HERSHEY, PA. — As the chocolate realm prepares for record-high cocoa prices in 2025, The Hershey Company is proactively mapping out strategies to shield its operations from the inevitable ups and downs of commodity costs.
Strategic Adjustments in Response to Cocoa Prices
Michele Buck, the company’s CEO and chairman, sees this moment as a key turning point for Hershey.
She recognizes the imminent strain on earnings brought about by rising cocoa prices, viewing these challenges as likely temporary.
Hershey’s dedicated teams are ready to act quickly, exploring various measures such as adjustments in pricing, modifications to product packaging and formulations, and targeted investments to navigate the shifting commodity landscape.
To further bolster its position, Hershey is refining its sourcing and hedging practices.
This includes a keen focus on diversifying supply chains and origins, alongside ongoing investments in cocoa science initiatives.
Buck emphasized how the capabilities of their R&D team enhance their ability to achieve cost efficiencies, ensuring that the beloved quality and flavor of their products remain intact.
Financial Performance and Market Outlook
Steve Voskuil, senior vice president and CFO, expressed a bright outlook on managing costs, particularly regarding cocoa, which is presently at inflated prices compared to past years.
He pointed out that Hershey’s coverage strategy effectively mitigates risks while enabling the company to reap benefits should cocoa prices fall.
Despite these hurdles, Hershey’s operational perspective remains upbeat.
The company has not encountered any issues with global cocoa supplies, reporting improvements in arrivals from major producing nations up around 30% from the previous year.
Additionally, nearly half of the cocoa supply from other regions is experiencing a growth rate of 10% year-on-year.
Hershey has already secured much of its cocoa butter, liquor, and powder needs for the coming year.
However, projections for Hershey’s adjusted gross profit margin in 2025 paint a challenging picture, with expectations of a decline between 650 and 700 basis points, driven by high cocoa, sugar, and labor costs, as well as potential tariffs.
Sales growth for 2025 is estimated at a minimum of 2%, yet analysts anticipate a significant drop in earnings per share—forecasted to decline by around 40%, with adjusted figures hovering in the mid-30% range, estimated between $5.54 and $5.86 per share.
Positive Trends and Future Plans
On a more encouraging note, Hershey wrapped up the previous year on a strong note.
The fourth quarter showcased particularly robust sales, especially in its North America Confectionery and Salty Snacks divisions.
Total net sales reached $2.88 billion, marking an 8.7% increase from the same quarter the previous year.
The net income climbed sharply to $796.6 million, translating to $3.92 per share—a remarkable 131% uptick compared to the prior year.
Adjusted earnings per share also saw a 33% rise, landing at $2.69.
The Confectionery segment, which includes fan-favorites like Reese’s, Jolly Rancher, and KitKat—as well as the newly acquired Sour Strips—reported net sales of $2.35 billion, representing a 6% year-over-year increase.
The income from this segment rose by 11.5% to $808.2 million.
During the earnings call, Buck highlighted the positive impact of Halloween and holiday sales on overall quarterly performance.
Items like Reese’s Caramel and Lava Big Cup performed exceptionally well in retail.
Notably, a sizable portion of the sales growth stemmed from club, dollar, and e-commerce channels.
Hershey’s Salty Snacks division also exceeded expectations, reporting net sales of $278.9 million—an impressive 36% increase year-on-year, with segment income soaring by an astonishing 424% compared to the previous year.
Looking toward the future, Hershey’s full-year results for 2024 reported net sales of $11.2 billion, reflecting a modest increase of 0.3%.
Net income reached $2.22 billion, or $10.92 per share, a noteworthy 21% rise from the year before.
However, adjusted earnings per share did see a slight decrease of 2.3% compared to 2023.
An analyst inquired about Hershey’s response to shifts in consumer buying patterns, especially with the advent of GLP-1 weight-loss medications.
Buck reassured stakeholders that the company is diligently analyzing both internal and external data, confirming that consumers using these medications have not significantly reduced their consumption of Hershey products.
She recognized a larger trend towards healthier choices among consumers, reiterating Hershey’s commitment to evolving its portfolio in response to these changing preferences.
As a testament to her commitment during this transformative time, Buck announced her retirement for June 2026.
She is focused on achieving the company’s 2025 objectives and aims to ensure a smooth leadership transition while guiding Hershey towards its future growth trajectory.
Her dedication to spearheading significant initiatives aims to enhance the company’s position for greater success down the road.
Source: Foodbusinessnews