Hershey hikes candy prices due to soaring cocoa

Tue Jul 15, 2014 8:16pm EDT
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(Reuters) - Hershey Co, the No. 1 candy producer in the United States, on Tuesday hiked its chocolate prices for the first time in three years, a sign that a year-long soaring cocoa market is eating into confectioners' profits.

The overall price increase, effective immediately, would be about 8 percent and was aimed at tackling rising commodity costs, the company said.

The maker of Reese's, Kit Kat and Ice Breakers candy expects 2014 sales growth to be at the lower end of its long-term target of 5 to 7 percent. It also expects diluted growth in adjusted earnings per share to be at the low end of its 9 to 11 percent target.

Adjusted gross margins were forecast to fall "slightly" in 2014 from last year, Hershey said. It had earlier expected full-year adjusted margins to expand by 50 basis points.

"Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year," Hershey's North America head Michele Buck said in a statement on Tuesday.

The price increases, which affect packaged candy and grocery products, would not have an effect on earnings until next year.

Customers who buy directly from the company will be able to buy at the pre-increase prices until Aug. 12.

Analysts said Hershey's price increase announcement will likely trigger a flurry of similar announcements from rivals such as Nestle SA and Kraft Foods Group Inc. Price increases are often done quietly, analysts said.

Hershey last raised wholesale prices in 2011 by roughly 9.7 percent in the United States, a company spokesman said.   Continued...

Hershey's candy bars are displayed at a gas station in Phoenix, Arizona October 27, 2011. REUTERS/Joshua Lott