News briefs: cost crunch hits choc makers

By Neil Merrett

- Last updated on GMT

Related tags New zealand Chocolate Confectionery Cadbury

In a week of major upheaval for a number of leading confectioners, reports suggest Cadbury may enact a number of job cuts in its New Zealand and Australian operations, while Mars joins rival Hershey in pushing up prices for its brands.

Cadbury mulling pacific production shake-up

Cadbury is looking to cut 330 positions across it operations in Australia and New Zealand in a bid to refocus its chocolate operations, according to reports.

Following an announcement in June that the confectioner was looking to reduce it workforce by 15 per cent amidst increased production costs, the company is now set to shake up its Australasian operations, according to the New Zealand Herald newspaper.

About 145 of the redundancies are expected to come from the company’s New Zealand-based Dunedin plant, which will also undergo a NZ$51m (€24.5m) refurbishment to step up manufacture of boxed assorted chocolates, the report added.

Clarification of the group’s plans are expected to be clarified next month.

Mars may push prices

One possible abbreviation for M&Ms this week may be ‘more’ and ‘money’, as manufacturer Mars looks set to follow some of its most prominent rivals in announcing price increases designed to offset material costs.

The confectioner is set to push up the wholesale prices for its chocolate products by about 12 per cent to reflect higher own payouts for everything from nuts and cocoa to fuel, according to the Associated Press (AP).

The changes, which are expected to come into place by the middle of October, would reflect a third price hike across the group’s brand portfolio this year alone, the report added.

News of the move comes after last weeks announcement by US-based Hershey was to raise its own wholesale prices for chocolate bars by 11 per cent.

The increase, which will apply to its entire domestic product line, comes on the back of a “significant” ​rise in input costs, including raw materials, packaging materials, fuel and transportation.

In Hershey’s case, analysts said they did not expect a significant impact on the group’s sales over the upcoming financial period as a result of these moves.

However, price increases have not been the only strategy adopted by confectioners to alleviate cost concerns in the current market.

Manufacturers have moved manufacturing facilities to cheaper areas amid the challenging economic environment. Hershey, for example, closed plants in the US and Canada in 2007 and moved the operations to Mexico to save costs.

Despite changes in the economy, chocolate sales remain strong in both the US and Europe. According to Mintel, sales of chocolate confectionery in the US amounted to $16.3bn in 2007, a very small increase from the $16bn recorded in 2006, and a 22 per cent increase since 2002.

It said the market is predicted to increase at a rate of about 4 per cent per year during the next six years.

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