Hershey Raises Prices for First Time in 3 Years as Cocoa Costs Spike
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First came the coffee price hike, due to rising coffee bean costs. Now, with cocoa bean costs at a three-year high, chocolate makers are beginning to increase prices as well.
On Tuesday, Hershey announced its first price hike in three years, with an increase of approximately 8 percent across the cocoa giant's lines.
“Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year," Hershey president Michele G. Buck said in a statement. "Given these trends, we expect significant commodity cost increases in 2015."
Analysts say the move will likely trigger similar price increases by competitors such as Nestle and Kraft.
In June, cocoa costs hit a three-year high, due in part to a booming demand for chocolate in Asia. With chocolate consumption increasing in countries like India and China, demand for cocoa beans in Asia has risen 29 percent over the last five years.
Chocolate prices are further complicated by long-term concerns regarding the sustainability of cocoa supplies. While the Ivory Coast and Ghana's above-expectations output this year has helped soothe concerns regarding cocoa's future, the industry's reliance on small farms with increasingly elderly farmers and the potential for disease in aged trees has raised questions regarding the sustainability of the industry.
With recent price increases for cocoa, dairy and nuts, not to mention other commodities including coffee, beef and chicken, restaurants and food manufacturers are being forced to raise prices across the board. And, with cost increases for raw ingredients affected by everything from climate change, to increased demand, to infertile roosters, it doesn't look menu prices will be coming back down any time soon.