How much will Halloween candy cost you this year?

The National Retail Federation expects Americans to spend $3 billion this year on Halloween candy. So how much will handing out treats cost you this season?

The cost of the 10 most popular candy brands, including assortment bags, has risen an average of 13% since 2021, with some jumping as much as 45%, according to Datasembly’s Grocery Price Index. Skittles leads the pack in inflation, while Nestlé Crunch saw the smallest price increase.

Complete list of Datasembly:

Bowling: 45% increase

Starburst: 35% increase

M&M’s: 14% increase

Snickers: 14% increase

Twix: 13% increase

Reese’s: 13% increase

Sour Patch Kids: 12% increase

Kit Kat: 11% increase

Matching bags: 8% increase

Sticks: 7% increase

Nestlé Crunch: 6% increase

In addition, the shrinkage phenomenon has also affected holiday candy. Shrinkflation occurs when manufacturers reduce the size of products instead of reducing the price. The Washington Post reported that a bag of Hershey’s Kisses dark chocolate has shrunk a few ounces, while Cadbury’s milk chocolate bars are about 10% lighter than before.

While price can determine what you give away, what cheaters are looking for depends on location. Overall, America’s favorite is Reese’s Peanut Butter Cups, with Skittles and M&M’s following in second and third respectively, according to CandyStore.com. Hot Tamale’s may surprise some, sitting firmly at #5 this year. And the ever-controversial Candy Corn slipped into the top ten, at number ten.

Sour Patch Kids are most sought after in New York, Swedish Fish in Georgia, Tootsie Pops and Salt Water Taffy in Tennessee, Lemon Heads in Louisiana while Double Bubble Gum is a hit in Massachusetts. In most places, yours truly is ashamed to love Candy Corn, but apparently I’d call Michigan and Utah home! Click here to find out what’s most popular in your state. Also, if you’re struggling with last-minute costume ideas or trying to avoid looking like everyone else, click here to see which Halloween costumes are most popular in your area. (Props in Cheyenne, Wyoming, where people love to dress up as roller coasters!)

Despite rising costs, many Americans still plan to celebrate Halloween, and it continues to be the most lucrative holiday for retailers, after Christmas. Including costumes, decorations and treats, consumers are expected to spend $10 billion this year, up 5% from last year, according to the National Retail Federation. What do these dynamics tell us about the power of prices and investment opportunities in times of high inflation?

Standout prize

Pricing power is the ability to raise prices in order to maintain or increase margins without impeding demand. Or in other words, in times of inflation, a company’s ability to pass on rising costs to customers and keep them buying. In the case of Halloween, people’s desire to indulge in the festivities is enough to overcome some substantial price increases, indicating that confectionery companies have pricing power during the holiday.

More generally, in an environment of volatile markets, supply chain issues, inflationary and recessionary pressures, sectors and companies with more pricing power generally have an advantage over those with less. “We believe that companies with pricing power have the potential to outperform the broader market in the months ahead,” said Chief Investment Office (CIO) strategist Michelle Laliberte.

To determine pricing power, the CIO focuses on companies with high and stable gross margins, but also considers five macroeconomic factors:

1. Competitive Rivalry:

An industry made up of a small number of firms with a competitive advantage will produce higher pricing power.

2. Supplier Power: In the traditional sense, supplier power relates to the ease with which a firm’s suppliers can raise their prices. Generally, if suppliers offer a unique product that is hard to find elsewhere, they have a better ability to raise prices. In a broader sense, supplier power can be linked to pressure on input costs. For example, in a tight labor market, labor suppliers have more bargaining power, and price increases may be offset by higher wages in labor-intensive industries.

3. purchasing power: The power of the buyer is the reverse of the power of the supplier. If there are only a few buyers and the purchasing power is high, a company must be cautious not to lose them. This effectively reduces the pricing power of a firm.

4. Surrogate Threat: The ability to substitute one product for another is an indicator of the elasticity of demand for a product. Inelastic demand indicates that consumer demand is less sensitive to price. Products that have few substitutes have relatively less elastic demand. Branding can help protect against the threat of substitution, at least partially. Some products have multiple substitutes, but a strong brand image or higher quality product can evoke brand loyalty, making consumers more loyal and pricing power higher.

5. Threat of new market entrants: The term “natural monopoly” is used to describe companies or industries that benefit from an “economic gap”. This means that barriers to entry lead to high start-up costs, which makes it extremely difficult for new competitors to enter. Companies that operate in industries with high barriers to entry tend to enjoy higher pricing power, but there are exceptions. For example, regulations may exist to prevent natural monopolies from price-gouging.

There is no universally accepted or perfect way to quantify these five forces, but they are important to consider in today’s economy, according to Laliberte.

Pricing Power Standouts is a tactical equity theme from the CIO and includes a list of 22-name stocks. To view the list and learn more, please ask your advisor for the report entitled US Equity Tactical Themes: Monthly Updatepublished on October 11, 2022.

Main Contributor: Wendy Mock

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