September 19, 2008
Hershey, Mars raise pricesAs the price for cocoa reaches its highest in more than 20 years, confectionery companies are struggling to balance product prices with input costs.
First, it was The Hershey Co. that announced an increase in wholesale prices across its U.S., Puerto Rico and export chocolate and sugar confectionery products. A weighted average 11% increase will apply to the company’s instant consumable, multi-pack and packaged candy lines, while a 10% increase will apply to the company’s entire domestic product line. The price changes will aid in offsetting price increases in raw materials, packaging materials, fuel, utilities and transportation.
“We will focus on productivity and other initiatives to offset a portion of the higher input costs and increased consumer investment,” says Hershey’s David J. West, president and ceo.
“Market prices for ingredients such as cocoa, corn sweeteners, sugar and peanuts are up 20 to 45 percent since the beginning of the year,” West said. “As such, in 2009 we expect our commodity cost increase to be more than double the 2008 increase. Execution of commodity hedging strategies to firm up our 2009 commodity cost profile will add approximately $10-12 million, or roughly $0.03 per share, to our initial estimate of about a $100 million increase in 2008 raw material costs.”
The price increase in raw materials will be reflected in Hershey’s third quarter results, West said. In addition, the company projects 2008 earnings per share-diluted from operations to be in the $1.85 to $1.90 range.
“For the full-year 2008, we continue to expect net sales growth of three to four percent,” West said. “Consumers are likely to see higher everyday and promotional retail prices as we implement the price increase and, as a result, we expect volume in the fourth quarter and next year to be lower than previously estimated. In 2009, we expect net sales growth of two to three percent versus our previous projection of three to five percent.”
Almost a week after Hershey’s announcement, The Associated Press reported that Mars would follow suit. The Snickers and M&M’s manufacturer will raise wholesale prices more than 12% to offset its input costs, including raw materials, packaging and energy. The price increases represent a 12.2% value increase in Mars’ U.S. confectionery lines including single bars as well as other package types, a Mars spokesperson said.
Most of the price increases will go into effect by October 17, 2008 with limited volume in some package types. Because Mars has raised its prices twice already this year, the combined increases equal a 15.5% total increase for the year.
Exhibitors showcase technology, products at Sweet EurasiaSweet Eurasia, the annual sweet, chocolate, biscuits and confectionery exhibition held this past June and organized by IPEKYOLU International Exhibitions, featured 72 exhibitors from 20 countries. Visitors from around the world, including Turkey, Central Asia, the Middle East and North Africa, attended the exhibition. The region’s largest gathering of sweet related products was held in Istanbul, Turkey with product segments such as confectionery, sweets, chocolate, sugar, biscuits, chocolate machinery and equipment, chewing gum, ingredients, organic sweets and sweeteners amongst others.
Sweet Eurasia plans to become not only the leading sweets, chocolate, biscuits and confectionery event in the Eurasian region, but also one of the most prominent exhibitions in the world. The second Sweet Eurasia exhibition will take place again in Istanbul from June 18-20, 2009.
For more information on the exhibition, visit www.sweeteurasia.com.
Cadbury upgrades plants, trims labor in Australia, New ZealandAccording to a report in Australian Food News authored by Daniel Palmer, Cadbury announced a $135-million proposal to improve productivity in its Australia and New Zealand manufacturing facilities. The company plans to convert operations at Dunedin, New Zealand; Claremont, Tasmania; and Ringwood, Victoria into “centers of excellence,” each one specializing in a different type of chocolate product. For example, its Claremont site will specialize in moulded chocolate blocks, the Ringwood factory in chocolate bars and the Dunedin plant in assortments.
The manufacturing changes will result in the loss of 330 jobs (160 in Claremont, 145 in Dunedin and 25 in Ringwood). By the end of 2010, 330 fewer permanent roles will be needed at the three sites, Palmer indicated.
Almonds bolster new product launchesThe Almond Board of California (ABC) revealed that the number of introductions of new almond-containing packaged food products in North America grew 30% from 2006 to 2007, according to the most recently available figures from the Mintel Global New Products Database (GNPD). Almond introductions strongly outpaced the growth of nut products in general (up just 2%) and the rate of new food product launches overall (down 2%).
ABC reports that during the past five years, both the United States and Canada have significantly increased their annual number of new almond product introductions. The United States nearly doubled from 183 almond products launched in 2003 to 312 almond products launched in 2007. Canada more than doubled its launches over the same period, from 42 to 109. In 2007, the top category for new almond products in the United States was snacks and in Canada it was confectionery.
According to Information Resources Inc. (IRI), sales of energy and health bars with almonds grew more than the overall energy bar category, with an increase in unit sales from 97 million in 2006 to 104 million in 2007. Almond granola bars’ share of the overall granola bar category increased in 2007, averaging 41% of sales in this $1.5-billion category.