Recently falling cocoa prices were a relief to chocolatiers such as Hershey, but Trump’s global tariffs will send prices skyrocketing again. So Hershey is asking the White House for a tariff exemption for the volatile commodity. Just in time, too, since the first-quarter financial results were disappointing.
“The current U.S. levy on cocoa is an exposure that we must manage on top of the cocoa market’s unprecedented recent price swings,” said Chairman/CEO Michele Buck said in the company’s first-quarter earnings report on May 1. “Cocoa cannot be grown in the United States and thus, we are engaging with the U.S. government to seek an exemption.” She didn’t elaborate.
The quarterly report predicted tariff expense, “as understood today,” to be approximately $15-20 million in the second quarter.
The update noted easing prices in recent months. “We are encouraged by the recovery in the 2024/25 cocoa crop,” Buck continued. “The top three global cocoa markets are tracking to a 20% increase in supply this season. High cocoa market prices are incentivizing investment in origins around the world. Farmer prices have also increased in the Ivory Coast, which should enable more investment in fertilizer, pesticides, and other techniques to improve yields. There are reasons to believe that this year’s crop marks the beginning of a multi-year growth cycle in cocoa supply.”
The chairman/CEO also noted that the company’s hedging strategies will help mitigate any sudden price jumps while “allow[ing] us to participate if cocoa markets retreat materially.”
Despite being negatively impacted by tariffs on imported ingredients, such as cocoa, “As a largely domestic food producer, we are relatively less exposed to tariffs than other industries.”
Back to the quarterly results: Sales declined 13.8% to $2.8 billion, a decrease of 13.8%. Net income dropped even more, down nearly 72% to $224 million. Both North American confectionery and international sales were down 15% but salty snacks eked out a 1% gain.
Nevertheless, the company confirmed its outlook for the year, with sales growth of “at least 2%,” but earnings per share dropping 30-40%.
