- Tootsie Roll reported significantly higher supply costs for ingredients, materials and manufacturing supplies in 2023 after new agreements became effective early in the year, according to a Q3 earnings report.
- Year to date, the product costs of goods sold stood at $382.6 million, up 16.3% YoY, according to a 10-Q filing. The cost of raw materials and supplies also increased in Q3, up 12% YoY to $45.7 million.
- “We believe that the increases in ingredients and packaging materials costs from 2021 to present are the greatest that we have experienced over any two-year period in decades,” the company said.
The candymaker disclosed that limited supply and high demand for materials have contributed to the higher unit costs for many ingredients and packaging materials in the past two years.
Despite the higher costs, Tootsie Roll reported that its supply chain has significantly improved this year, compared with 2022 when ingredients and packaging suppliers were unable to meet the designated delivery dates due to logistics limitations.
Currently, the candymaker remains focused on its supply chain to avoid possible delays and disruptions that might impose temporary shutdowns at its manufacturing lines, some of which are also facing labor shortfalls.
“We did expand our work shifts and overtime in the first nine months of 2023 in order to increase production and inventory levels, and insure that we can meet our sales demands in 2023 on a timely basis,” according to the earnings report.
The rising cost of key commodity ingredients like sugar and cocoa have plagued candymakers and sparked heightened prices this year. The cost of sugar crops, for example, spiked globally since the start of 2023 due to shortages spurred by dry weather patterns. Cocoa-growing countries have also been experiencing drought conditions that have caused chocolate companies like Hershey to raise prices.
The ingredient price hikes from manufacturers even led AMC Entertainment Holdings to launch its own candy line in theaters to offset the spike in costs.