All Hershey products will get more expensive in 2022

Stress eating is about to get more expensive: Hershey is raising prices this year.

“Price will be an important lever for us this year and we expect it to drive most of our growth,” Hershey CEO Michele Buck said in comments prepared to discuss the company’s financial results on Thursday.

In its 2022 financial forecast, the chocolate company behind Reese’s and Kit Kats said it is planning “list price increases across all segments” as a way to drive sales growth.

The price increases should help offset higher ingredient and labor costs, Steven Voskuil, the company’s chief financial officer, said during a conference call with analysts on Thursday.

Hershey is hiring to help relieve pressure on overworked employees.

Voskuil also noted that prices for sugar, dairy, packaging materials and specialty ingredients are rising.

Still, Hershey finds itself in a relatively good position two years after the pandemic.

In 2020, demand for sweets and snacks grew as consumers shopped for comfort foods and settled in at home.

Reese’s retail sales have grown about 25% over the past two years, according to Buck.

And Hershey’s sales growth hasn’t stopped in 2020. Last year, retail sales for the company’s top candy brands grew more than 12% on average, Buck said.

And Hershey’s snack brands also performed well last year. Skinny Pop’s retail sales grew by 22%, and Pirate’s Booty sales increased by more than 26%.

Altogether, net sales grew 10.1% in the year.

Part of this success can be attributed to Covid restrictions, as consumers are still spending more on grocery items while continuing to work from home.

But some of those changes could be permanent, Buck noted, especially as workplaces continue to offer remote options.

Still, the company faces challenges. Demand is still outstripping supply and Hershey is increasing capacity to meet it.

Strategic price increases

The candy maker has already raised prices and consumers have accepted them. Higher prices contributed to fourth-quarter sales growth, according to the company.

“Historically, our category has been able to successfully execute price increases and we expect that to be the case this year as well,” Buck said.

Hershey believes that customers will continue to accept higher prices because of loyalty to its products. “They don’t want to switch to another brand,” Buck said during the call with analysts on Thursday.

But Hershey is planning to take it easy, she added. “We want to be aware of the potential impact of broad inflation on the consumer.”

The US consumer price index, a key indicator of inflation, rose 7% last year before seasonal adjustments, the Bureau of Labor Statistics said.

That was the biggest spike since June 1982, and it was higher than economists had predicted. Grocery prices rose about 6.5% last year.

So far, other companies have managed to raise prices without scaring off consumers.

Starbucks said on Wednesday it would raise prices this year, following hikes in October and January.

“With these price actions, we still saw incredibly strong demand during the holiday season,” noted CEO Kevin Johnson.

And McDonald’s raised menu prices by about 6% last year to help offset higher food, packaging and labor costs.

Still, sales at McDonald’s U.S. stores that have been open for at least 13 months rose 13.8% last year, the biggest annual increase since McDonald’s began reporting comparable sales in 1993.