Yesterday’s selloff in Hershey stock was downright silly. Some analysts have sounded the alarm bell on the stock, “downgrading” it in notes to investors on the theory that the 1.5% sales growth in the third quarter was a signal of weakness.
As I’m sure this will surprise absolutely none of you, I do not see it that way. In the past year, Hershey has embarked on a series of aggressive price increases for its chocolates, mints, and gums. The whole Hershey portfolio of candies and other confectionaries saw price increases of 8%. The Reese’s brand, which has some of the most extraordinary profit margins and pricing power of any product sold over the past half-century, has seen its price go up by 12.5% in the past year.
Hershey has making its chocolate more expensive disproportionate to the 2.5% rise in the price of cocoa and all dairy input costs. It … Read the rest of this article!