin impact due to cocoa,” Stephen Voskuil, chief financial officer, said on the call.
Hershey stock fell more than 2% on Friday.