Hershey Says Opportunity Lies In “Satiating” Salty Snacks

The Hershey Company reported net sales rose 11.1% year-over-year to over $3 billion during Q3 2023, driven largely by seasonal demand and the impact of its new Salty Snacks ERP system. The company has reaffirmed its full-year guidance after results surpassed analysts’ expectations.

Here’s a brief overview of the numbers:

• Organic, constant currency net sales increased 10.7%, driven primarily by price realization.
• Volumes increased slightly (+0.9%), while prices increased 9.8%
• Gross margin gained over 4 points y/y, rising to 44.9% in the quarter.
• Reported net income rose 29.9% to $518.6 million, or $2.52 per share-diluted.

The company’s Salty Snacks segment (composed of Dot’s Pretzels, Skinny Pop, Pirate’s Booty and more) generated $345.2 million in sales – a 25.5% increase – driven by volume growth (+22.2%) and price realization.

The segment’s sales growth in MULO plus-convenience retail was flat, with SkinnyPop’s takeaway dropping 3.9% due to slowdown in popcorn consumption. However, Dot’s Homestyle Pretzels saw an increase of 17.6%, resulting in a 160 basis point share gain in the. Hershey purchased Dot’s (which included the company’s four pretzel seasoning facilities) as well as its copacker, Pretzels Inc., for $1.2 billion in 2021.

According to Hershey president and CEO Michele Buck, pretzels and other “satiating” snacks like meat sticks and tortilla chips are expected to capture consumer demand better than aerated snacks such as rice cakes and popcorn.

“We know that affordability and value are of increasing importance to consumers. We’re also seeing them prioritize some of the more satiating snacks,” Buck told investors during this morning’s earnings call. “So as we look at our business, we’re seeing a lot of strength in pretzels in the category as well as our Dot’s distribution opportunities.”

Hershey is seeking to capitalize on growth in the sweet segment through higher levels of innovation, with Buck highlighting the new Reese’s Caramel product. The brand is also building “aggressive displays” with its Halloween candy in an effort to combat softness in the season driven by consumer concern over affordability.

“Some of the capacity that came online this year has been helpful to us relative to the seasons and better being able to take full advantage in that area that will be a benefit next year,” she said.

Elsewhere, the company’s international segment reported a $31.7 million profit in Q3, reflecting a $3.7 million decrease from the year prior as sales growth and margin expansion were offset by higher brand and capability investments.

Looking ahead, Hershey projects full-year net sales growth of approximately 8% and reported earnings per share growth of 13% to 15%. According to Buck, the company will focus on making its products more accessible to consumers nationwide, with no future price hikes planned.

“We’ve heard from consumers that they’re having to make difficult choices. We are focused on that and making sure we’re really focused on our value equation in terms of selling channels and having the right opening price points,” she told investors during today’s call. “We’re focused on where the growth levers are that can continue to drive and engage consumers.”