Hershey Increases Wholesale Prices
Commodity spot prices for cocoa, dairy, nuts have increased "meaningfully"
HERSHEY, Pa. -- The Hershey Co. has announced an increase in wholesale prices across the majority of its U.S., Puerto Rico and export portfolio. A weighted average price increase of approximately 8% across the company's instant consumable, multi-pack, packaged candy and grocery lines went into effect July 15.
These changes will help offset part of the significant increases in Hershey's input costs, including raw materials, packaging, fuel, utilities and transportation, which the company expects to incur in the future.
"Over the last year, key input costs have been volatile and remain at levels that are above historical averages," said Michele G. Buck, president for North America at The Hershey Co. "Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year. Given these trends, we expect significant commodity cost increases in 2015. We are a gross margin-focused company and remain committed to our consumer-centric business model of bringing insights to retailers that will enable us to grow our business and the category. During the transition period, we will support our brands with higher levels of investment, including merchandising, programming, advertising and innovation that will benefit Hershey and the category."
Direct-buying customers will have an opportunity to purchase transitional amounts of product at price points prior to the increase during the four-week period through Aug. 12, 2014.
The company does not expect seasonal net price realization until Halloween 2015. Given this timing, the company does not expect the announcement to have a material impact on its financial results in 2014. It expects that most of the financial benefit from this pricing action will affect earnings in 2015.
Due to expected volume elasticity on everyday take-home items and instant consumable products, as well as year-to-date U.S. channel mix headwinds, the company expects full-year 2014 net sales growth to be around the low end of its long-term 5% to 7% target.
The Hershey Co., based in Hershey, Pa., is the largest producer of quality chocolate in North America and a global leader in chocolate and sugar confectionery. With revenues of more than $6.6 billion, Hershey offers confectionery products under more than 80 brand names, including Hershey's, Reese's, Hershey's Kisses, Hershey's Bliss, Hershey's Special Dark, Kit Kat, Twizzlers, Jolly Rancher and Ice Breakers.