Hershey Faces Challenges Amid Soaring Cocoa Prices Ahead of Valentine’s Day

As Valentine’s Day approaches, Hershey is navigating through turbulent waters due to a significant surge in cocoa prices, which has implications for the company’s profit growth in 2024. The confectionery giant is grappling with the impact of doubled cocoa futures prices over the last year, reaching an unprecedented high of $5,874 per metric ton. This spike is attributed to adverse weather conditions in West Africa, adversely affecting cocoa crop yields and driving up costs.

Citi analyst Thomas Palmer has noted the swift and substantial nature of these price increases as unprecedented, highlighting the pressure it places on chocolate producers. With Valentine’s Day around the corner, the timing poses a particular challenge for Hershey and the broader chocolate market, especially as consumers remain cautious about spending amid persistent inflation concerns.

Hershey’s CEO, Michele Buck, has sought to reassure both consumers and investors, stating that the company plans to leverage all available strategies, including product pricing adjustments, to navigate the current economic landscape. During Hershey’s recent quarterly earnings call, Buck emphasized the company’s commitment to managing through the cocoa price surge effectively.

However, the financial outlook for Hershey reflects the strain of these cost increases, with the company forecasting its full-year earnings per share to remain relatively unchanged from the previous year, partly due to the escalated expenses for cocoa and sugar. Hershey’s CFO, Steven Voskuil, also indicated that the company’s confectionery segment would likely experience the most significant margin impact from the rising cocoa costs.

As a result of these challenges, Hershey’s stock experienced a 3.4 percent decline at the close of trading on Friday, underscoring the market’s reaction to the company’s current predicaments.