Hershey Co. has revealed that it will raise its prices on chocolate to offset costs.
Higher freight prices boosted Hershey’s cost in the third quarter and the issue will most likely persist into 2019, Chief Executive Michele Buck said Thursday (October 25).
Many consumer product companies have raised prices lately because of freight costs, Buck said in an interview, according to the Wall Street Journal. “Based on what we know from our experience and what we’ve heard, it seems to be going okay. Retailers understand that when costs go up, something has to give.”
Hershey’s shares fell about 6 percent on Thursday, as its third-quarter sales and adjusted gross profit margin came in below analysts’ expectations.
In a press release, the company revealed that its consolidated net sales hit $2,079.6 million, an increase of 2.3 percent, while its reported net income came to $263.7 million, or $1.25 per share-diluted. Adjusted earnings per share-diluted were $1.55, an increase of 20.2 percent.
“We remain on track to achieve the financial targets we shared earlier this year, and I am pleased with the progress we are making against our key strategic focus areas,” said Buck. “Our U.S. core confection retail takeaway and share trends are sequentially improving, in line with our expectations, driven by strong Halloween results and distribution gains on core items. The addition of Pirate Brands strengthens our brand portfolio and marks our second high-growth, high-margin acquisition this year to capture incremental snacking occasions. Our International business continues to deliver profitability improvements while driving strong constant currency organic sales growth. Importantly, we are achieving these results while staying true to our values and purpose, as evidenced by being named to the Dow Jones Sustainability World Index for the 6th consecutive year.”
With Halloween and the holidays approaching, Hershey’s expects sales to be stronger from new candy offerings such as hot cocoa-flavored Kisses, and next year, it is releasing a thinner Reese’s Peanut Butter Cup. The company is also looking beyond sweets. In January it acquired the owner of SkinnyPop popcorn and snacks, Amplify Snack Brands, for $1.6 billion including debt, its largest deal. And in September, Hershey’s agreed to buy the maker of Pirate’s Booty for $420 million.