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Forbes Daily: Rising Cocoa Prices Lead Hershey To Raise Candy Prices

Forbes Daily: Rising Cocoa Prices Force Hershey's into Shrinkflation Tactics

In the ever-evolving landscape of consumer goods, where economic pressures and supply chain disruptions collide, one of America's most beloved chocolate makers is facing a bitter reality. Hershey's, the iconic brand behind classics like Reese's Peanut Butter Cups and Hershey's Kisses, has quietly resorted to shrinkflation amid skyrocketing cocoa prices. This practice, where companies reduce product sizes while maintaining or even increasing prices, is becoming a hallmark of inflation-weary industries. But for Hershey's, it's a direct response to a global cocoa crisis that's pushing the boundaries of affordability and sustainability in the sweets sector.

The story begins in the lush, yet increasingly volatile, cocoa farms of West Africa, which supply over 70% of the world's cocoa. Countries like Ivory Coast and Ghana, the top producers, have been hammered by a perfect storm of challenges. Erratic weather patterns, exacerbated by climate change, have led to droughts, floods, and the spread of diseases like swollen shoot virus, decimating harvests. Add to that aging tree stocks, poor farming practices, and political instability, and you've got a recipe for scarcity. According to recent reports from the International Cocoa Organization, global cocoa production is projected to fall short by as much as 10-15% this year, driving prices to record highs. Cocoa futures have surged over 40% in the past 12 months, hovering around $4,000 per metric ton—a level not seen since the 1970s.

For Hershey's, this isn't just a distant supply issue; it's a direct hit to the bottom line. The company sources a significant portion of its cocoa from these regions, and with raw material costs eating into margins, executives have had to get creative. Enter shrinkflation. In recent months, eagle-eyed consumers and retail analysts have noticed subtle changes on store shelves. For instance, the standard Hershey's milk chocolate bar, once a hefty 1.55 ounces, has been trimmed to 1.45 ounces in some markets, with no corresponding price drop. Similarly, multipacks of Reese's cups have seen individual pieces slimmed down by a few grams, while the overall package price remains steady at around $4.99. These adjustments might seem minor—mere fractions of an ounce—but they add up, allowing Hershey's to preserve profit margins without the backlash of overt price hikes.

Hershey's isn't alone in this strategy. The broader confectionery industry is grappling with the same pressures. Competitors like Mars (makers of Snickers and M&M's) and Nestlé have also implemented similar tactics, from reducing bar sizes to tweaking recipes with cheaper alternatives like palm oil or artificial flavors. But Hershey's, with its deep roots in American culture since 1894, feels the scrutiny more acutely. The company reported in its latest earnings call that commodity costs, particularly cocoa, contributed to a 2% dip in net sales last quarter, despite overall revenue holding steady at $2.5 billion. CEO Michele Buck addressed the issue indirectly, stating, "We're committed to delivering value to our consumers while navigating unprecedented input cost inflation." Yet, critics argue this "value" comes at the expense of transparency, as shrinkflation often goes unnoticed until consumers compare old and new packaging side by side.

The consumer backlash has been swift and vocal, amplified by social media. Platforms like TikTok and Reddit are rife with videos of shoppers weighing candy bars or dissecting packaging to highlight the reductions. One viral post from a Pennsylvania-based influencer, home to Hershey's headquarters, showed a side-by-side comparison of KitKat bars from 2023 and 2025, revealing a 10% size decrease. "It's not just smaller chocolate; it's a smaller piece of joy," the poster lamented, echoing sentiments from families who rely on these treats for holidays and everyday indulgences. Economists point out that shrinkflation disproportionately affects lower-income households, who spend a larger share of their budgets on groceries and may not notice the subtle changes until their purchasing power erodes further.

Beyond the immediate consumer impact, this cocoa crunch raises deeper questions about the sustainability of the global chocolate supply chain. Experts warn that without significant interventions, the industry could face chronic shortages. Initiatives like the Cocoa & Forests Initiative, backed by major players including Hershey's, aim to promote sustainable farming practices, reforestation, and fair wages for farmers. Hershey's has pledged to source 100% of its cocoa from certified sustainable farms by 2030, but progress is slow. In Ghana and Ivory Coast, farmers earn as little as $1 per day, far below a living wage, leading to child labor issues and disincentives for maintaining cocoa plantations. Climate models predict that by 2050, rising temperatures could render large swaths of current cocoa-growing areas unsuitable, potentially shifting production to less ideal regions like Southeast Asia or even lab-grown alternatives.

Innovation is emerging as a potential lifeline. Companies are exploring cocoa substitutes, such as carob or engineered flavors, though purists decry these as inferior. Biotech firms are developing disease-resistant cocoa varieties through genetic editing, while vertical farming startups experiment with controlled-environment agriculture to grow cocoa indoors. Hershey's itself has invested in these technologies, partnering with research institutions to bolster supply resilience. However, these solutions are years away from scaling, leaving short-term strategies like shrinkflation as the go-to fix.

From a macroeconomic perspective, this episode underscores broader inflationary trends. The U.S. Consumer Price Index for food has risen 5% year-over-year, with sweets and desserts outpacing the average. Shrinkflation isn't new—it's been a tactic since the 1970s oil crises—but its prevalence has surged post-pandemic, affecting everything from toilet paper rolls to cereal boxes. The Federal Reserve's interest rate hikes aim to curb inflation, but supply-side shocks like the cocoa crisis evade monetary policy's grasp. Analysts at Goldman Sachs forecast that cocoa prices could climb another 20% by year's end if West African harvests disappoint again, pressuring companies like Hershey's to either absorb costs, pass them on, or continue shrinking products.

For investors, Hershey's stock (NYSE: HSY) tells a mixed tale. Shares have dipped 8% year-to-date amid these headwinds, but the company's strong brand loyalty and diversified portfolio—including salty snacks like SkinnyPop popcorn—provide a buffer. Dividend yields remain attractive at 2.5%, drawing income-focused investors. Yet, long-term growth hinges on stabilizing cocoa supplies. As one Wall Street analyst noted, "Hershey's is navigating choppy waters, but if they can innovate out of this, they'll emerge sweeter."

Consumers, meanwhile, are adapting in their own ways. Some are switching to store-brand chocolates or artisanal options that emphasize ethical sourcing, even at a premium. Others are baking at home, rediscovering the joy of homemade treats amid rising store prices. The rise of "dupe" culture—seeking cheaper alternatives—has even spawned online communities sharing recipes that mimic Hershey's favorites without the corporate markup.

In the end, Hershey's shrinkflation saga is more than a tale of smaller candy bars; it's a microcosm of global economic fragility. As cocoa prices continue to rise, driven by environmental and social factors, the chocolate industry must confront uncomfortable truths about consumption, equity, and adaptation. For now, that Hershey's Kiss might be a tad smaller, but the underlying issues are anything but bite-sized. As we look ahead, the question remains: Can the world afford its sweet tooth, or will we all have to savor less? This is the reality facing Hershey's and its peers in 2025—a year where the cost of indulgence is measured not just in dollars, but in ounces lost.

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Read the Full Forbes Article at:
[ https://www.forbes.com/sites/daniellechemtob/2025/07/24/forbes-daily-rising-cocoa-prices-lead-to-hersheys-shrinkflation/ ]