Not so fast, parents of America.
We see you — sneaking off with your children’s Halloween treats. And we are thoroughly ashamed of you.
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Now, in all fairness, we’re not saying all Moms and Dads are raiding their kids’ goodie bags every year on All Hallow’s Eve; we’re just sayin’ that a shocking number of you are doing that very thing.
A terrifying 83% of parents admit that they swipe Halloween treats from their offspring, according to the National Confectioners Association.
Chocolate is the cornerstone of Halloween, a holiday that dates back to the ancient Celtic festival of Samhain, when people lit bonfires and wore costumes to scare off spooks.
Sales of Halloween chocolate and candy reached $7.4 billion in 2024, up 2.2% from the previous year and representing nearly 18% of all confectionery retail sales in 2024, the candy-industry group reports.
Cocoa is the fundamental ingredient of chocolate, and investors may have noticed that the price of the powder made from the roasted and pulverized beans of the cacao tree has been taking off like a witch on a turbocharged broomstick.
Hershey taking ‘pivotal’ steps on cocoa inflation
Prices took off last December and hit unprecedented highs as supply concerns from poor weather and crop failures in West Africa intensified.
The region was hit by three years of excessive rain followed by dry seasons, along with diseases like the Cocoa Swollen Shoot Virus, which led to widespread crop failures. All of it hammered cocoa production.
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The problem sparked a 10% to 20% increase in chocolate prices for Valentine’s Day, which was tough news for Cupid since candy is the most popular gift on Feb. 14.
Nevertheless, an NCA survey showed that despite the high prices, 91% of Americans had planned to celebrate Valentine’s Day with chocolate and candy, a decision that probably saved a lot of relationships.
Hershey (HSY) has the biggest share of the U.S. confectionery market and then-CEO Michele Buck told analysts during the second-quarter earnings call in July that “we have taken pivotal steps towards mitigating cocoa inflation through enhanced productivity, technology enabled efficiency and speed and strategic pricing.”
(Buck is retiring; Kirk Tanner, a veteran executive at PepsiCo and former CEO of restaurant chain Wendy’s, took over as Hershey’s CEO as of Aug. 18.)
But then things started turning around, as the governments of Ivory Coast and Ghana paid farmers more for their cocoa beans in a bid to encourage sales and boost cocoa supplies.
Cocoa prices tumbled to a 10-month low, according to CNBC, and analysts at Societe Generale said that cocoa contracts traded in London had been “extremely oversold.”
“Money managers turned net short this week,” they said in a note to clients. ”[Cocoa is] extremely vulnerable to short covering. … Money managers’ short positioning [has] increased to the highest level since August 2022.”
Chocolate maker Mondelez (MDLZ) recently said that the latest cocoa pod count in West Africa was 7% above the five-year average and “materially higher” than last year’s crop.
Analyst: Cocoa prices retreat but consumers tighten spending
TheStreet Pro’s Chris Versace has been keeping an eye on cocoa prices, noting in his recent column that the “price of cocoa continues to retreat from lofty levels that have plagued profits at companies whose products claim that as a key ingredient.
“Those include Hershey with its named bars and my personal favorite, the Kit Kat; and Mondelez, which owns Cadbury, Milka and Toblerone and is the company behind another personal fave, Oreos,” said TheStreet Pro’s lead portfolio manager.
Related: Hershey moves beyond chocolate with new candy line
With consumers expected to be more restrained in their spending this year, Versace said, their outlays on chocolate and other treats might not be as robust as they were in the past year.
“But it’s the decline in cocoa prices following recent price increases that should help deliver some margin improvement and potentially some [earnings per share] upside,”
At Hershey, which announced a low-double-digit-percent price increase across its candy portfolio in July, cocoa accounted for around 20% of its cost of goods sold in 2024. That’s the total cost of producing and selling its confections, including the price of raw materials like cocoa and sugar, labor and manufacturing overhead.
“At Mondelez, that figure is estimated to be around 10%, which reflects the wider product array at the company compared to Hershey,” Versace said.
Sugar, another key ingredient, accounts for about 10% to 15% of Hershey’s cost of goods sold. And while the spot price for sugar has rebounded in recent weeks, Versace said, “it remains well below year-ago levels for the September quarter and the start of the current one.
“That combination is going to lead us to add Hershey shares to the bullpen as we do more work on them,” he said. “Consensus EPS for 2026 is expected to climb around 14% to $6.77 — still down from $9.37 posted in 2024 but a nice rebound from the expected $5.94 for this year.”
But if the Trump adminstration conducts the massive job cuts the president has threatened, “it could be a demand headwind that restrains the potential positive margin impact from those falling key input prices,” Versace added.
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