*

Candy companies shift to cheaper gummies, licorice due to

high

cocoa costs

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Hershey's new non-chocolate products include Jolly Rancher

Ropes

and Shaq-a-Licious gummies

*

Halloween candy prices rise, with chocolate up 7.5% and

non-chocolate up double digits

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Chocolate prices outpacing broader food inflation

By Jessica DiNapoli

NEW YORK, Oct 8 (Reuters) - Trick-or-treaters hoping to

collect handfuls of chocolate candy this Halloween might be

facing a bit of a letdown.

U.S. confectionery companies are stocking store shelves with

fewer Halloween chocolates and doubling down instead on cheaper

gummies and licorice such as Mondelez's ( MDLZ ) Sour Patch Kids

and Hershey's Twizzlers ghosts, according to market

research firm Circana.

Prices on sugary non-chocolate sweets - though still cheaper

than chocolate - are also up double digits, according to

Circana.

The shift to gummies, licorice and flavored crèmes comes as

chocolate makers face shrinking margins and slowing sales.

Consumers have been curbing their cravings for costly chocolate,

and the candy companies have faced a double-whammy on their own

costs for the treat, first from supply chain snarls during the

COVID pandemic and now from a cocoa bean shortage.

"Chocolate candy, there's just not as many items per

retailer on shelf," said Dan Sadler, principal of client

insights at Circana, who focuses on confection. "We're seeing

double-digit increases in non-chocolate items."

Candy companies took a similar approach for Easter,

unveiling new products lighter on cocoa. But for Reese's cup

maker Hershey, a top U.S. chocolate maker, the sales results

were disappointing, with the company's category for the spring

holiday declining, executives told investors on conference

calls. They pegged it on an earlier Easter and a shorter selling

season.

A spokesperson for Oreo maker Mondelez ( MDLZ ) said that shoppers

for Halloween are looking for more limited editions and special

flavors, such as its Sour Patch Kids' apple harvest and cherry

varieties. Mondelez ( MDLZ ) does not have a major U.S. chocolate brand.

Privately-held Mars did not reply to a request for comment.

Hershey's key new products for Halloween are its Reese's

Werewolf Tracks, which feature a vanilla crème top instead of

milk chocolate, and its KitKat Ghost Toast with a cinnamon toast

flavored crème, a spokesperson for the company said.

The Hershey, Pennsylvania-based company sees non-chocolate

candy as having potential for higher growth, the spokesperson

said. Last month Hershey introduced two new non-chocolate

candies, Jolly Rancher Ropes and Shaq-a-Licious gummies, which

are inspired by the former U.S. basketball star Shaquille

O'Neal.

Hershey plans to introduce more sweets in the next several

months, the spokesperson said.

To be sure, the spokesperson added that chocolate makes up a

bigger part of Halloween sales across the candy category

compared to everyday purchases.

'SUMMERWEEN' AND 'AUGTOBER'

Confectioners and retailers like grocer Kroger ( KR )

started selling Halloween candy earlier than ever this year,

indicating the importance of the holiday to their sales figures,

and fueling decorating and party trends like "Summerween" and

"Augtober."

Halloween was the biggest holiday for candy sales last year,

according to the National Confectioners Association.

Candy companies are increasingly relying on holidays and

special occasions like birthdays for sales growth as shoppers

find everyday chocolate purchases unaffordable.

Kroger ( KR ) had Halloween candy for sale as soon as students were

back to school, the earliest ever, a spokesperson said. The

grocer has also seen higher demand for non-chocolate candy, the

spokesperson said.

Hershey started selling its Reese's peanut butter pumpkins

online in July for the first time.

Hershey expects its Halloween sales will grow in line with

total company sales for the year, the spokesperson said. Hershey

cut back its annual sales growth expectations to 2%.

There is not only less chocolate candy for Halloween in

stores, but it is also more expensive. Prices on seasonal

chocolate candy have increased by as much as 7.5% from last

year, Sadler said.

Chocolate makers were exposed to higher cocoa costs when

planning for this year's holiday, said David Branch, a sector

manager at Wells Fargo Agri-Food Institute, leading to higher

prices at retailers. Chocolate companies typically cover

volatile commodity costs like cocoa with hedges protecting them

for six months to a year.

Average unit prices on chocolate are up more than 40% from

2020, according to data from NielsenIQ, outpacing broader food

inflation, which has started to moderate.

Hershey announced more price hikes this summer to cover the

rising cost of cocoa. The Hershey spokesperson said that those

increases did not affect Halloween candy for sale now.

At Target ( TGT ), a 120-piece, roughly 46-ounce bag of Mars' Milky

Ways, Snickers, M&Ms and Twix chocolates is $19.99.

Candy companies are hiking prices on candies without

chocolate by double digits, Sadler said.

"Non-chocolate is catching up," Sadler said. "When you look

at the price per pound of non-chocolate versus chocolate, it's

still a value."