Hershey Q1: Salty Snack Brands Outpace the Category, Confectionery Price Hikes to Come
The Hershey Company set a positive tone for 2023, raising its full year financial outlook after outperforming expectations in its Q1 earnings report today.
According to the company, consolidated net sales were up just over 12% in Q1 to $2.9 billion (organic net sales grew 12.2%) while reported net income increased 10.9% to $587.2 million.
The company said it now anticipates 8% net sales growth in 2023, while reported earnings per share are projected to improve 15%.
“We had a great start to the year as our increased investments in the business and strong execution delivered resilient consumer demand and drove double digit sales and earnings growth in the quarter,” said president and CEO Michele Buck in a statement. “As we look to the balance of the year, we remain confident in our ability to deliver our financial goals and continue executing against our key commercial, supply chain and operational strategies to sustain our momentum into 2024 and beyond.”
Sales of Hershey’s North America Confectionery division were up 10.6% in the quarter, around $2.4 billion, with its candy, mint and gum retail sales increasing 12.3% across channels. Its North America Salty Snacks division grew 19.4% to $270 million, with growth outpacing the category as SkinnyPop and Dot’s Homestyle Pretzels both increased their market share.
In Q1, selling, marketing and administrative expenses increased 10.9% fueled by higher levels of media and capability investments. Advertising and related consumer marketing expenses were up 8.8%.
Speaking to investors and analysts on an earnings call this morning, Melissa Poole, VP of Investor Relations at Hershey, noted the recent acquisition of two production plants is expected to provide the company with “sufficient capacity” to support growth for the coming years. Poole noted that the company will continue to invest in its emerging Salty Snacks division, highlighting the strong performance of SkinnyPop as an opportunity for continued growth.
During its AnalystDay event, Hershey announced a plan to implement a high-single-digit price increase on about half of its confectionery portfolio at the end of May. On the call today, Buck said the company has “protection in place” for promotions and programming throughout the end of the year and is continuing to work with retailers on the rollout of the price hike, which she said will lead to a more “high level” impact on earnings in 2024.
Poole added later in the call that Hershey will continue to focus on driving sell-through as price hikes take effect.
“We always partner very closely with our retail customers to try and do what we believe is best to meet consumer demand and also to drive category growth, which is good for both of us,” Poole said. “So we continue to have very collaborative discussions with our retailers relative to our pricing implementations, which also includes a lot of discussion about with the right plans to have business reinvestment that will enable the support of very strong unit conversion.”
