Chocolate makers like Hershey and Mondelez face tougher trading conditions over the next year as they attempt to pass on soaring cocoa costs to cash-strapped consumers who are cutting back.
The industry has enjoyed bumper profits over the past couple of years as demand for chocolate held up despite price hikes, but data seen by Reuters shows this trend may be breaking just as prices for cocoa hit 46-year-highs and sugar prices are near their highest in more than a decade.
Consumers in Europe and North America have already seen price increases of about 20 per cent over the past two years and are starting to cut back on the amount of chocolate they buy, data pulled for Reuters by market researchers Nielsen shows.
Consumers are "shopping around more, hoping to find deals," Mondelez chief executive Dirk Van de Put said last month.
Cadbury-maker Mondelez expects inflation in cocoa and sugar to continue. In response, the company said it is ensuring it is significantly hedged and continuing to drive productivity.
"The increase in sugar and cocoa specifically is material," Mondelez chief financial officer Luca Zaramella said in July. "We are talking about most likely a 30-plus percent (increase) if you look at the last 12 months, or even more, particularly in cocoa."
The Hershey Company chocolate factory in downtown Hershey, Pennsylvania, US (Photo: iStock)
But after more than two years of higher prices, retailers are pushing back, analysts said, resulting in a battle that puts chocolatiers' margins and profitability at risk.
One such battle resulted in Mondelez previously pulling Cadbury and Milka bars from Belgian supermarket chain Colruyt's shelves after failing to agree on prices.
"I don't know if it's going to be as clear cut as being able to take pricing wherever they want," Barclays analyst Patrick Folan said.
Chocolate makers are banking on the traditional resilience of their product to price increases. Mondelez raised its annual revenue growth forecasts last month while Hershey hiked its profit forecast.
"Now that pricing is 100 per cent secured, we expect volume and revenue growth, as well as margin improvement for Europe," Zaramella said, after Mondelez resolved its spat with Colruyt.
However, Mondelez' chocolate sales volume growth has weakened substantially this year – from 14.8 per cent in the 4 weeks to Feb. 25 to 3.2 per cent in the 4 weeks to July 15 year-on-year – even as it kept its price rises in the low double digits, according to a Bernstein analysis of Nielsen data seen by Reuters.
The data showed Hershey's sales volumes increasingly declined during the period as the company hiked prices.
"We are seeing consumers starting to react more than before, I'd be very cautious with price increases," said Dan Sadler, a candy expert at US-based market researcher IRI. "We're seeing consumers starting to trade down."
Employees walk at Barry Callebaut production site in Wieze, near Brussels, on June 30, 2022. (Photo by KENZO TRIBOUILLARD/AFP via Getty Images)
Barry Callebaut, the world's biggest chocolate maker supplying most major brands including Nestle, doesn't expect any growth in sales volumes this year. It reported last month that volumes fell 2.7 per cent in the nine months ended May 31.
Meanwhile, lower priced 'private label' chocolate continues to pick up market share.
In the US, private label sales volumes grew nearly 9 per cent in the year to mid-June despite near double-digit price rises, IRI data shows.
Hershey's already-announced price hikes for the rest of 2023 are in the "high single digits," while those for next year are "low single digits," chief executive Michele Buck said in July.
Pennsylvania-based Hershey is hoping that as it eases off the rate of price hikes, its sales volumes will reverse their current downtrend. It is planning to lean on automation to keep its costs of production down, it said.
Rabobank says those cost pressures could continue into next year due to the El Nino weather event in West Africa and the lack of alternate producers who can ramp up output quickly.
Top cocoa producers Ivory Coast and Ghana have faced drought, excess rains and disease for the past two years. They produce two thirds of the world's cocoa and officials are struggling to help farmers cope with climate conditions. A 2019 'living income' scheme has been largely ineffective.
The police-led National Business Crime Centre (NBCC) is urging retailers to make full use of the crime prevention and training resource available for free via their website to help support shop workers during the busy festive season.
With the most recent crime survey from the BRC showing incidents of abuse and violence towards shopworkers have risen to 1,300 a day, the lead up to Christmas can be extremely challenging for those working in retail.
The NBCC has designed a series of training videos for those working in the retail sector to help them deal with difficult situations and customers and to provide practical steps they can take to stay safe and de-escalate a potential flash point.
The videos cover four key areas: personal safety and de-escalation, saying no - refusing service, deterring and interacting with thieves, and handling disruptive behaviour. Each video is no more than four minutes long and provides tactics and strategies which any retail worker can use.
“We know what a difficult time the run up to Christmas can be for those working in retail. Long queues and crowded shops can lead to tempers fraying and provide more opportunities for shop thefts. The NBCC has developed easy-to-use support for retailers and their staff to help keep staff safe and reduce the potential for shop thefts. We hope that the easy to digest training videos can give shop workers a bit more confidence and support during a very busy time,” Supt Patrick Holdaway, NBCC lead, said.
Retailers can also access a comprehensive employer framework aimed at preventing violence and abuse within retails retail settings.
