Rising prices curb consumers' taste for chocolate

Consumers are cutting back on chocolate due to the cost of living crises in Europe and the United States, according to new data and comments from executives at the world's biggest chocolate companies.

Overall US chocolate retail sales volumes have been "off and down" 2% to 3% over the last couple of months as prices have risen in the "high single-digit, low double-digit" range, said Hershey vice president of investor relations Melissa Poole in an interview with Reuters. 

Hershey's performance closely tracks the rest of the chocolate category.

"We are expecting that as we move through the year... we will see a bit of pull-back in volume," Poole said. Hershey has previously flagged that it expected a softening in demand. Until the recent dip, "consumers haven't really reduced consumption much at all," she said.

Chocolate sales, particularly in the United States, ballooned along with purchases of many consumer products in the later stages of the coronavirus pandemic, with shoppers buoyed by government stimulus payments and sticking with "homebody lifestyle" habits such as buying in bulk.

But chocolate companies are now seeing some consumer behaviour change - for instance, shoppers choosing individual candy bars at the register instead of multipacks.

According to Chicago-based market researcher IRI, the volume sold of chocolate products in the United States dropped 1.5% versus a year ago in the 13 weeks ended June 12 as prices soared 8.2%.

"We're going to see chocolate becoming more sensitive to price. Consumers will treat themselves, but it will be smaller sizes, a small treat. That's why you're seeing (a sales) volume decline," said Daniel Sadler, a principal at IRI.

IRI data also showed sales volumes of US store-brand or "private-label" chocolate, a minor part of the overall market that is cheaper than name-brand chocolate, grew by 8% in the last six months.

In Britain, consultants McKinsey found 40% of Britons traded down to cheaper products in both snacks and confectionery in the four to six weeks ended mid-May.

Cheaper chocolate has a lower cocoa content, meaning even if chocolate makers' sales volumes stay the same in a downturn, cocoa demand would fall.

The Russian invasion of Ukraine has also impacted demand, traders and experts say, with the two countries together accounting for 5% of usual global cocoa demand.

Some chocolate makers, including majors Lindt and Nestle, withdrew from or reduced sales in Russia this year to protest the invasion. But Lindt said the impact of that move on its finances would be small.