CHICAGO — Snack and confectionery manufacturers would face consumer blowback if rising commodity costs push them to hoist product prices, according to market research firm NielsenIQ (NIQ).
In its “Mid-Year Consumer Outlook: Guide to 2025” study, NIQ said 60% of global consumers surveyed would buy fewer snacks and confectionery products if prices stay high or climb in the next three months. That marked the highest “dropout” response across all surveyed categories, the Chicago-based researcher noted.
Food categories affected by increased commodity costs already have felt the impact of elevated product pricing on sales volume. In snacks and confectionery, 3.3% average year-over-year price growth was accompanied by a 0.7% volume decrease during NIQ’s study period of mid-March to mid-June.
The correlation was most pronounced in chocolate, where a 6% average price increase came with a 24% drop in global consumption. Meanwhile, a 6% rise in candy pricing resulted in a 2% decline in sales volume, NIQ said in its report.
Similar year-over-year price growth was seen in sweet spreads (up 8%) and ketchup (up 6%), with both categories experiencing 1% volume decreases. Pricing was up just 1% in the competitive cereal category, yet volume fell 2% over the 12-week period. Categories with flat to slightly down pricing — including dry pasta, milk substitutes and ready-to-drink coffee — had flat to slim volume growth, whereas average price increases of 2% in ice cream and 1% in yogurt came with respective volume gains of 2% and 5%, NIQ said.
‘Hot commodities’
During the three-month period examined by NIQ, commodities experiencing some of the highest price increases — dubbed “hot commodities” — included cocoa (up 128%), coffee (up 43%) and milk (up 44%), based on economic indicator data from Trading Economics. “Cold commodities,” or those with pricing decreases, included wheat (down 27%), soybeans (down 26%) and sugar (down 24%).
“In April 2024, cocoa surged to a record high of $12,000 per metric ton amid shortage forecasts and $8.7 billion in cocoa futures bets from hedge funds,” the NIQ study said. “Unlike a commodity such as wheat, whose costs were largely driven up by global geopolitical conflicts (but have since leveled off due to an influx of freshly harvested crops), the issues facing cocoa may take much longer to resolve. Difficult weather conditions and disease have affected production in West Africa, which produces about 70% of the world’s cocoa, and may take a full growing season to resolve.”
Consumers would prefer that manufacturers squeezed by commodity costs adapt product packaging rather than raise prices, NIQ’s research revealed. Of shoppers polled, 32% said food companies should offer larger, economy-size packages if their product prices remain high or rise. Likewise, 19% of consumers supported smaller pack sizes at a lower price, while 12% backed slightly downsized packages at the same price.
Just 9% of consumers said manufacturers should raise product prices proportionately to cost increases. Yet some respondents in NIQ’s survey agreed with promotional trade-offs to ease pricing pressure. Eleven percent said food companies could offer the same number of sales but at a lower savings, and 9% supported fewer sales promotions. Only 8% liked the idea of manufacturers upholding current prices by producing slightly lower-quality products.
“When faced with increased costs, consumers overwhelmingly prefer strategies to lower price per serving and smaller pack sizes over those that produce lower-quality products,” NIQ said in its report.
Snack and confectionery manufacturers may need to make some hard choices to prevent high commodity costs from forcing product price increases that turn away consumers, according to NIQ.
“Although local market nuances and specific snacks or candies may be immune to this type of activity, it nonetheless offers a stark reminder that companies must evaluate cost, quantity and quality trade-offs, using the right data, to make sound, growth-savvy decisions,” the study said. “In the case of rising cocoa prices, news reports indicate that some manufacturers of chocolatey foods are already considering shifts to similar alternatives to replace cocoa. But swapping out cocoa (for carob, chicory, etc.) and/or cocoa butter (for palm oil, coconut oil, etc.) can require drastic reformulations of recipes and alter nutritional values. Such dramatic pivots could risk losing customers who are increasingly focused on — and paying attention to — changing health attributes and product labels, so proceed with caution.”Inflation adjustment continues
For the year ended June 16, global product pricing in the confectionery and snacks category was up 6.8% from a year earlier, compared with 4.4% for alcohol, 3.4% for beverages, 3% for ambient food, 2.8% for frozen food and 2.6% for fresh perishables, NIQ data showed.
Among food and beverages, the only segments experiencing volume decreases were confectionery and snacks (down 0.4%) and alcohol (down 1.1%), versus volume gains in beverages (up 2%), ambient food (up 1.7%), fresh perishables (up 1.2%) and frozen food (up 1%).
NIQ’s report noted that purchasing power “hasn’t fully recovered yet” for most global consumers, even with consumer packaged goods (CPG) inflation dropping from 10% in May 2023 to 1.7% in May 2024.
Compared with 2022 CPG pricing levels, consumers today are spending 17% more — with a $100 purchase now costing $117, the study said.
“Over the past six months, there has been a determined shift from cautious to intentional consumption habits,” said Lauren Fernandes, vice president of global thought leadership at NIQ. “Consumers are willing to spend more but remain conscious of potential changes. Consumers are seeking value with every purchase in multiple ways. They are spreading their spending very purposefully and expect to leverage any excess in strategic ways in 2025 and beyond.”
