Tootsie Roll sees 'significantly higher' ingredient costs into 2024

By Stephen Nakrosis

Tootsie Roll Industries (TR) experienced higher ingredient costs in 2023, and expects more of the same for 2024.

The confectioner said second quarter and first half 2023 sales contributed to improved net earnings, but added "significantly higher input costs mitigated much of the benefits of these higher sales."

Ellen Gordon, the company's chairman, said second quarter and first half 2023 gross profit margins and net earnings were adversely affected by higher costs for ingredients, among other items. Gordon added input unit costs moved "significantly higher" in 2023, following the expiration of supply agreements and subsequent new deals.

"These higher costs in 2023 are incremental to the significant increase in input costs that we experienced last year in 2022 when compared to 2021. 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," Gordon said.

Gordon also said the company believes costs for ingredients will be even higher in 2024 than in 2023.

Tootsie Roll's supply chain improved in first half 2023 compared to the prior year, Gordon said, adding the company remains focused on it "in order to insure that we avoid delays and disruptions which could result in the temporary shut-down of one or more manufacturing lines resulting in lost sales and profits in 2023."

The labor market isn't as tight in 2023, Gordon said, adding "we continue to experience some labor challenges at some of our manufacturing plant locations." Work shifts and overtime were expanded in the first half of this year to increase production and inventory levels "and insure that we can meet our sales demands in 2023," Gordon said.

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07-25-23 1902ET

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