CAGNY: Cocoa Costs Have Pinched, But Hershey’s Feels Optimistic About Future
The Hershey Co. offered analysts its take on how sky-high cocoa prices have presented challenges to the company but also how it sees the growing trends in snacking as offering a ray of light for the long-term future. CEO Michele Buck said the company’s long-term profit and earnings growth prospects remain strong once cocoa costs normalize.
Consumer sentiment has rebounded in Hershey’s favor, with tailwinds in better-for-you snacking, Gen Z and Millennials’ purchasing power and the growth in the popularity of sweets overall.
Hershey has “really evolved” its portfolio, Buck said, to include not only indulgent snacking, but permissible snacking products as well. On top of that, the explosive growth in the salty snacks category continues to drive the company. Hershey’s salty snacks business grew from $363 million in retail sales in 2017 to $1.4 billion in 2024, heavily driven by the acquisition and expansion of the SkinnyPop and Dot’s Homestyle Pretzels businesses.
The sweets business has grown as well, to a $940 million business, another area Hershey has focused on because consumer demand shows prime opportunity. Meanwhile, the company continues to monitor the evolution of the retail channel, as it has done for decades, today tapping into influencers — going so far as to develop a licensing partnership with basketball Hall of Famer Shaquille O’Neal for a gummy candy using his likeness, and acquiring Sour Strips, a sour candy brand developed and led by a digital influencer.
Hershey continues to try and meet consumer needs. First, delivering superior value for the consumer focuses on the price point of the products (more than 80% of the company’s everyday chocolate items are under $4, Buck noted) and packaging changes that are coming to help shoppers see and understand the value of the product at the point-of-purchase.
The company also has focused on new flavors and experiences — targeting the “sweet and salty” experience for products — and it will continue to elevate healthier snacking and target occasions and special events to build growth in underpenetrated channels.
In the North American Confectionery business, Hershey is aiming to reignite chocolate through greater innovation, increased marketing for variety brands (such as Heath, Almond Joy and Mounds, for example), and continued work perfecting store displays to address consumer needs.
The Sweets business is riding strong momentum toward $1 billion in retail sales, with Shaq-a-licious and Sour Strips expected to help boost this, along with new flavors in Jolly Rancher, and seasonal assortment enhancements such as Reese’s Red Velvet and holiday-shaped Reese’s products.
In the North American Salty Snacks business, RTE popcorn, pretzels and puffs are key to the growth, Buck said. Hershey has a SkinnyPop brand refresh on tap, including new packaging design and the addition of actress Jennifer Aniston as a celebrity brand partner who will appear in advertising soon. Meanwhile, Dot’s “has been a juggernaut,” Buck said, and the company has big flavor innovations ahead, including BBQ, for one.
Internationally, the company will continue leveraging and growing the Reese’s brand, and it is working to strengthen its business in India and Brazil. Buck said Hershey has made no changes to its M&A strategy, and that it will look to acquire on-trend brands or disruptors.
The company has made numerous moves to defend against the high costs of cocoa, and Buck believes Hershey will emerge as a stronger, more efficient and more agile company. The company continues to reimagine its R&D and innovation capabilities through partnerships, and to lean on the technology available to more accurately gauge consumer needs and provide the products when they are needed. Finally, Buck said, if needed, the company has actions prepared to manage persistent cocoa inflation.
