Chocolate and salty snacks show that Hershey can weather any recession.
Shoppers will still splurge on chocolate and salty foods, according to Hershey Co. officials, despite the fact that inflation has negatively impacted American grocery budgets. The company that makes Reese’s and Skinny Pop intends to increase advertising in the upcoming year as a result.
“In pre-recorded remarks released ahead of a Feb. 2 earnings call with securities analysts, our largest categories, chocolate and salty snacks, rank as two of the top three resilient treats that consumers are not willing to forgo,” stated Michele G. Buck, Chairman and Chief Executive Officer. “Chocolate moments are so deeply ingrained in consumers’ weekly routines—from stress reduction to self-care to rewarding moments—that they suggest they would prefer to spend less on other things to make place for them.
A double-digit increase in advertising spend is slated for this year, with nearly half of the increase dedicated to Reese’s, Hershey’s and seasonal products.
“Key white space growth opportunities including gummies and better-for-you will also receive greater levels of support this year,” Ms. Buck said. “Salty snacks will see a meaningful increase in investment this year as we look to deepen consumer engagement and build brand equity for these fast-growing brands. Over the past three years, retail sales for Skinny Pop, Pirate’s Booty and Dot’s have more than doubled.”
The recent fiscal year represented one of the strongest in the company’s history, despite record inflation, supply chain disruptions and economic volatility, Ms. Buck noted.
“We achieved a milestone in 2022, exceeding $10 billion of net sales, led by double-digit organic sales growth across our segments and the addition of more great tasting snacks to our portfolio,” she said. “While high inflation contributed to our sales growth, we were also able to grow volume, a testament to our brands and execution in a volatile market.”
For the fiscal year that concluded on December 31, 2022, the Hershey Co.’s net income was $1.6 billion, or $8.22 per share on the common stock. This represents an increase of 12% over the previous year’s $1.5 billion, or $7.34 per share.
Over the course of the year, net sales rose 16% to $10.4 billion from $9 billion in the previous year.
Foreign currency exchange caused a 0.2-point headwind to net sales, which was somewhat offset by the 4.3-point advantage from the acquisitions of Dot’s Pretzels and Pretzels, Inc.
“Our salty snacks segment now represents approximately 10% of company net sales with the addition of Dot’s Pretzels and Pretzels Inc. to the portfolio,” Ms. Buck stated. “The year’s organic growth was 18.7%, with volume growth accounting for nearly half of the gain as our brands reached more households and were promoted during more consumer occasions.”
Despite capacity limitations, Reese’s retail sales increased 10.5% year over year, recording its second consecutive year of double-digit growth.
Net income for the fourth quarter increased by 18% to $396 million, or $1.98 per share, from $335.6 million, or $1.67, in the same time last year.
From $2.3 billion to $2.7 billion in net sales a year earlier, a 14% increase was made.
“We anticipate sustained growth in net sales this year, with reported net sales expected to grow 6% to 8%,” stated senior vice president and chief financial officer Steven E. Voskuil in remarks that were pre-recorded. With volumes predicted to be flat to slightly lower for the year due to higher levels of advertising and additional capacity offsetting price elasticities, price is expected to be the biggest driver of growth.
This year’s capital expenditure is expected to range from $800 million to $900 million, with the majority of the investment going toward expanding core capacity. Three new projects were announced by the corporation last year: a line expansion at the Robinson, Illinois plant, a chocolate production plant, and a plant in Hershey.
“These projects, which are anticipated to be operational in 2024, will expand our capacity of Reese’s, Hershey’s, and Mounds/Almond Joy,” stated Mr. Voskuil.
During the results call, Ms. Buck stated that innovation is still a top focus for the whole Hershey’s portfolio, including the recent introductions of limited-edition Reese’s Creamy Cups and Reese’s Crunchy Cups, as well as Reese’s Big Cup Stuffed with Reese’s Puffs Cereal. Milkilicious, a recent addition to Hershey’s Kisses, contains a milk chocolate filling. Additionally, Dot’s Pretzels just released a cinnamon sugar product.
In addition, Ms. Buck stated, “We really don’t want to stray away from a primary focus on our core, even though innovation is important and we will support innovation across the board for news and excitement.” “Our long-standing, sustainable brands are well-known in the market. Customers adore them. They will always have faster velocities than innovation. Therefore, the first task across our whole portfolio is to drive our core, and the second is to use new innovation for news and excitement.