- IHS Markit is projecting candy prices this Halloween to jump 3.9% from 2018, which would be the fastest increase in eight years. Prices were up just 1.6% last year after dropping in both 2016 and 2017, the London-based global information firm found.
- Spending on Halloween candy will hit $2.7 billion this year, which is a 3.6% hike from 2018, but lower than the 7.6% increase last year, according to the report. The average household will fork over $21.30 on treats this year.
- While sugar prices remain relatively steady, milk is the first suspect when it comes to higher candy prices, IHS Markit noted. Rising labor costs are also contributing since average hourly wages for food manufacturing production workers saw a 5% annual growth rate as of September, which was the highest since 1991.
With the rise of ingredients and labor costs, paired with consumer confidence and disposable income, the increase in Halloween candy prices and spending isn't surprising. The report found that those factors, plus stronger employment markets, have pushed demand up regardless of trade wars and economic uncertainty.
Prices for candy rose 2% or more annually between 2005 and 2011, but, except for 2015, the gains dropped below that level until now. Despite the growth, manufacturers may need to consider that consumers could cut back on spending for Halloween candy if pricing gets too high and incomes don't keep pace.
In recent years, candy makers have been taking advantage of the fact that people are willing to pay more for candy. This summer, Hershey announced it would put 9% higher price tags on some chocolate and candy products starting next year. That's in addition to the 2.5% increase the company instituted this year on bagged candy, gum and mints. Such moves are a gamble, though, because even if revenue goes up — as it did for Hershey in the most recent quarter — retailers may buy fewer of the company's products.
Big candy makers such as Hershey are prone to cyclical earnings changes caused by higher sales that are tempered by increased costs. The candy maker saw a 3.1% boost in sales growth in its North American segment in last year's third quarter because of increased prices, yet higher freight and shipping expenses reduced margins. And those aren't the only costs eating into revenue.
Which ingredients are hiking up candy prices? According to IHS Markit, milk is a big one. The Producer Price Index for raw milk has grown at a daunting pace this year and that could continue in the future. Demand for cocoa is also soaring as premium varieties, dark chocolate options and sugar-free products grow in popularity.
The cost of labor has also pushed up candy prices, per IHS Markit. Ghana and Ivory Coast recently set a floor price for their cocoa, so the coveted commodity will likely drive candy prices up in the next few years. But since 12 of the top 25 Halloween candies in the U.S. contain chocolate, it's possible consumers could continue to treat themselves no matter how tricky the prices get.