Wednesday, August 27, 2008

Rising Cost of Candy - A Brief Study of Hershey Prices

imageIt was big news this month when Hershey Co. announced that it was raising its wholesale candy prices by 11%. This is the second price jump for them this year, in January they raised prices by 13% for select products in their line as well.

Most of this is due to increased cost across the board. Rising fuel prices in all sectors means that it costs more to buy energy to operate their factory candy kitchens, air condition their warehouses and drive trucks around. Add to that the biggest change, the raw materials cost more because of their vast distances from the Pennsylvania confectioner on top of their actual costs which have risen 20% - 45% this year alone.

imageThe falling value of the dollar hasn’t helped much either, as all cocoa products are imported and there is more competition for quality cocoa beans. Even though they’ve trimmed their workforce within the past 18 months, rising health care costs are a huge burden for companies lately as well.

The change in the wholesale price for Hershey Co. is different than their tactics in the past when dealing with this sort of volatility. It seems kind of quaint now how Milton S. Hershey tried to lock down his costs by entering into long term buying deals for cocoa beans and even building his own sugar plantations in Cuba (and a community named Hershey there too, complete with schools, libraries and a railroad system). Back then attempts were made to keep the price of the candy the same, so they would change its size as needed.

image
(see larger)

The green line at the top represents the size of the chocolate bars (shown in grams). It’s easy to see that through the early years the price of the bar increased steadily (though slowly) but the size of the bar sold was volatile, even when taking the price per ounce into consideration. Oddly enough, the bar did become a better value quite often, both growing in size and dropping in price, though that trend ended after WWII and shortages and price swings in raw materials normalized.

Often though when the price went up, so did the size of the bar as a way to offset the perception of poor value.

The trend more recently, in the past 20 years though, has been to keep the bar the same size but simply raise the prices as needed. This means that things like slots in store shelves, wrappers, nutrition panels and manufacturing equipment stays the same.

DSC01045closeWhile the icon of Hershey’s Milk Chocolate is fun to use as a benchmark, what is important to recognize is that Hershey’s doesn’t just play with the size and price of their products. They also change the manufacturing process (Hershey’s no longer roasts their own beans or processes them into chocolate liquor, they’ve subcontracted that to Barry Callebaut), alter how long products are conched and lately have even started substituting substandard ingredients. In 2006 Hershey’s began using PGPR, which is an emulsifier and extender, in some of their milk chocolate products, but it wasn’t until this year that it finally appeared in the formula for the Hershey’s Milk Chocolate bar.

To demonstrate how else Hershey’s has begun to cut corners, I only needed to look at Hershey’s classic Hershey’s Miniatures to discover that two of their iconic and early chocolate brands, Mr. Goodbar and Krackel, are no longer chocolate bars at all. Hershey’s was a strong and vocal supporter of The Grocery Manufacturers Association’s attempt to change the definition of chocolate from its present and not terribly stringent one (chocolate must contain cocoa solids and cocoa butter and no additional vegetable oils). In order to get chocolate products from Hershey’s now, consumers have to opt for their premium lines like Bliss and Cacao Reserve or pay true premium prices for their Dagoba or Scharffen Berger product lines.

Other changes to Hershey’s products over the past three years include:

  • 5th Avenue Bar - no longer has a milk chocolate coating
  • Take 5 - no longer has a milk chocolate coating
  • Hershey’s Kissables - is now called chocolate candy as it is has additional vegetable oils
  • Whatchamacallit - no longer has a milk chocolate coating
  • Milk Duds - no longer has a milk chocolate coating
  • Mr. Goodbar - no longer made of milk chocolate
  • Reese’s Sticks - no longer has a milk chocolate coating
  • Reese’s White Peanut Butter Cups - the white coating used to be white chocolate (with cocoa butter) now just a white confectionery coating
  • Reese’s FastBreak - no longer has a milk chocolate coating
  •  

  • Read packages of Limited Edition and Seasonal Hershey’s Kisses carefully - as an example, the Candy Cane Kisses introduced in 2006 were made from cocoa butter for the white chocolate but when re-introduced for 2007 they were no longer a pure product.
  • Other products which have never been real chocolate (so you’re not confused):

