AMC Entertainment Holdings debuted plans to make its own candy to offset major price hikes from manufacturers.
“We noticed recently, as a result of the pandemic and the supply chain shortages, that candy manufacturers had increased their price to us by a huge amount,” Chairman and CEO Adam Aron said during a May 5 earnings call. Some manufacturers increased their wholesale prices by as much as 33% in a single bump, the CEO added.
AMC said it could manufacture a private label of popular candy and sell it at a lower price than the current name brands the theater chain offers, Aron said. Even at lower prices, AMC would still maintain a higher profit margin because the “cost to manufacture the private label brand is so much less than the normal brands.”
The entertainment company expects to introduce its private label of popular candies in theaters sometime later this year or early 2024, Aron told analysts.
Competing theater chain Cinemark Holdings also noted that inflationary pressure on commodities has pushed up candy prices. CFO Melissa Thomas told analysts on a Q1 earnings call that while canola and corn prices have somewhat eased, sugar has been on the rise.
While manufacturing its own candy may be cheaper for AMC, sweets makers across the board have been plagued by a slew of challenges since the start of the pandemic, including elevated shipping costs, long delivery times, labor and ingredient shortages.
Last year, Tootsie Roll, for instance, struggled to meet demand amid delayed supplier deliveries and other supply chain challenges. Meanwhile, Hershey has worked to build up its distribution efforts after experiencing capacity constraints last year, including within its Reese’s brand.