Apr
11

Chocolate Rising – Price Increase at Hershey’s

By on April 11, 2011

Hershey’s publicly announced a price increase of 9.7%.  Why would they do this? Not why would they raise price, but why would they announce it?

There are two logical reasons for announcing their price increase:

1.  They can blame it on someone else.  Their sugar costs are going up significantly so by announcing it they are able to blame the sugar prices for their price increases.  Customers are more willing to accept a price increase if the company is just covering increasing costs and not simply trying to increase profits.

2.  They are asking their competitors to follow.  It wasn’t explicit, but by taking the lead and announcing it, they are letting their competitors know that now is a good time to increase prices.  Hershey’s competitors are also facing rising sugar costs and they are probably wondering how they were going to increase prices anyway.  Hershey’s gave them the excuse.

If the competitors do not follow with price increases you can be sure that Hershey’s will bring their prices back down.  It is unlikely they will let competitors take their business based on price.

How do you see it?

Categories : 4. Pricing Dynamics
Technorati Tags:

Comments

  1. Alys Milner says:

    Mr. Stiving, you’ve introduced me to a whole new world. Interesting blog.

    Time to stock up on my Hershey’s, a childhood favorite that has carried me through to adulthood.

  2. [...] pricing too aggressively to win business.  For example, recall the blog on the press release where Hersheys announced their price increase.  In that announcement they “told” their competitors it [...]

  3. [...] accept the price of gasoline goes up when the cost of oil increases.  Remember the blog “Chocolate Rising – Price Increase at Hershey’s“?  Hershey was announcing a price increase and blaming the price of [...]

Leave a Reply

Other Stuff...

Top Product Management Blogs