Hershey (HSY) 1 Aug 24 2024 Q2 Earnings call transcript

In The Hershey Company's second quarter 2024 earnings call, executives discussed the company's performance, strategic initiatives, and the impact of cocoa costs on their operations. Here are some key takeaways from the call.

Financial Performance and Strategic Priorities

The Hershey Company reported a mixed performance in the second quarter, with revenue growth partially offset by challenges in North American confectionery, including lower retail inventory and the impact of Halloween shifting to the third quarter. Despite these challenges, management expressed confidence in the company's long-term outlook, citing strong innovation and strategic initiatives to drive growth.

One of the key strategic priorities is the expansion into salty snacks, with a focus on brands like Dot's and SkinnyPop. Michele Buck, the CEO, highlighted the company's ability to leverage its core capabilities in snacking and adapt to consumer preferences. The company also announced a pricing increase to cover some of the inflationary pressures, particularly related to cocoa costs.

Cocoa Costs and Pricing Strategies

Cocoa costs have been a significant challenge for The Hershey Company, with current prices unsustainable according to management. To address this, the company announced a pricing increase of 6-7 points for North American confectionery, with a focus on maintaining value for consumers and minimizing elasticity. The pricing strategy is part of a broader approach to managing inflationary pressures, which also includes productivity improvements, cost savings, and innovation.

Market Share and Competitive Landscape

In the context of shifting consumer preferences and competition, Michele Buck addressed questions about market share trends in core chocolate. She highlighted the category's growth and the company's focus on innovation, particularly in the salty snacks segment, to drive share growth. Despite challenges in the C-store channel, The Hershey Company is optimistic about its positioning in key retailers and the upcoming launch of new products, such as the Shaq partnership and Reese's innovations.

Innovation and Growth Opportunities

The Hershey Company is investing in innovation to drive growth, particularly in the salty snacks segment. The launch of new forms for the Shaq partnership and continued innovation for Reese's are expected to contribute to the company's back half performance. Additionally, the company is focusing on digital capabilities and workforce planning to enhance its commercial capabilities and optimize its supply chain.

Looking Ahead

The Hershey Company's earnings call highlighted the challenges and opportunities facing the company in the context of cocoa costs, competitive pressures, and shifting consumer preferences. Management remains confident in the company's strategic initiatives and ability to navigate these challenges, with a focus on innovation, cost savings, and strategic partnerships. As the company moves into the second half of 2024, investors and stakeholders will be watching closely for signs of progress in these areas and the impact on The Hershey Company's financial performance.