High prices put squeeze on candy makers
The Denver Post
The cost of making sweets is on the rise, leaving a sour taste for local candy makers. Sugar prices have soared 95 percent this year as global demand is forecast to exceed supplies.
At the same time, cocoa beans have been selling near a 20-year high on reports of diminished production in Ivory Coast, the world’s largest grower. That’s taking a bite out of confectioners’ profits.
“Sugar prices are the highest I’ve ever seen,” said Andrew Schuman, president of Hammond’s Candies in north Denver. “They’ve been consistently rising over the course of the past year.”
Sugar constitutes about 12 percent to 14 percent of Hammond’s total production costs.
Schuman said he is not being hit as hard as huge manufacturers such as Hershey or Mars because Hammond’s candies are handmade. As a result, his labor costs are proportionately higher and sugar costs a smaller share of operating expenses compared with mass-production plants.
Still, he expects Hammond’s costs to rise 4 percent next year, largely because of high commodity prices.
“But I’m going to try my hardest not to raise prices,” he said. “That’s important because of the economic environment we’re in now.”
Durango-based Rocky Mountain Chocolate Factory recently doubled its storage capacity in an effort to stockpile sugar before its current purchase contract expires and prices rise again.
The company now keeps two semitrailer loads of sugar – a two-month supply – on hand at the factory.
Rocky Mountain uses about 400,000 pounds of sugar annually to make candy and chocolates for its 330 franchised and company-owned retail stores.
“We’ve been holding our prices flat despite the rise in our commodity costs,” said Bryan Merryman, chief operating officer and chief financial officer. “We’re seeing a reduction in our fuel costs, which has helped offset the commodity increases.”
Raw-sugar futures were trading in New York at 22 cents a pound Wednesday, compared with about 12 cents a year ago.
Ivory Coast’s output of cocoa, the primary constituent of chocolate, will drop 12 percent to 1.2 million tons this year, the lowest level in 10 seasons, the International Cocoa Organization said last month.
Sugar-price increases have sparked a debate between food and candy manufacturers and U.S. sugar growers on import tariffs.
While growers support higher tariffs to keep domestic production profitable, manufacturers say markets should be opened to cheaper imports.
“We have long said that U.S. quotas and tariffs on imported sugar are market-distorting and invariably lead to tight supplies and increased prices for consumers,” said Susan Smith of the National Confectioners Association. “This year is no exception.”
Steve Raabe: 303-954-1948 or email@example.com