The ‘Framework for Employers’ brings together existing good practice within the sector and presents it as a comprehensive, simple step by step process that can be implemented by retailers to demonstrate how they will support their employers to prevent violence and abuse in retail settings.
It includes a post-incident support process which highlights the practical steps employers should be taking to support retail workers after an incident of violence and abuse occurs, for example, their responsibility to ensure incidents are reported, risks are analysed and appropriate support systems are put in place.
If a crime is committed then it is essential to report it to police and capture any digital evidence such as CCTV. The NBCC have worked with the Crown Prosecution Service (CPS) and police forces to develop a standard witness statement which retailers can use when submitting CCTV evidence to the police using a Digital Evidence Management Systems (DEMS). Retailers can access it here.
When reporting a crime to the police it is important that key information is conveyed calmly and accurately to the operator so that they can assess the information and decide on the appropriate response. The information provided to the operator is important in assessing the threat, harm and risk enabling the police to decide on how best to respond. The NBCC has developed a comprehensive guide for retailers and shopworkers on what you need to tell police when reporting a crime and when to dial 999.
“Undoubtedly crimes will take place, and when they do, we want retailers to report the crime and know how to get the digital evidence to the police in the fastest way possible and how to support and care for employees who may have been impacted emotionally or physically by abuse or violence towards them,” Holdaway added.
The NBCC has a dedicated section on the website for Shopworker Safety.
UK food businesses are expected to face significant financial challenges in 2025, grappling with multiple cost pressures. The cost of food items is predicted to rise by up to 4.9 per cent next year, according to the Institute of Grocery Distribution (IGD).
IGD’s latest Viewpoint Special Report, “Hungry For Growth”, highlights food inflation as one of the most significant challenges for UK households. However, it also places the increase in food prices within a wider context of overall industry pressures.
IGD’s forecast for food inflation in 2025 is based on a full overview of all the cost pressures on food businesses for the next 12 months. While energy and commodity prices will remain stable albeit a little higher in 2025, there will be significantly increased employment and regulatory costs for food businesses in the coming year which will mean food inflation could hit anywhere between 2.4 per cent - 4.9 per cent.
In July 2024, IGD forecast that retail food inflation in 2025 would average 2.1 per cent. This forecast has been revised upward principally on the basis of measures announced in the budget.
In forming these new forecasts, IGD assumed that major policy changes raising business costs will arrive in three phases over the next year:
April: rising costs to employment staff due to increases in National Insurance and National Living Wage
July: rising costs of food imports due to implementation of the Windsor Agreement framework with the EU
Oct: first payments are due to fall on Extended Producer Responsibility (EPR), increasing costs on packaging
IGD estimates that the food sector will only be able to absorb between 20 per cent - 40 per cent of these costs, meaning the remainder will be passed onto the consumer.
Food inflation is likely to continue to exceed inflation in other items, not just in 2025 but also 2026.
“We do not see food prices going down in the foreseeable future," said IGD Chief Economist James Walton. "The rising cost of living, combined with increased employment and regulatory costs, will keep inflation elevated. Consumers will undoubtedly look for ways to save money, but the impact of these cost pressures will be felt across the economy.
"For the food sector, the increased financial burdens are becoming harder to absorb, particularly for smaller players in the sector. The cumulative impact of multiple changes landing within a short period of time will drive significant cost into all food businesses across the UK.”
Police investigating crimes linked to the Post Office Horizon IT scandal are looking at "dozens" of potential suspects, but don't expect trials to begin until 2027. The police will also await the publication of Sir Wyn Williams’ public inquiry into the Post Office Horizon IT scandal before moving forward to charging, stated recent reports.
The investigation, which the police describe as unprecedented in size and scale, is in the first instance examining potential offences of perjury and perverting the course of justice by those involved in making “key decisions” on Post Office investigations and supporting prosecutions of branch owner-operators.
However, a second phase, which is being developed concurrently, is looking at “wider offences” and decision-makers involved more broadly at the Post Office, as well as at Fujitsu, which developed the controversial Horizon accounting software.
Three suspects have already been interviewed under caution and there are plans to interview others next year, according to police.
But no one will be charged until officers have read the final report from the separate public inquiry, almost 30 years after concerns were first raised.
Stephen Clayman, the Met commander overseeing the police investigation, said officers were “looking at the actions of prominent individuals” beyond those directly involved in making decisions on Post Office investigations and supporting prosecutions.
“We will go where the evidence takes us,” The Guardian quoted Clayman as saying. “We are looking at the Post Office and Fujitsu and anything wider. We will cast the net wider in terms of culpability.”
“The scale of the task ahead is unprecedented. I do know that if you take into account Post Office criminal and private prosecutions, civil claims and contract withdrawals, there are potentially thousands of victims who we are working hard to identify.”
Clayman added, “No key decisions will be made around submissions and charging decisions until the final report is delivered and thoroughly reviewed by the investigation team and the Crown Prosecution Service. We are looking at 2027 [for trials] realistically.”
“We have been building a larger investigation team made up of officers across all forces. All forces are contributing to the build of a national team. This is a truly national operation in scale and should be resourced as such.”
