Brace yourself: The price of chocolate is going up.

gourmet barsLast week the Hershey company announced it would be raising prices for their products by eight percent, and Mars followed suit, announcing a seven percent hike for their chocolates.

Why is this happening? This is a econ 101 lesson playing out in the real world. While supply and demand play a big role, the price hike is primarily due to the rising cost of commodities. In short, ingredients and associated costs are more expensive for them, so chocolate is going to be more expensive for you.

According to Hershey’s North America head Michele Buck, “Commodity prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year.” You can add sugar to that list as well, as American businesses continue to struggle with unfair, outdated sugar subsidies that artificially inflate prices and drive companies out of the country.

Big companies such as Hershey and Mars can raise prices to ensure their profits without fearing much of a fallout. But how does a small company such as Bacci Chocolate Design manage the higher cost of commodities taking a bigger bite of a much smaller profit margin?

When commodities go up, everything goes up. There is simply no other way to manage. And when you add in the costs of a rising minimum wage, mandatory sick leave (still under discussion) and rising health care costs, those contribute to price hikes as well. Our prices will be rising, but for now, only on the wholesale side. For that reason, we will invest in machinery that will make our delicious peanut butter cups faster and better, and will help us meet our growing orders without having to invest in more part time help. That’s a cost we can control.

On the retail side, we’ll be working off smaller margins, and we’ll have to continue to be vigilant about every penny we spend. So, when we don’t give out extra gift bags and we restrict our beautiful boxes to one pound or more of our product, we aren’t being parsimonious, we are trying to keep our prices as low as possible.

The good news is that trend watchers show chocolate remains popular, with no sign of interest waning among consumers. People buy chocolate in good times and bad, to celebrate and to comfort. Chocolate continues to be an affordable luxury, and the industry continues to grow, in spite of the hike in costs. That’s why we are so lucky to be in the business we are in, and with some fine tuning, will enjoy continued success.

This entry was posted in The Chocolate Truffle and tagged , , , , , , , , , , , . Bookmark the permalink.

Comments are closed.