Halloween is approaching, and with this holiday, streets around the world will fill with costumes, candy, and “trick or treating” will be repeated in many Western countries. However, terror is spreading among those who are usually the big winners of Halloween. The candy giants face the holidays in a different way, with two big monsters destroying their predictions and leading to a real crisis. The scale is such that companies in the sector in the United States and around the world are reorienting their product offering for Halloween in order to adapt the enormous supply of candy to the difficulties they are going through.
Focusing on the United States, the National Retail Federation hopes today will focus only on sweets. an exceptional expenditure of $3.5 billion occurs. However, due to raw material problems, the association itself said that all companies have completely changed the offer to fill supermarket shelves with more profitable jelly beans and other treats, while removing chocolate-related products as much as possible, such as the sweetest candies.
In Europe, the situation is similar but not as urgent since Halloween represents a somewhat weaker consumption “boom” due to the fact that the party and celebration It is not as established as the North American nation. In the UK alone, party spending is estimated to rise to £776m compared to £1,071m last year, according to data from Bizimply. In Germany, data shows an expenditure of 320 million euros. In Spain, the latest study by the Spanish Consumer Association (Asescon) estimates that Spaniards will spend an average of 70 euros, which will mainly go to costumes, makeup, decoration and parties… but which will largely affect sweets.
In this context, companies in the sector want to take advantage of the opportunity to maximize your profitability and forget about a crisis that affected your price throughout the year. North American companies are clearly feeling it, with the 19th Century Tootsie Roll down 11.42% so far this year. Mondelez, the empire of Chips Ahoy, Milka and Oreo, among others, lost 5.48%. Hershey lost 7.57%. Mars was the only one that managed to establish itself in the region, with powerful increases of over 18%. On the other hand, in Europe, Nestlé lost 17.6% and Lindt is performing flat over the year, with declines of 10% since September.
The chocolate crisis
Even though cocoa prices have fallen sharply from their April highs, when they reached 12,000 dollars per ton (compared to the current 7,409), the reality is that there is no completely brutal decline and that the raw material is still 188% above the prices at which it was quoted in 2023. Companies in the sector have tried to soften the blow to their margins through increased prices, but this can only be partially resolved by this means in a context of strong competition like the current one.
During Hershey’s analyst round of questioning last August, the company said that was its big problem. “Everyone knows that we have been seeing historic prices for some time and while we don’t think they will stay at these levels, we do think there will be structurally lower pricesWhen asked about the extent to which pricing affects the company’s future, CEO Michele Buck said that “we have raised prices and reduced costs… but it is clear that pricing and these factors will not cover not completely up.” The company said this was the main reason why profits fell 48% year-over-year to $287 million last quarter.
JP Morgan explained that the rise in cocoa prices is precisely due to “a global shortage stemming from a major drought in West Africa, where 80% of the world’s supply comes from.” According to the World Cocoa Organization, this year the supply has been reduced by 11%. “Cocoa is not a normal agricultural crop, which We cultivate it everywhere, like other goods. “To grow, you need a very specific site and temperature range,” said David Branch, sector director at the Wells Fargo Agri-Food Institute.
“We will likely see shrinking packaging and a limited amount of chocolate in mixed bags”
The Bloomberg analyst consensus estimates that the impact of a new crop free of the problems of this one will only be felt until at least September 2025. However, even after that date will continue to detect structurally higher prices. Futures predict that by July 2025, the lowest price recorded will be $6,337. In 2025, they hardly believe that this amount will reach $5,400.
Regarding the impact on Halloween, Wells Fargo explains that this will have an impact on the lower profitability of these companies but that users will see “reduced chocolates”. The company explains that “it is likely that we will see that packaging undergoes a relative contraction and that if you buy a bag containing a variety of sweets, the contents will reduce both the quantity and the chocolatey and high sugar products” .
In an interview with CNN, Mars admitted that there would be movements in this direction and that they chose “expand the range of gummies and treats” while ” offering more varied bags that mix products with and without chocolate “.
The sugar crisis
But it’s not just chocolate, the other monster that threatens Halloween’s big winners is sugar. Although he did not experience a situation as dramatic as that of cocoa, he also felt a powerful awakening which affected the profitability of these companies and this has strengthened since August. Since the start of 2023, prices of this raw material have skyrocketed by 36%. However, concerns resurfaced with prices rising 25% from their August lows.
From Cobank they explain that “thanks to significantly higher wholesale sugar costs, consumers pay 9.2% more for this type of product.” Although the company recognizes that the biggest impact has come from the chocolate base, this will have a key impact. “Supply is very scarce and prices will remain high.”
Sugar prices were already experiencing a historic development in 2023. At that time, a combination of factors conspired against the raw material, highlighting a series of vintages very disappointing, particularly that of India, with the surge in the prices of chemicals necessary for their production and the rise in energy prices.
However, even with the decline in oil, harvests remained disappointing in India, which represents 19% of global supply, but significant problems were added in Brazil, the great market dominator with production of 25% of the world’s supply. total world supply. The South American country notably experienced major climatic problems which reduced production, with drought and fires which directly damaged crops. Sugarcane industry group Orplana said up to 2,000 fires affected up to 80,000 hectares of sugar cane planted in Sao Paulo.
