The Hershey Co. is increasing wholesale prices across the majority of its U.S., Puerto Rico and export portfolios.
A weighted average price increase of approximately 8 percent across the company's multipack, packaged candy and grocery lines is effective today. These changes will help offset "significant increases in Hershey’s input costs," which include raw materials, packaging, fuel, utilities and transportation, the company said in a news release.
“Over the last year, key input costs have been volatile and remain at levels that are above historical averages,” said Michele G. Buck, president of Hershey's North America division. “Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year. Given these trends, we expect significant commodity cost increases in 2015.
"We are a gross-margin-focused company and remain committed to our consumer-centric business model of bringing insights to retailers that will enable us to grow our business and the category. During the transition period we will support our brands with higher levels of investment, including merchandising, programming, advertising and innovation, that will benefit Hershey and the category," Buck added.
Direct-buying customers will be able to purchase transitional amounts of product at pre-raise prices through Aug. 12. The company does not expect seasonal net price realization until Halloween 2015, the release said.
Hershey said it does not expect the price hike to have an impact on its 2014 financial results. The expectation is that the majority of the financial benefit from the price increase will affect 2015 earnings.
The company expects full-year 2014 net sales growth to be at the low end of its long-term 5 percent to 7 percent target, including the impact of foreign currency exchange rates.
Additionally, the company expects commodity costs, primarily dairy, to be greater than its previous estimate, resulting in adjusted gross margin that is slightly down versus last year. Officials are still expecting a 9 percent to 11 percent increase in adjusted earnings per diluted share.
For the second quarter ending June 29, the company expects net sales and adjusted earnings per share-diluted to be relatively in line with its forecast.
Specifically, second-quarter net sales are expected to increase around 4.5 percent, including an approximate 0.75 point headwind related to foreign currency exchange rates, resulting in adjusted earnings per share-diluted of 75 cents to 77 cents. Preliminary reported earnings per share-diluted for the second quarter is estimated to be 74 cents to 76 cents.