Got "Milk"? Regualtions, Climate, Tariffs & Chocolate

When I was a corporate attorney in the mid-aughts, one of the cases I worked on had some fascinating ancillary information: Hershey's bars sold in Europe had a different label. Why? In the US it said "Milk Chocolate" under Hershey's. It qualified as neither milk nor chocolate under the labeling/food regulations in Europe. It was mostly wax. Don't believe me? Think about how much Hershey squares don't melt when eating a s'more.

That was a legacy choice for Hershey to make chocolate affordable and a profit. They opted for lower quality ingredients than Cadbury and the regulations in the US let them get away with it - well that sounds like they did something wrong and the US turned a blind eye, but that's not the case. The US regulations are less stringent than Europe's in many, many areas. Which is part of the reason there is a trade deficit with some of those countries: our quality is too low for their standards. I digress...

But where does business continuity come in? News I read last week about Halloween candy.

Climate change created shortages and tariffs made importing cocoa butter very expensive for companies like Hershey's and impact their ability to continue making affordable products. The decreased or inability to access a main component of your product will force you to find another source or find an alternative that should be similar enough to the original so customers won't be upset or notice. There are multiple solutions to these problems that the candy industry on the whole has tried. The first few tackle maintaining product integrity.

Tweaks like smaller packaging have been used for years. If the candy is chocolate-coated instead of made of chocolate, they have thinned out the layer of the coating. They've used smaller chocolate chips in cookies. These things escape most people's attention. The more "invasive" changes alter the recipe and also hit up against regulations.

For some candy bars with the chocolate coating, they will not only thin out the coating but also put a layer of another product underneath it. There is also a huge boon for the food research industry as the chocolate makers are having to do reformulations (read: recipe substitutions or changes). Over the years there has been less sugar used, but in order to compensate for less cocoa butter, the sugar content is ticking up again. Naturally, as the ingredients change, so does the ability to meet the even-lower US standards for food labeling, hence Hershey's removing "milk chocolate" from Rolos, Almond Joy, and Mr. Goodbar. Hershey's is not on my hit list, but the other makers (Mars) only have one change (to Snickers years ago) or didn't confirm their change (Nestle), just the fact that reformulations saved their stockholders $500M dollars.

My favorite part of all of this? There is a company - Cargill - that sells ingredients. They noticed the interest over the years for a cocoa butter alternative and have invested millions in research to achieve that end. They aren't treating the cocoa butter shortage as temporary: they are ahead of the curve in creating a new product that will satisfy the like/kind alternative.

So, to review: having a manufacturing issue with a core component? Find alternatives that don't alter your product too much. Make small tweaks until a suitable alternative comes along. Make sure your changes are updated on labels. Be ahead of the curve.

You could also decide to release a high-end version of your product that tracks with the original component but at a higher price point. Right now Hershey's wants to keep the "milk chocolate"on their US-sold bars...you know, the ones that didn't qualify as "milk chocolate" in Europe for the last 20+ years.