Chocolate makers pin hopes on Easter as cocoa prices bite
Hershey, Mondelez and other confection makers are employing promotions and pitching more nonchocolate Easter treats like cookies ‘n’ cream bunnies at a time when soaring cocoa prices threaten their profits and shoppers balk at high prices.
With a decline in shoppers’ impulse buys of chocolate and sweets at convenience stores and in grocery checkout lines, according to industry data, special occasions like Easter and Halloween are increasingly important to sales.
Cocoa prices have tripled over the past 12 months thanks to bean disease in West Africa, which continues to worsen, meaning companies are not expected to get relief any time soon. Sugar prices are also up about 7%.
Chocolate makers set their plans for this Easter in 2023 and have said they would hike prices again to cover the cocoa crunch. The companies face additional pressure on their profit margins as their hedges protecting commodity costs expire later in 2024 and 2025.
But the price hikes are coming at a delicate time as inflationweary consumers are already pushing back.
That makes seasonal sales key. Easter sales in the US, the world’s biggest chocolate consumer, are expected to at least reach 2023’s total of about $5.4bn, though this will be driven mostly by price increases not volumes sold, according to the National Confectioners Association.
IMPULSE BUYING
Easter is the third-biggest occasion in the US for buying chocolate and sweets, with Halloween taking the top spot, followed by the winter holidays, according to the association.
“People will buy during the holidays but they will cut out impulse buying” through the year, said David Branch, a sector manager focusing on cocoa at Wells Fargo Agri-Food Institute.
Data from the National Confectioners Association shows that in 2023 the volume of chocolate and sweets sold for everyday occasions fell 3.6% compared with 2022. Volumes of chocolate and sweets sold for seasonal occasions like Easter rose a marginal 0.1%.
Branch projected that the trend would continue, given the continued inflation in cocoa.
Hershey is shipping more non-cocoa treats to retailers this Easter in addition to its iconic Reese’s chocolate bunnies.
Hershey spokesperson Allison Kleinfelter said consumers were continuing to buy seasonal products because parents wanted to preserve traditions. The non-chocolate Easter offerings had no connection to current cocoa prices, she added.
Simon Crowther, marketing director for seasonal confectionery UK at Mondelez, told Reuters the Oreo biscuit maker had introduced a new “Cadbury Ultimate Egg” range and a premium Toblerone “Edgy Egg”, aimed at older families and upmarket shoppers who might be more willing to splurge.
US retailers have increased discounts on Cadbury, Reese’s, Hershey’s, M&Ms and Lindt this Easter, according to research analytics firm Dataweave.
Big box store Target and supermarket chain Kroger are also offering bigger discounts in 2024 compared with 2023, according to the firm. A Kroger spokesperson said it updated its strategy to include more frequent promotions on top-selling brand and pack sizes.
John Ament, an independent consultant and former global vice-president of cocoa at M&Ms maker Mars, said there was no doubt that chocolate would be more heavily discounted this Easter because consumers were weary of price increases.
Chocolate makers had already pushed through price increases, “So this Easter will be more expensive than last year, and there’s less consumer appetite to spend,” he said.
He added that 2024’s holiday would be tougher than 2023s ’ because of the hikes. “The category will see slower — if any — growth in the coming year.”
HEDGING
Chocolate firms tend to hedge their raw material purchases up to 12 months in advance, and with the bulk of the cocoa price surge happening this quarter, current chocolate making costs will come to be seen as low at the end of the year.
Even so, it’s getting tougher to push through price hikes. Data from Nielsen shows the price per unit of chocolate in the US rose 10.4% in the year to early March, versus a 14.3% gain in the same period a year earlier.
A Mondelez spokesperson said that as input costs rose, the company would consider not just price hikes but “changing the unit weights” of its chocolates — a technique commonly known as shrinkflation.
“We’ve had a couple of years of strong price increases in chocolate and you tend to find in the first year, the elasticity is okay, in the second’ year it gets
we re in worse,’and year, it s going now to be awful, a”third said Kepler Cheuvreux analyst Jon Cox. He said premium chocolate makers like Lindt were likely to fare better because the already high markup on their chocolate means they might be able to hike prices less, in percentage terms, than regular chocolate makers.
But he added: “Even they will see sales volume pressure, it’s not going to be an easy year for them.”
Independent consultant Ament said mass-market chocolatiers like Mondelez — which also sells biscuits and other snacks — were more likely to invest in brands not tied to cocoa.