Pop Quiz: How much will Americans spend on Halloween this year?
A.) $5.2 billion
B.) $9.4 billion
C.) $10.9 billion
D.) $13.1 billion.

According to the National Retail Federation, the answer is D. For perspective, that’s about $1.5 billion (12.9%) more than last year. By category, costumes get the most of our money, followed by candy, decorations, pumpkins and other miscellaneous items.

Besieged by inflation, consumers could be forgiven for cutting back this year. After all, you don’t get much use out of a giant inflatable witch cauldron any other day of the year. So retailers must be heartened by the solid double-digit projected spending increase, particularly with Black Friday just a few short weeks away.

For “research” purposes, I browsed Wal-Mart’s (NYSE: WMT) seasonal aisle yesterday and wasn’t too surprised to see large bags of assorted sweets selling for $20 to $25. That seems a bit pricier than last year. But data from Nielsen IQ shows that candy prices have generally climbed about 10%-12% over the past 12 months.

Alternately, some producers are holding the line on pricing but slimming down portion sizes. Maybe that 3-ounce chunk of caramel and nougat is now 2.2 ounces and made of cheaper fillers. Like a plague of zombies, the dreaded “shrinkflation” epidemic has been hard to contain.

Fortunately, consumers have a huge array of choices. That wasn’t always the case. Prior to World War II, there were relatively few mass-produced confections. Fewer still were individually packaged. Instead, revelers commonly received apples, nuts and even pennies. If you’ve seen It’s The Great Pumpkin Charlie Brown (a tradition in our house), then you know poor old Chuck got nothing but rocks.

These days, the discussion of favorite Halloween candy is the source of endless debate. One study from Food & Wine determined Reese’s peanut butter cups to be the clear No. 1, edging out M&Ms, Kit Kat and Snickers. Another poll had Butterfinger, Baby Ruth, and Skittles at the top.

There are large regional differences. Generational too. Junior Mints remain popular among the over-50 crowd… not so much with the kids. But I think we can all agree that pink starburst is the best.

Personal preferences aside, chocolate-based goodies will likely be a smaller part of the mix this year. Unless you’re a commodities investor, you might not realize that raw cocoa prices skyrocketed 178% in 2024, on the heels of a 61% surge the year before.

The cocoa futures market has cooled quite a bit recently, with prices retreating from a record peak near $13,000 per metric ton back down towards $8,000. But that’s still double the historical norm. And the decline hasn’t been baked into retail prices yet. Manufacturers are still whittling down older (and more expensive) inventory stockpiles.

These elevated prices could stick around a while.

Climate change is the primary culprit, with flooding monsoons, searing droughts and other extreme weather patterns ravaging harvests. Farms across Ghana and the Ivory Coast (which combined account for 60% of the world’s supply) have also been plagued by pestilences such as fungal rot, Black Pod Disease and Swollen Shoot Virus that have devastated crops.

The International Cocoa Organization reports that global deliveries shrank 13% last growing season to 4.3 million metric tons, creating the largest deficit in half a century — hence the record prices. But the shortfall appears to be easing due to improved weather, new plantings and expanding output in Ecuador.

Still, this situation has already affected consumer behavior (like fewer impulse purchases in the checkout aisle), taking a bite out of global demand. Just this week, Candy Warehouse.com filed for bankruptcy protection. The Texas-based online retailer had been reporting a steep 20% decline in sales this year.

But don’t let that scare you away from this space entirely. Hershey (NYSE: HSY) has navigated these challenging environments before and has the pricing power to push through rising input costs and maintain lofty margins. It helps to own a stable of 90 iconic, well-loved brands that have fueled 16 straight years of steady dividend hikes..

The innovative company (whose portfolio also includes salty snacks like Dot’s Pretzels) is currently grappling with rising manufacturing costs and disruptive tariffs. Both are weighing on earnings. My colleague Jim Pearce touched on a few of these issues recently. But on the positive side, sales volume rose more than 20% last quarter, so Hershey continues to connect with customers and consolidate market share.

Trading well off its 2023 peaks, HSY is looking sweeter following a rare double upgrade and target boost from Goldman Sachs last month.