15 Food Stocks Hit by Commodity Inflation

Hershey

Hershey (HSY)

Company Profile: Hershey, Penn.-based Hershey is engaged in the manufacturing, marketing, selling and distributing package types of chocolate and confectionery products, food and beverage enhancers and gum and mint refreshment products.

The maker of Reese's, Twizzlers and Kit Kat confections brands said it expects adjusted gross margins to be relatively flat in 2011 year-over-year despite "meaningfully higher input costs."

>> Hershey Heats Up on Sweeter Dividend

Cocoa prices surged recently following a one-month ban on exports imposed in the Ivory Coast, the world's biggest cocoa producer, which could tighten world cocoa supplies.

Sugar prices also spiked in recent sessions to three-decade highs after Australia's already flood-stricken Queensland coast was hit with the strongest cyclone the nation had seen in 100 years.

Hershey said that despite higher ingredient costs this year, "productivity and cost savings initiatives are in place" and "we continue to leverage the global go-to-market capabilities we have built over the past few years."

Hershey cautioned its margins would continue to be pressured since passing on all the higher ingredient costs to consumers could hurt its sales.

On March 30 Hershey said it raised wholesale prices on most of its products sold in the U.S., effective immediately.

Hershey said a weighted average price increase of around 9.7% will be added to its instant consumable, multi-pack, packaged candy and grocery lines, effective immediately.

"These changes will help offset part of the significant increases in Hershey's input costs, including raw materials, packaging, fuel, utilities and transportation," the company said.

"Given this timing and some higher than anticipated costs, we do not expect this action to materially impact our financial expectations this year," CEO David J. West said. "We expect the majority of the financial benefit from this pricing action to impact our earnings in 2012."

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