Candy Aisles Prices Illustrate Widening Income Inequality

October 30th 2015

Alex Mierjeski

The growing income gap between low, middle, and high-income households in the U.S. is melting profits for one of America's top chocolate and candy manufacturers, and it's highlighting a deeper truth about income inequality in America.

Hershey's Company, which makes staple confections like Reese's products, Hershey's Kisses, Kit Kat bars, and their namesake chocolate bars, reported lower sales this week and cut profit forecasts, the Huffington Post reported. The company said in an investor call that "consumer bifurcation has been an important driver" in sales dips recently, meaning that there are increasingly only two kinds of consumers: those who can buy high-end sweets and those who can only afford the bargain bin.

Pile of candy bars

The brands that depend on the middle class are struggling.

As Huffpo notes, Hershey's—a longtime middle-class sweets stalwart—makes for a telling indicator of the state of widening income inequality if consumers are either opting for higher or lower-priced items. The company also said that declines in sales were driven by how their goods are peddled at retailers nationwide, with stores like Wal-Mart allocating less space for Hershey's and other similar products as a response to consumers shopping less

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Income inequality is a potential driver for much more than just chocolate—especially in the retail arena. Low cost stores like Dollar Tree reported booming sales this year, and higher-end stores like Nordstrom have also recently reported spikes in profits and sales. At the same time, retailers targeting middle-class consumers, such as Target, J.C. Penny, and Gap have struggled to keep pace, according to recent research on the income gap and the retail sector by the Center for American Progress

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Thirty percent of U.S. income in 2013 when to the top one percent.

None of this should be surprising. The most recent Federal Reserve data on family income in the U.S. showed income inequality widening between 2010 and 2013. The data revealed that about 30 percent of U.S. income in 2013 went to the top one percent of earners and about 53 percent went to the bottom 90 percent of earners. Excluding the top ten percent, average median incomes dropped. 

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