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Consumers more frugal, concerned about 'shrinklation'

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Discounts this year were bigger, started earlier

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Candy companies trying to restore profits after cost

increases

(Adds quotes, background, data throughout)

By Jessica DiNapoli

NEW YORK, Oct 30 (Reuters) - U.S. retailers are

discounting some Hershey candy ahead of Halloween on

Friday, the confectioner's biggest holiday, after it hiked

prices this summer due to cocoa inflation, according to

third-party data.

The data, from investment bank Jeffries and Datasembly,

showed Hershey was among food makers with the highest volume of

products sold at a discount in the four weeks to October 4

compared to the prior year, and one mass retailer put more than

half of the company's seasonal candy on sale by early October.

U.S. consumers are tightening spending in general due to an

uncertain economy and government shutdown, and the rising cost

of sweets has further prompted them to trim their candy budgets.

This is forcing confectioners and retailers to turn to

discounts. Datasembly said Halloween discounts on all candy

brands started earlier this year, were deeper and covered more

items than in the past.

These include products from Mondelez ( MDLZ ), which makes

Sour Patch Kids sweets, and Mars, home of M&M's and Skittles, as

well as Hershey, famous for Kisses and KitKat bars.

A Hershey spokesperson said that its seasonal candy - like

pumpkin-shaped Reese's - had significantly fewer discounts this

year than last year.

Hershey told retailers in July it would be implementing a

double-digit price increase on average on its candy, and media

reports said this would be about 10%. The spokesperson said

Halloween candy was not included in that price hike, and the

company has not significantly changed its spending on Halloween

discounts.

Halloween candy shopping continues throughout October, and

the data cited by Jeffries covered all Hershey products which

include salty snacks.

Overall, chocolate candy sales per unit were flat in the 12

weeks ended October 5, but prices rose 8%, according to Circana,

a market research firm.

HALLOWEEN IS 'MAKE OR BREAK' FOR CANDY COMPANIES

Hershey CEO Kirk Tanner said on Thursday that Halloween

sales were "somewhat soft," and he cited warmer weather and the

timing of the holiday later in the week.

After peaking in late 2024, the price of cocoa -- the key

ingredient in chocolate -- has moderated but remains

historically high at about triple its pre-2022 level.

Retail candy prices still do not cover that historic rise so

manufacturers are trying to pass on costs to consumers in an

effort to restore profit margins.

Halloween and seasonal occasions like Easter and Valentine's

Day are especially important for confectioners because consumers

budget for holiday treats.

"It's make or break for our seasonal business," said Chantal

Butler, Mondelez ( MDLZ ) president of North American confectionery.

Hershey is among 31 food makers tracked by investment bank

Jeffries that had the biggest increase in volume of goods sold

with a discount in the four weeks ended October 4, according to

a Jeffries research note that cited Nielsen data.

Consumers love holiday treats but right now want they want

"the best bang for their buck and are waiting for promotions.

They won't opt out of the holiday," said Katie Thomas, the lead

of the Kearney Consumer Institute.

Thomas added that consumers are increasingly aware of

package sizes as companies shrink them to keep prices stable, a

tactic known as "shrinkflation."

"It's not just the price, it's the value," she said. "Not

only do I not want to pay $30 (for a bag of candy), I don't want

to pay $30 for really small pieces of candy."

On Tuesday, Mondelez ( MDLZ ) CEO Dirk Van de Put said some of its

promotions in recent months have not been effective, adding

consumers are "very concerned in general about the economy."

(Reporting by Jessica DiNapoli in New York; Editing Cynthia

Osterman)