Halloween is coming and, with this holiday, the streets around the world are filled with costumes, sweets and ‘trick or treating’ will be repeated among many countries throughout the West. However, terror is spreading among those who are normally the big winners of Halloween. The candy giants face the holiday in a different way, with two great monsters destroying their forecasts and leading to a real crisis. Such is the magnitude that companies in the sector in the US and worldwide are redirecting their product offering for Halloween to adapt the enormous supply of candy to the difficulties they are going through.
Focusing on the US, the National Retail Federation hopes that it will only be on sweets today an exceptional expenditure of 3.5 billion dollars occurs. However, due to the problems in raw materials, the association itself has said that all the companies have completely changed the offer to fill supermarket shelves with jelly beans and other more profitable sweets while removing as much as possible products linked to both chocolate, like the most sugary candies.
In Europe the situation is similar but not as pressing since Halloween represents a somewhat smaller ‘boom’ in consumption due to the fact that the holiday and celebration It is not as established as the North American nation. In the United Kingdom alone, it is estimated that party spending will end up being 776 million pounds compared to 1,071 million last year, according to data from Bizimply. In Germany the data points to an expenditure of 320 million euros. In Spain, the latest study by the Spanish Consumer Association (Asescon) estimates that Spaniards will spend an average of 70 euros, which will mostly go towards costumes, makeup, decoration and parties… but which will largely affect sweets.
In this context, companies in the sector want to take advantage of the opportunity to maximize your profitability and forget about a crisis that has been affecting your price throughout the year. North American companies are clearly feeling it with the nineteenth-century Tootsie Roll sinking 11.42% so far this year. Mondelez, the empire of Chips Ahoy, Milka and Oreo, among others, lost 5.48%. Hershey loses 7.57%. Mars is the only one that has managed to overcome in the region, with powerful increases of more than 18%. However, going to Europe, Nestlé has lost 17.6% and Lindt is trading flat for the year, with drops of 10% since September.
The chocolate crisis
Even though cocoa prices have dropped sharply from their April highs, when they hit 12,000 dollars per ton (compared to the current 7,409) the reality is there is no completely abrupt decline and the raw material is still 188% above the prices at which it was quoted in 2023. Companies in the sector have tried to mitigate the blow to their margins thanks to price increases, but this can only be partially fixed through this means in a context of high competition like the current one.
In the round of questions from Hershey’s analysts last August, the company claimed that this was its big problem. “Everyone knows that we have experienced historic prices for some time and although we do not believe that it will remain at these levels, we do believe that there will be structurally lower prices“Asked about the extent to which prices affect the company’s future, CEO Michele Buck commented that “we have raised prices and reduced costs… but it is clear that pricing and these factors will not completely cover the escalation.” The company announced that this was the main reason why profits fell 48% year over year, to $287 million last quarter.
JP Morgan explained that the rise in cocoa prices is due precisely “to a global shortage derived from a major drought in West Africa, where 80% of the world’s supply comes from.” According to the World Cocoa Organization, this year the supply has been reduced by 11%. “Cocoa is not a normal agricultural crop, which It is grown everywhere, like other commodities. “You need a very specific site and temperature range to grow,” said David Branch, sector manager at the Wells Fargo Agri-Food Institute.
“We are likely to see pack shrinkage and limited chocolate in mixed bags”
The consensus of Bloomberg analysts believe that the impact of a new harvest free of the problems of this one will not be felt until at least September 2025. However, even after then will continue to detect structurally higher prices. The futures contracts anticipate that by July 2025 the lowest price that will be recorded will be $6,337. In 2025 they barely believe it will reach $5,400.
Regarding the impact on Halloween, Wells Fargo explains that this will be felt in lower profitability for these companies but that users will see ‘reduced chocolates’. The firm explains that “it is likely that we will see that the packages suffer a relative contraction and that if you buy a bag with a variety of sweets, the content will reduce both the quantity and the chocolate and high-sugar products.”
In an interview with CNN Mars confessed that there are going to be movements in that sense and that they have chosen “expand the offer of gummies and sweets” while “offering more variety bags that mix products with and without chocolate.”
The sugar crisis
But it’s not just chocolate, the other monster that threatens the Halloween of its big winners is sugar. Although he has not experienced a situation as drastic as cocoa, he has also felt a powerful awakening that has affected the profitability of these companies and that has been reinforced since August. Since the start of 2023, the prices of this raw material have skyrocketed by 36%. However, concerns have now re-emerged with a 25% rally in prices from their August lows.
From Cobank they explain that “thanks to clearly higher wholesale costs of sugar, consumers are paying 9.2% more for this type of products.” Although the firm recognizes that the great impact has come from the chocolate base, this will have a key impact. “The supply is very scarce and prices will remain high.”
Sugar prices were already experiencing historic price performance in 2023. At that time, a combination of factors conspired against the raw material, highlighting a series of vintages very disappointing, particularly that of India, skyrocketing prices of chemicals for their production and a rise in energy prices.
However, even with oil falling, harvests continued to be disappointing in India, which accounts for 19% of the world’s supply, but significant problems were added in Brazil, the great market dominator with a production of 25% of the entire supply. world. In particular, the South American country has had major climatic problems that have reduced production, with a drought and fires that directly damaged crops. Sugar cane industry group Orplana said up to 2,000 fires affected up to 80,000 hectares of sugar cane planted in Sao Paulo.
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