Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Hershey Co (HSY, Financial) has a diversified portfolio of resilient brands in growing categories, which provides a strong foundation for success.
- The chocolate category has shown consistent growth, with a 4% CAGR since 2009, indicating its resilience and relevance to consumers.
- Reese's Caramel is the number one innovation in the category this year, and Reese's Lava is outperforming expectations, showcasing successful product innovation.
- The company has seen strong momentum in its sweets portfolio, with significant share gains in recent months.
- The Hershey Co (HSY) is taking strategic actions to improve market share and drive growth, including new leadership in the US confection business and targeted investments in international markets.
Negative Points
- The company faced historically high cocoa prices, impacting financial results and contributing to a challenging operating environment.
- There was increased competition in the confectionery segment, leading to market share losses to smaller players and private labels.
- Executional issues in promotional programming and supply chain changes led to underperformance in certain segments.
- Retailer inventory management efforts and seasonal shipment delays negatively impacted sales volumes.
- The company revised its sales growth outlook to be approximately flat for the year, down from a prior guidance of 2% growth, reflecting ongoing consumer and competitive pressures.
Q & A Highlights
Q: Can you elaborate on the impact of high cocoa prices on Hershey's financial performance and future outlook?
A: Michele Buck, Chairman and CEO, explained that historically high cocoa prices have significantly impacted earnings, contributing to a reduction in the company's sales growth outlook for 2024. Despite expectations of a global supply surplus in 2025, cocoa prices remain high, affecting cost structures. The company anticipates continued pressure from cocoa costs into 2025, although they have flexible hedging structures to manage potential cost normalization.
Q: How is Hershey addressing the challenges in the North America confectionery segment?
A: Michele Buck highlighted that Hershey is focusing on reigniting chocolate for instant consumables by expanding their gold standard planogram and optimizing promotional strategies. They are also redeploying trade and media investments to support variety brands with strong velocities. Additionally, Hershey is accelerating its sweets portfolio with new innovations and flavors to drive growth.
Q: What are the key factors contributing to the decline in the North America Salty Snacks segment?
A: Steven Voskuil, CFO, noted that the decline was primarily due to lapping the planned inventory build from the previous year and retailer inventory reductions. However, the base business showed low single-digit growth, driven by strong performance from Dots Pretzels. The company expects Skinnypop to return to growth in Q4, supported by increased media and merchandising efforts.
Q: How is Hershey planning to enhance its international market performance?
A: Michele Buck stated that Hershey is investing in growth markets like Mexico, Latam, the UK, and Australia by accelerating the growth of power brands such as Hershey's, Pelon, and Kisses. They are optimizing their go-to-market strategies and focusing on global innovation to engage more consumers in key growth markets like India.
Q: What measures is Hershey taking to ensure long-term sustainable growth?
A: Michele Buck emphasized that Hershey is transforming its business by evolving its marketing organization, integrating supply chains, and advancing capabilities in data science and technology. These efforts aim to drive efficient growth and better address evolving consumer needs. The company is also focused on controlling variables within their control to improve market shares across their business segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