     

  • Reese’s Whipps
  • Whoppers
  • Reese’s Crispy Crunchy Bar
  • Hershey's Mr. Goodbar (2008)Hershey’s has not completely made this switch over and their website still contains erroneous graphics and text that mislead consumers (UPDATE: I’ve documented more of that here), as an example, the 5th Avenue bar has not been made with a milk chocolate coating since at least early 2007, yet the main product listing and the product page still say that it is a milk chocolate & crunchy peanut butter. I cannot say if this is intentional, but based on my experience with calling Hershey’s customer service hotline and emailing them, they do not seem to understand that consumers should get up-to-date and accurate information when contacting a manufacturer.

    While Hershey’s seems to be concentrating a great deal of effort on honing their efficiency, based on the fact that they’re subcontracting, eliminating factories and a percentage of their workforce while manufacturing more in Mexico, they seem to have neglected their primary mission: making good chocolate. Milton Hershey was often derided for not embracing advertising for his products. He said, “Give them quality, that’s the best kind of advertising in the world.” But presently they’re advertising quality with their new Pure Chocolate campaign but neglecting to actually deliver it.

    Sources:
    Wall Street Journal: Hershey Raises Prices Again by Jay Miller (8/18/2008)
    Food Navigator: Hershey and Barry Callebaut Join Forces (4/27/2007)
    Grocery Manufacturers Association Citizen’s Petition to the FDA (PDF) on Standards of Identity (10/25/2006)
    Food Timeline: Historic Food Prices
    Hershey Archives: Wrapper Visual Chronology
    The Emperors of Chocolate: Inside the Secret World of Hershey and Mars by Jo?l Glenn Brenner
    The Chocolate Chronicles by Ray Broekel
    The Great American Candy Bar Book by Ray Broekel

    Related Candies

    1. ReeseSticks (Revisit)
    2. Kissables (Reformulated)
    3. Hershey’s CEO to Retire
    4. What Made Hershey’s Want to Change Chocolate?
    5. Big Candy Buyouts - Hershey & Jelly Belly
    6. What does that Hershey’s code mean?

    POSTED BY Cybele AT 12:38 pm Tracker Pixel for Entry     CandyHershey'sFeatured News

    Comments
    1. Good research there. So basically, prices won’t change for Mr. end-buyer at Walgreen’s, but the actual candy making efficiency goes up and maybe the quality goes down in order to keep prices in check?

      Or will my Whatchamacallit now be 95 cents and not 85 cents…

      Comment by Matt on 8/27/08 at 1:29 pm #
    2. Oliver Sudden's avatar

      This is a good study.

      I remember back when candy bars cost a nickle and when they introduced ten-cent bars that were much bigger and a better deal. What I thought at the time, and refuse to give up, is that over the next year or so the nickle bar became increasingly difficult to find, and soon was impossible. There was only the ten-cent bar, and then it shrunk to being just a bit over the old size of the nickle bar.

      I could be remembering this all wrong, of course, but it’s a practice that I now consider iconic and see everywhere.

      Back then, as you noted, they didn’t have all the stockholders looking to better each quarter’s results, so there wasn’t as big an emphasis on trimming costs by reducing quality or hurting the workers. See how we’ve progressed?

      Comment by Oliver Sudden on 8/27/08 at 6:25 pm #
    3. This is helpful info. I was wondering, what is the status of other major candy companies? Should similar changes be expected from US-based chocolate companies like M&M;/Mars? I’m really sad to see Take 5 on the list, since I think that bar is pretty original and reliably delicious.

      Comment by kristin on 8/27/08 at 8:55 pm #
    4. Great article! fascinating read. Its interesting the lengths that companies like Hershey are going to save on production costs! Do they not understand we would rather pay that bit more for higher quality!?? At the momment it just seems we are getting a very rough deal.

      Comment by Jim on 8/27/08 at 11:37 pm #
    5. Very interesting! I enjoyed reading that, and it just underlines why I’ve been eating less and less Hershey chocolate over the years.

