No. of Recommendations: 6
Is the price of cocoa, or tea in China, relevant to HSY share price?
Fair warning: I'm no expert and am not pretending to be one, but FWIW, the price of cocoa is available from FRED to beginning of 2022
https://fred.stlouisfed.org/series/PCOCOUSDAAnd of course the share price of HSY is available.
Just from eyeballing, here are some significant moves:
1990-1992: cocoa 13% drop, HSY price 29% rise
1993-1998: cocoa 51% rise, HSY price 219% rise
1998-2000: cocoa 47% drop, HSY price 22% drop
2002-2004: cocoa 13% drop, HSY price 17% rise
2006-2010: cocoa 96% rise, HSY price 26% drop
2010-2012: cocoa 24% drop, HSY price 73% rise
2013-2015: cocoa 28% rise, HSY price 45% rise
2015-2017: cocoa 35% drop, HSY price 6% drop but roughly 17% drop 2015-2016
CONCLUSION:
Rises in cocoa price (or drops) don't seem particularly well correlated with HSY share price.
It seems reasonable (to me at least) to speculate that HSY, a large industrial user of cocoa, is a player in the cocoa futures market to try to hedge the effect of cocoa price on its product.
I didn't do extensive analysis, but my impression is that cocoa and sugar are indeed major components of Hershey's product line, in contrast to Nestle (NSRGY) which seems much more diversified. So if the price of these components goes up then that's an issue for HSY that needs addressing. Maybe some hedging, maybe some price rises in items that has some price elasticity e.g. "I really do like my occasional indulgence in a Hershey chocolate bar, and it won't break the bank for me to pay 20% more, so what the heck".
Nestle looks quite interesting too, I did a flutter on them some time back when the price got lower (it's never cheap) and that worked well.
