Hershey Co. will boost wholesale chocolate prices for the second time in a year, the company said a few days ago. On average, prices charged to retailers will go up 13 percent on about a third of the Pennsylvania-based company's products. Hershey blamed higher prices for raw materials (cocoa beans and milk), electricity, shipping and other expenses.
This is classic pass-along inflation. Input costs are up, so end-users have to pay more, too. It's affecting numerous other kinds of goods and services, but chocolate producers and consumers are presented with an especially bitter cup.
In April Hershey raised prices on the same items 4 percent to 5 percent, the Associated Press reported. Mars increased prices on Snickers and Milky Way bars in March and did so again last week, AP said.
Worst for Hershey are milk prices - up 19 percent last year, according to the Bureau of Labor Statistics.
Producers have blamed food inflation on government programs to boost the use of ethanol, an alternative to gasoline derived mainly from corn.
Subsidized demand for ethanol has driven up corn prices, which increases the cost of feeding a cow, which you would think would drive up the price of milk.
The ethanol lobby denies this, saying supply, demand and government programs determine milk prices, not input costs.
In any event, food executives say higher food prices will keep going.
Two weeks ago Indra Nooyi, PepsiCo's chief executive, predicted that "structural inflation for food is here to stay for another two to three years," according to the Times of London. "This is not about scale and taking out costs," she said, suggesting there is little producers can do to avoid passing on higher prices to consumers. "It is about the behavior of governments, of ethanol programs."
jay.hancock@baltsun.com