Hershey's candy to cost more

Energy, commodity prices cited for move

By MARC LEVY
THE ASSOCIATED PRESS

last updated: January 29, 2008 03:29:35 AM

HARRISBURG, Pa. -- Hershey, the nation's largest candy maker, said it is raising the wholesale price of its chocolate bars for the second time in a year as energy and commodity costs spiral higher.

The Hershey Co. defended the move, saying it is more exposed to the rising cost of milk and cocoa than its competitors, which include Mars and Nestlé.

"While we have no way of knowing what others are thinking, or what their cost situation is, we do know that within the category our products include far more pure milk chocolate and solid chocolate than our competitors," Hershey spokesman Kirk Saville said.

The price increase, effective immediately, boosts wholesale prices by 13 percent on standard chocolate bars, king-size bars, six-packs and vending lines, or about one-third of its domestic candy line.

In April, Hershey raised wholesale prices of the same items by 4 percent to 5 percent.

Hershey is closing a chocolate manufacturing plant in Oakdale that formerly employed 575 workers. Friday will be the last day of work for more than 200 employees still working there. The plant is expected to be vacant by the end of February.

The Oakdale closure is part of a broader restructuring plan announced last year to shift much of Hershey's chocolate production to a new plant in Mexico. Five other plants in the United States and Canada were shuttered as part of the restructuring effort.

A Nestlé USA Inc. spokes- woman, Patricia Bowles, would not comment on whether the company plans a price increase. Nestlé last increased U.S. candy prices in April, she said. A Mars Inc. official did not immediately return telephone messages.

Price increases are a sensitive topic right now in the industry. Canada's federal Competition Bureau is investigating price- fixing allegations against the Canadian divisions of Nestlé, Mars, Hershey and others, prompting an inquiry by the U.S. Justice Department and several lawsuits.

In a conference call with analysts to announce Hershey's fourth-quarter results last week, Hershey's president and chief executive officer, David J. West, would not discuss any potential price increase. However, he said Hershey is dealing with "an unprecedented run-up in costs over the last couple of years" for fuel, dairy and other things.

In April, Hershey's then-chief executive, Richard H. Lenny, said the candy maker was looking at ways to adjust its formula to use less lactose to offset rising milk costs.

Saville would not comment specifically on that development, but indicated Hershey is not seeking to lower the cocoa butter content in its chocolate. The company, he said, supports the existing federal standard of chocolate identity -- that chocolate in its purest state must contain between 50 percent and 60 percent cocoa butter.

In 2006, food industry groups asked the U.S. Food and Drug Administration to amend the standards that guide how nearly 300 foods can be produced. One proposal would allow chocolate to contain "a vegetable fat in place of another vegetable fat named in the standard (e.g. cacao fat)."

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