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Mars Chocolate North America follows Nestlé and Hershey with price hike

By Oliver Nieburg+

23-Jul-2014
Last updated on 23-Jul-2014 at 17:43 GMT

Mars Chocolate North America ups wholesale prices 7%....1% lower than Hershey's price hike
Mars Chocolate North America ups wholesale prices 7%....1% lower than Hershey's price hike

Mars Chocolate North America has become the latest to introduce wholesale price increases after similar moves from Nestlé and Hershey.

It has introduced a 7% price increase for most of its portfolio, although levels vary by product.

Ampy Vasquez, senior manager, brand public relations, at Mars Chocolate North America said: “In the three years since our last price increase, in March 2011, we have invested significantly in the category and have experienced a dramatic increase in our costs of doing business.

“We have invested dollars in advertising, domestic manufacturing, sales resources, and key innovation, which have contributed to category growth. In order to continue to support our desired marketing levels and manufacturing capabilities we must balance our business model to offset rising costs.”

Vasquez said that rising costs of commodities such as cocoa, dairy and nuts alone did not affect pricing decisions

North America decision

In an earlier interview with ConfectioneryNews at the World Cocoa Conference in June, Andy Harner, global cocoa vice president at Mars Chocolate, said his company was experiencing the same pressures from rising commodity costs as its competitors. "I'm not aware of any price increases that are looming and those are usually independent decisions from the buying of the cocoa or any other raw material."

Vasquez said that Harner was referring to price increases on a global scale and decisions for Mars Chocolate North America were taken separately. She added: “This is not his area of accountability.” Vasquez said that commodity costs alone did not determine wholesale prices and commodity teams were not consulted on pricing decisions.

Confectioners up prices

This month, Hershey introduced an 8% price hike for its instant consumables, multi-pack, packaged candy and grocery lines in the US, Puerto Rico and export markets.

The firm said the decision was taken to counter rising input costs from raw materials as well as packaging, fuel, utilities and transportation. It flagged rising costs for cocoa, dairy and nuts.

In April, Nestlé said it planned to up prices for its confectionery products to restore growth to the category. Wan Ling Martello, CFO at Nestlé said that increased pricing was due to both currencies and commodities.

Ernst Tanner, CEO of Lindt, now America’s third largest chocolate player behind Hershey and Mars, said that his firm could weather rising cocoa costs without widespread wholesale price increases.

Euromonitor International recently estimated that cocoa accounted for 14% of a manufacturer’s cost for 100 g of chocolate.

The organization said that if cocoa prices were to double by 2020 to $6,000 per metric ton, a manufacturer’s mark up on 100 g of chocolate would fall from $0.44 today to $0.37, if the cost was not passed on to the consumer.

The shadow of price fixing

While there is no suggestion of collusion in this latest wave of price increases from the chocolate giants, past actions have not always been so clear-cut.

Eleven chocolate companies including Nestlé and Kraft were fined over €60m ($82m) last year for colluding to raise chocolate prices in Germany in 2007. Mars and Ritter escaped financial penalties as the initial whistleblowers.

Last year, Mars and Nestlé were charged by Canada’s competition watchdog for allegedly fixing the price of chocolate in 2007, claims both firms deny. The case is ongoing. Hershey Canada was fined $4m after pleading guilty.

Mars and Nestlé did however settle a separate class action lawsuit over the same Canadian price fixing allegations in September last year.

In February, a $727m US chocolate price fixing lawsuit against Hershey, Mars and Nestlé was thrown out by a district court in Pennsylvania. However, the case has been appealed.

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