      Comment by Debby on 8/28/08 at 2:30 am #
    6. Very well said.

      Wow, I had been thinking that my palate was becoming more sophisticated, and it has.  But instead of just gravitating to better chocolate, it knows when it tastes not-so-good chocolate.  Hence, I subconsciously overlook Hershey’s chocolate as a matter of course.  And sadly, I have been truly skeptical of their premium line.

      What worries me the most is that we will come to the point that chocolate will become so expensive that true chocolate as we know it will be scarce.  Thus, people will eat ‘chocolatey confection’ and not realize the difference.  It makes me sad to think that perhaps, when my son is an adult, will have to hunt and search (and pay a mint) for the same good chocolate that he loves today.  Even at age 3, he knows what he likes, and it is dark, smooth and definitely not Hershey’s.

      Comment by Maggi on 8/28/08 at 4:29 am #
    7. Cybele's avatar

      Matt - you know, I’m not sure how the wholesale costs will impact consumers. Sometimes the stores absorb it all but more often they pass it along. But keep your eye out for sales and take advantage of them when they come along.

      Oliver - I distinctly remember when bars went from 15 to 20 cents ... which percentage-wise was a huge jump for a kid.

      Kristin - I am looking into Nestle & Mars, but info on their histories isn’t quite as easy to get.

      Jim - I am so disappointed as well. They’ve taken away my choice. If they just raised the price, then I could decide not to buy it. But now I couldn’t even buy a real Mr. Goodbar if I wanted to.

      Debby - I hope that Hershey’s sees it the same way and returns to their old quality. (Or better!)

      Maggi - I am glad that so many new chocolate makers have come along to pick up the slack. And yes, I’m willing to pay the price (but I really have to love it, not just like it as I am more tolerant of a bad Hershey bar since it’s less than a dollar). That said, I think that the Cacao Reserve stuff is rather nice for the price - but distinctive so not for all tastes.

      Comment by Cybele on 8/28/08 at 11:03 am #
    8. The biologist Stephen Jay Gould wrote an excellent essay documenting the progressive change in size/cost of Hershey bars, I highly recommend it!  The title is “Phyletic Size Decrease in Hershey Bars,” it was originally an article in Natural History Magazine, you can find it in the book of his essays title “Hen’s Teeth and Horse’s Toes,” or you might be able to find the full text online somewhere.

      Comment by Anne-Marie on 8/29/08 at 2:02 am #
    9. I like Hershey’s as a brand, despite the fact that I don’t so much like their chocolate.

      Very interesting article!

      Comment by HA on 9/04/08 at 5:52 pm #
    10. Yurei's avatar

      I wrote in a long letter to Hershey yesterday through their website putting forth my complaint about their changes in their chocolate after I accidentally ate a Mr. Goodbar in the past couple weeks and it tasted like absolute crap because it wasn’t chocolate anymore. Highly annoyed that I now have to read the stinking labels on any of their products before I pick it up now, I sent them a nasty gram voicing my ire.

      I used to stock up on about 6 months of candy the day after halloween with all the clearance sales. I can tell you now that there probably won’t be many hershey products in there sadly.

      Comment by Yurei on 9/05/08 at 3:50 am #
    11. This is a fabulous post, and I feel saddened by these changes.  Hershey’s used to be a favorite brand of mine, especially since I grew up near there in Lancaster County.  To know that lots of their chocolate isn’t milk chocolate any longer is disheartening. 

      Halloween won’t be the same!

      Comment by nat on 9/05/08 at 1:14 pm #
    12. I unconsciously noticed a difference in the taste of the Hershey’s products.  I used to go in the grocery store, or go inside to pay for my gas and be unable to come out without something Hershey’s.  After seeing the story on Today this morning, I now know why I have been having no problem avoiding purchasing my favorite candy bars.

      Comment by PO on 9/19/08 at 2:11 am #
    13. This is crazy. They didn’t even tell us what happened! The only milk chocolate I ever eat is Hershey’s milk chocolate, and it’s disappearing from classic American candy. If they kept the chocolate and the price, they’d get quite a bit of profit to go with it.

