Tootsie Roll Industries: Navigating Higher Ingredient Costs

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Higher Costs Forecasted for 2024

Tootsie Roll Industries, a renowned confectionery company, faced increased ingredient costs in 2023, and they are bracing for more of the same in the coming year.

Impact on Financials

While the second quarter and first half of 2023 showed promising sales, the company’s net earnings were hampered by “significantly higher input costs,” according to Ellen Gordon, Chairman of Tootsie Roll Industries. Gross profit margins and net earnings for the same period were adversely affected by various factors, including the rising costs of ingredients. Gordon attributed the increase in input unit costs to the expiration of supply agreements and the subsequent establishment of new deals.

Notably, Gordon highlighted that the elevated costs witnessed in 2023 were additional to the significant increase in input costs experienced in 2022 compared to 2021. She stressed that the escalation in ingredient and packaging material costs from 2021 until now is unrivaled in decades.

Looking Ahead

Tootsie Roll Industries expects ingredient costs to be even higher in 2024 compared to the current year.

Despite these challenges, the company managed to improve its supply chain in the first half of 2023 as compared to the prior year. Gordon emphasized that continued focus on the supply chain is critical to avoid delays and disruptions that could potentially lead to temporary shutdowns of manufacturing lines, resulting in lost sales and profits.

Labor Challenges

While the labor market has shown some flexibility in 2023, Tootsie Roll Industries continues to face labor challenges at some of its manufacturing plant locations. To address this, the company expanded work shifts and overtime during the first half of this year to boost production and inventory levels, ensuring they can satisfactorily meet sales demands.

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