Nestle to Raise Prices of Some US Chocolate on High Cocoa Costs

(Bloomberg) — Nestle USA is increasing prices for some chocolate products due to commodity costs, a sign that sweet treats will stay expensive for consumers in the near term. 

The US division of Nestle SA, the world’s largest food company, will raise prices of its Toll House morsels, baking cocoa and fudge kits starting June 23, according to a memo viewed by Bloomberg News. 

The hikes follow letters sent from the company at the end of last year to some of its commodity suppliers in which Nestle asked them to reduce prices, provide rebates and in some cases even cancel supply contracts altogether, according to people familiar with the matter who asked not to be identified because the information is private. Some suppliers declined to do so, according to the people. 

The letters were specific to each supplier and detailed what the company wanted for a number of products it buys, including sugar and coffee, the people said. 

Prices for chocolate and some food items are still rising even as overall grocery inflation moderates. Tight supply pushed up cocoa futures to a record late last year, prompting price hikes, which are testing consumers’ appetite to pay up for snacks. 

Nestle and its rivals have faced surging cocoa and coffee costs over the past year, prompting price increases to protect margins. Those hikes were the main driver of Nestle’s better-than-expected sales growth in the first quarter, with Chief Executive Officer Laurent Freixe saying the Swiss group is taking “as much price as we can to cover our costs while being mindful of the consumer response in a competitive environment.”

Nestle will communicate specific price changes to products at a later date, according to the memo. Price changes for consumers will be decided by retailers, which weigh a range of factors including competition.

The Toll House price increases come after “exhausting efforts to offset aggravations due to increased commodity costs,” according to Nestle’s memo. The changes aren’t due to recent tariffs, the company said in the memo.

Nestle is seeking to deliver CHF700 million ($843.6 million) in cost savings in 2025, primarily through procurement.

A Nestle spokesperson said there’s been a significant rise in cocoa costs over the last two years and the company is implementing price increases after careful consideration of the macroeconomic environment and efforts to navigate higher costs. No additional cocoa products will be affected at this time. 

New York cocoa futures soared last year to a record near $13,000 a ton, as poor weather and disease hit crops in West Africa. While prices are now down about 30% from the peak on expectations of a small surplus, cocoa is still far costlier than historical levels. 

Arabica coffee futures also reached a record earlier this year, as dry weather hurt top grower Brazil’s output.

Economists, investors and companies are keeping an extra-close eye on prices following years of higher inflation that have reduced the purchasing power of some consumers. Expansive, fast-changing tariffs from US President Donald Trump are expected to further increase prices of some goods. US consumer confidence dropped in April to an almost five-year low due to growing pessimism about the economy and the labor market. 

Related: Mondelez Says Wary US Shoppers Are Cutting Back on Snacks 

Nestle has been struggling in North America, which was one of the company’s weakest-performing regions in the first quarter. It was also one of the few areas where average prices declined. The Swiss food company lost market share as inflation-wary consumers turned to cheaper alternatives — something that CEO Freixe has pledged to ease by cutting prices on products such as frozen pizzas in the US. 

Sweets, coffee and eggs are among items that are outpacing overall grocery inflation of low single digits, according to US government data. Average unit prices of US chocolates have risen about 18% to $3.45 for the 4 weeks ended April 19, compared with two years earlier, according to research firm NIQ. 

Higher chocolate prices have dented volume for some food companies as consumers stay cost-conscious. Hershey Co. said earlier this month that prices of everyday chocolates are up 8% year-to-date while volume is down 4.5%. Meanwhile, Mondelez International Inc. said recently it’s reconfiguring its chocolate business to offer a range of pack sizes while keeping prices low for certain key products.

–With assistance from Ilena Peng.

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