The Hershey Company ((HSY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The Hershey Company’s recent earnings call painted a mixed picture of the company’s current position and future outlook. While there were positive developments, particularly in international markets and innovation within the sweets segment, significant challenges such as cocoa pricing, gross margin pressure, and competitive pressures in international markets were also highlighted. The overall sentiment of the call was cautious, with a focus on managing commodity risks and maintaining market share.
Strong Performance in International Markets
The Hershey Company reported a robust performance in its international segment during the fourth quarter, driven by broad-based strengths across various markets. The company benefited from favorable laps and a successful Black Friday, which helped bolster results in these regions.
Improvement in Elasticity Performance
Elasticities are showing signs of improvement, either meeting or slightly exceeding expectations. This is a positive indicator for Hershey’s pricing strategies, suggesting better-than-anticipated consumer responsiveness to price changes.
Sweets Portfolio Innovation
The company has made significant strides in its sweets portfolio with the launch of products like Shaq-a-licious Gummies and Jolly Rancher innovations. Additionally, the acquisition of Sour Strips is expected to further drive growth in this segment, showcasing Hershey’s commitment to innovation.
Strategic Pricing and Hedging
In response to cocoa price volatility, Hershey has employed strategic pricing and hedging practices. These include leveraging options beyond traditional exchange mechanisms to secure more favorable pricing, highlighting the company’s proactive approach to managing commodity risks.
Challenges in Cocoa Price Management
Cocoa prices remain a significant challenge for Hershey, with elevated levels and uncertainty about future pricing. The company is taking steps to prepare for potential impacts in 2026, emphasizing the need for strategic planning.
Pressure in Convenience Store Channel
Hershey continues to face pressures in the convenience store channel, impacting everyday chocolate sales and contributing to market share declines. This sector remains a challenging area for the company.
Gross Margin Pressure
The company anticipates gross margin pressure due to higher cocoa costs, particularly in the second half of the year. This is a key area of concern, as it will impact profitability.
Increased Competitive Activity in International Markets
Hershey is experiencing heightened competitive activity in international markets, especially in Brazil and Mexico. This poses challenges for maintaining growth and signals the need for strategic responses to these competitive pressures.
Guidance
Looking forward, Hershey provided guidance on future growth strategies, focusing on managing cocoa prices and achieving balanced growth by 2026. Key levers include pricing adjustments, productivity initiatives, and efficiency improvements in SG&A. The company expects elasticity to align with historical levels and anticipates low single-digit revenue growth in 2025, influenced by factors such as a late Easter and fewer shipping days. Hershey remains vigilant about the competitive landscape, focusing on innovation in its non-chocolate portfolio to drive growth.
In summary, The Hershey Company’s earnings call reflected a cautious sentiment with a mix of positive developments and significant challenges. While international markets and innovation in the sweets segment offer growth opportunities, cocoa pricing, gross margin pressures, and competitive activities remain areas of concern. The company’s forward-looking strategies aim to navigate these challenges effectively, with an emphasis on strategic pricing and innovation.
