Inflation and supply chain issues are now impacting a treasured global staple: chocolate.
According to experts from Hershey, consumers are now cutting back on chocolate purchases due to the increased cost of living in Europe and the United States. While chocolate sales ballooned in the U.S. during the coronavirus pandemic, shoppers tended to buy in bulk rather than purchasing individual chocolate bars. Currently, the opposite is true, as shoppers are more likely to buy individual chocolate bars over bulk items.
However, now that pandemic restrictions have eased, and prices have shot up, consumers are looking for cheaper alternatives to satiate their sweet tooth. Store brand chocolate sales have risen 8% in the U.S. over the last six months, according to IRI data. Additionally, consulting firm McKinsey found that 40% of British citizens also opted for less expensive alternatives to brand names over the past six weeks. These less costly alternatives often have a lower cocoa content.
The changes in chocolate purchases are closely tracked by Hershey's, says Vice President of Investor Relations Melissa Poole. Poole says that Hershey's expects some pull-back in volume and a softening in demand as the year progresses. Inflation has also been a burden to Hershey's—formerly, 25% of their products were under two dollars, and now, only 20% are. This comes even after the recent opening of their newest fulfillment center in Annville, PA, which caters to mass discounters and dollar stores. Their current focus is on retaining customers with less to spend on chocolate items by reducing package sizes—also known as "shrinkflation."
"For those who have the money and have the space to store bigger bags, value to them is cheaper price per pound," Poole told Reuters. "Value to others might be something 'accessible to me' at an absolute lower price point."
Other companies like Cadbury have reduced the weight of their products rather than the packaging to help mitigate costs and demand shortages.