Michael Norman, the senior investigating officer, added that police were also looking at “investigators, solicitors, barristers and people within Fujitsu as well”.
“As others [persons of interest] come into scope we will look at those as well, if they become raised to suspect status,” Norman said. “It is very fluid. The issue of corporate liability, corporate culpability, is always open.”
Norman said that to date the police had interviewed three individuals under caution, dating back to 2021, with the most recent in September this year. Clayman said prosecutions would not reach trial until 2027, in part due to the “unprecedented” scale of the investigation, which is reviewing more than 1.5 million documents.
More than 900 post office operators were prosecuted between 1999 and 2015 because of faulty Horizon accounting software that made it look as though they had been committing fraud.
Tŷ Nant, a symbol of Welsh luxury and premium hydration, has announced the strategic acquisition of Fonthill Water and Decantae Mineral Water from the US-based Primo Water Corporation.
Tŷ Nant said the acquisition will elevate its status as one of the UK's leading premium water brands, following closely on the heels of acquiring the premium Welsh water and mixer brand, Llanllyr Source in late 2023.
Primo Water is a leading player in North America's beverage industry with a multi-billion dollar market cap and an EBITDA of $500 million in 2023.
Decantae Mineral Water, known for its pristine quality sourced from the foothills of Snowdonia, has been a leader in the premium bottled water sector in the UK and Europe. The acquisition of Decantae brings new packaging innovations to Tŷ Nant's line-up, including cuplets for travel retail and healthcare, complementing its existing glass and PET bottles.
Fonthill Spring Water, with its origins in the historic Fonthill Bishop Estate in Wiltshire owned by Lord Margadale, is celebrated for its naturally filtered, high-quality spring water. This acquisition not only broadens Tỳ Nant's geographical footprint but also enhances its product range with another iconic British water source and introduces Tŷ Nant to the water cooler market, targeting commercial, educational, and healthcare sectors with its 15L bottles.
Raminder Sidhu, chairman of Tŷ Nant, highlighted the synergy in these acquisitions, stating: “Our commitment to sustainability, innovation, and exceptional customer service aligns perfectly with the ethos of Decantae and Fonthill. These acquisitions are pivotal in our vision to grow our diversified super-premium adult beverage group, where each product carries a deep sense of provenance, alongside our commitment to premium and sustainable offerings.”
In a market increasingly driven by consumer demand for quality and sustainability, Tŷ Nant has been recognised as the UK's fastest-growing bottled water company in the Alantra Fast 50 this year, and ranked as the overall 4th fastest growing food and beverage company in the UK. This recognition is particularly impressive given that Tŷ Nant is already profitable, securing the highest average price per litre among all British mineral and spring water brands.
Looking ahead, Sidhu outlined ambitious plans for 2025. “We are poised for an exciting year continuing the tremendous growth we have experienced for the last four years. We will continue to innovate across our portfolio. We're introducing aluminium bottles and cans as an eco-friendly alternative to traditional packaging and refreshing the 'contemporary classical' look for Llanllyr Source. Moreover, we're set to launch new flavours from our award-winning Kings Hill small batch gin distillery in the Pentland Hills, Edinburgh and we are expanding into 10 new export markets.”
Bira (the), which represents 6,000 independent retailers across the UK, says the extension of waste electrical and electronic equipment (WEEE) regulations will finally create a level playing field between high street and online sellers.
"Electrical equipment like vapes are being sold in the UK by producers who are failing to pay their fair share when recycling and reusing of dealing with old or broken items," announced circular economy minister Mary Creagh on December 10. "Today, we're ending this: creating a level playing field for all producers of electronics, to ensure fairness and fund the cost of the treatment of waste electricals.
"As part of our Plan for Change, we are helping UK businesses compete and grow, and we continue to get more households recycling, cracking down on waste and ending the throwaway society."
Andrew Goodacre, CEO of Bira, said: "This marks a significant step towards fairer retail competition. The regulation of online marketplaces for WEEE compliance has been a particular concern in the vaping sector, where we've seen a surge in online sales without corresponding waste management responsibilities. These new rules will ensure all sellers contribute to the environmental costs of their products."
The WEEE directive, which covers all items requiring batteries, solar energy, or electrical current to operate, will now require online retailers to cover disposal costs for products they place on the market. This brings them in line with existing requirements for high street retailers who have long managed these responsibilities.
Jeff Moody, commercial director of Retra, Bira's specialist electrical retail division, added: "The vaping industry exemplifies why these regulations are needed. High street retailers have managed disposal responsibilities while online sellers haven't faced the same obligations. This has created an unfair advantage for online marketplaces, particularly with products like vapes that have significant environmental impact."
The directive, first introduced in 2002 and updated in 2012, places responsibilities on all producers - including manufacturers, importers, distant-sellers, distributors and retailers. These regulations ensure proper disposal and recycling of everything from large household appliances to small electronics, including the growing category of vaping products.
"As part of the Bira group, Retra has long advocated for equal treatment between online and physical retailers," added Mr Moody. "This announcement marks a significant victory for independent retailers who have consistently met their environmental obligations while competing with online sellers operating under different rules."