      Comment by Peter K on 9/19/08 at 3:57 am #
    14. This is a very good article and I also feel that over the years I’ve slowly liked Hershey chocolate less and less without relizing it. I just think that instead of providing quality chocolate, they’re just trying to do whatever makes them the biggest buck and that wasn’t what Milton Hershey was about. Yet, I think they’ve left tradition and what “he would’ve wanted” behind and are going in a direction no one expected.

      Comment by Adam on 9/19/08 at 8:16 am #
    15. hey! i seriously need some help…i need the costs of the candies..not the price the COST!

      Comment by lu on 3/17/09 at 5:15 pm #
    16. What does “no longer has a milk chocolate coating” mean especially regarding 5th Avenue?  Does it mean that it has a mockolate coating or does not it mean that it has no coating at all (i.e, is a naked, peanut buttery slab)?

      Comment by Whit on 3/18/09 at 4:58 am #
    17. Lu - I can’t help you there, I don’t know the cost of making them, this blog is about the consumer experience and this is their cost.

      Whit - the “no longer has a milk chocolate coating” for all of those means the format of the bar is the same but the ingredients have shifted. So they all still have their coatings, they’re just not pure chocolate.

      The seasonal favorite, the Reese’s Peanut Butter Egg, has joined that list.

      Comment by cybele on 3/18/09 at 5:58 am #
    18. I am happy to know there really has been a decline in quality of the Hershey’s products.  I just thought I was remembering the good old days as being better than they were!  The Mr. Goodbar miniature I just had was flavorless, grainy textured and definitely no longer contains the original Spanish peanuts.  I don’t think I will be buying too many of them in the future.

      Comment by Susan Baum on 9/26/10 at 11:24 am #
    19. I will NO longer purchase Hershey’s Cocoa! After several frustrating experiences (this past year) baking “so called” CHOCOLATE cakes and etc. using Hershey’s, I will not trust the product again! Hershey’s has convinced me if I use their (once time honored) product, I can expect a colorless, flavorless baked product with NO chocolate aroma!! NOTHING that resembles chocolate in any fashion!! How sad and disappointing this is!!!!!!!!!!!!!!!!!!!

      Comment by Mary E. Howard on 10/08/10 at 10:39 pm #
    20. This is a very interesting blog.  I’m actually doing a project on candy and blogs helped a lot and I especially like the chart about he prices.  Keep adding to your blog and you helped me out a lot thx

      Comment by Riley on 3/29/14 at 2:35 pm #

    Name:

    Email:
    (not published)

    Location:
    (not published - please don't put your address in there)

    URL:

    Comments may be held for moderation to prevent spam and other violations of the Candy Blog Comment Policy

    Remember me!

    Get updates to comments on this post?

    Next entry: Amadei

    Previous entry: Mint Cremes from the Makers of Jelly Belly




     

     

     

     

     

     

     

     

     

     

     

     

    ABOUT

    FEEDS

    CONTACT

    • .(JavaScript must be enabled to view this email address)
    • Here are some frequently asked questions emailed to me you might want to read first.

    EMAIL DIGEST

      For a daily update of Candy Blog reviews, enter your email address:

      Delivered by FeedBurner

    CANDY RATINGS

    TYPE

    BRAND

    COUNTRY

    ARCHIVES

    Meticulously photographed and documented reviews of candy from around the world. And the occasional other sweet adventures. Open your mouth, expand your mind.

     

     

     

     

    Facebook IconTwitter IconTumblr IconRSS Feed IconEmail Icon

    COUNTDOWN

    Sweets & Snacks Expo Starts

    -94 days

    Read previous coverage

     

     

    Which seasonal candy selection do you prefer?

    Choose one or more:

    •   Halloween
    •   Christmas
    •   Valentine's Day
    •   Easter

     

    image

    ON DECK

    These candies will be reviewed shortly:

    • Eat with your Eyes: Nougat

    • Orgran Molasses Licorice

    • Rogue Chocolatier

    • Hachez Braune Blatter (Chocolate Leaves)

    • Trader Joe’s Holiday Roundup 2014

     

     

    image