Hershey remains silent regarding future cocoa pricing strategies beyond the current year’s hedging contracts as cocoa prices hit record highs.
During a discussion of the company’s first-quarter results, President and CEO Michele Buck faced inquiries about cocoa prices amidst an 8.9% sales increase driven by inventory build-up from a new ERP system implementation.
Buck reiterated concerns about cocoa prices remaining high through 2025 despite a slight decrease to $8,000 per tonne from the peak of $12,261 in April. She emphasized that the company is confident in its long-term outlook and strategies to manage inflation and protect margins.
While Hershey has secured cocoa supply for 2024 through hedging contracts, Buck refrained from discussing future financial scenarios or pricing strategies due to competitive reasons.
In response to questions about the recent decline in cocoa prices, Buck explained that external factors like market liquidity, regulations, and speculation have contributed to the unprecedented price levels.
Despite an expected drop in gross margin for fiscal 2024 due to cocoa and sugar inflation, Hershey maintained a sales growth forecast of 2-3%. Finance chief Steve Voskuil highlighted the inflationary impact of cocoa derivatives on the company’s financial performance.
Cocoa price drivers
In a Q&A session, Buck attributed the recent cocoa price decline to market volatility and non-supply-demand economic factors. Voskuil emphasized proactive measures in hedging and supply chain diversification to address cocoa price fluctuations.
Regarding remarks by Mondelez International’s CEO on cocoa prices, Buck reiterated structural and transient forces affecting the market. She underscored Hershey’s commitment to resilient supply chain management and long-term business success.
