Chocolate is having a moment

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CNN Business

Between warnings of a recession, high inflation and fears of layoffs, the news is bleak. Why not have some chocolate?

Chocolate makers are reporting that sales are booming as stressed-out customers look for something sweet to pick them up.

In the third quarter, sales of Hershey’s ( HSY ) chocolates, which include Reese’s, Kit Kat and Hershey bars, rose 12.6% at retail. Mondelez ( MDLZ ), the global snack brand that makes Toblerone, Cadbury and others, said its chocolate sales grew 9.3% in the quarter.

Chocolate, like many comfort foods, got a boost during the pandemic. But unlike other categories like pizza, where interest fell as employees returned to the office and kids went back to school, chocolate is still growing, thanks in part to demand from stressed-out consumers .

“Chocolate grew in 2020 and has sustained that growth, something many industries were unable to do,” according to a 2022 report by research firm Mintel. “Increased occasions at home, the need for fun and stress relief, and the availability and convenience of chocolate all contributed to this upward trajectory.”

In the year to Oct. 30, chocolate sales reached $17.7 billion at U.S. retail, according to data from market research firm IRI, up from $14.6 billion in in the year 2019.

Chocolate sales are booming.

One reason for the growth is higher prices for groceries and snacks, including chocolate. The increase does not affect sales too much: buyers are not as sensitive to changes in the price of chocolate, said Dan Sadler, director of customer insights at IRI, who has experience in the confectionery market and tracks price sensitivity.

In the second quarter, the IRI found that the elasticity of chocolate was about -.4. That means a 10 percent increase in prices would translate into only a 4 percent drop in volume sales, Sadler explained.

“You can increase that price and you’ll see some volume impact, but not much, not like you’ll see in other categories,” he said.

Even chocolate makers have been surprised at how well demand is holding up.

Elasticity “is below expectations,” Mondelez CEO Dirk Van de Put said on a recent analyst call to discuss the company’s third-quarter results, which were even lower than before of covidWe see consumers saying that chocolate really is something they can’t live without.”

Hershey raised its net sales and earnings outlook for the year on Nov. 4 when it reported third-quarter results that beat its expectations.

“Our products continue to be an affordable pleasure for families and for consumers,” Hershey CEO Michele Buck said during an analyst call. “We know that part of that is that they want to reward themselves when times are tough. They also use these products for stress relief. And we think those trends will continue.”

Customers are making some changes, he noted, such as shopping in value channels or choosing value bundles.

Companies like Mondelez and Hershey are largely spared competition from store brands or private labels, which are gaining ground as grocery prices rise.

According to IRI, only 2.7% of the US chocolate retail market is private label, while this share is much higher. in other categories. In dairy milk, for example, store brands account for around 62% of sales. Even in savory and sweet snacks without chocolate, private label share is 4.8%.

Shoppers are “brand specific” when it comes to chocolate, Sadler said. “You’re going to make s’mores with a Hershey bar, you’re not going to substitute something else.”

Mondelez also benefits from this kind of brand loyalty. “Shoppers continue to say they are much less likely to switch to private label in chocolate and cookies compared to other categories,” Mondelez’s Van de Put said on the call.

Finally, the highest prices can reach the chocolate category. IRI is seeing volume sales start to decline, Sadler noted, suggesting consumers are becoming more price-sensitive.

And while private label sales pale in comparison to national brands, they are also growing at a faster rate than branded chocolate.

IRI data shows own-brand sales rose 16% in the year to October 30 compared with a year earlier, while domestic brands grew 8.8%.

Still, chocolate isn’t going anywhere. The sweet’s “position as an accessible indulgence will help protect it from significant impacts,” Mintel’s report said.

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