Hershey achieves annual sales boost, amid ongoing cocoa market challenges
The Hershey stand at Sweets & Snacks Expo 2023 in Chicago. Pic: Neill Barston
The Hershey Company has released its fourth quarter and full-year results for 2023, revealing net sales of $11.16 billion, up by 7.2%, as the company acknowledged fast-rising global cocoa prices would impact growth rates, writes Neill Barston.
Pressures on the markets in terms of higher core ingredients costs, which include a significant upward shift in sugar prices, and ongoing supply chain issues globally, were reflected in the US-headquartered firm’s performance in the final segment of the year.
Net income for the business in 2023 stood at $1.86 billion at the end of December last year, up from $1.6 billion at the close of the previous year.
Its fourth quarter results showed a 0.2% sales increase to $2.65 billion, with operating profits decreasing by $464 million (11.8% year-on-year), though the business stating that pricing adjustments had compensated for higher operating costs for its international activities.
Furthermore, the company said that it was implementing efforts to increase agility, enhance automation, and support a more efficient operating model to deliver its long-term business and financial goals.
As it noted, these initiatives are expected to generate on-going supply chain, manufacturing, and operating expense savings, net of reinvestment, of $300 million by 2026, of which $100 million is expected to be realised in 2024.
In terms of regional breakdowns, for North America, its fourth-quarter sales stood at $2.2 billion, up 2.2% year-on-year, with its mint and gum markets performing well within outlets (up 3.6% in sales), with a regional income of $724 million, up 3% year-on-year, driven by net sales growth and gross margin expansion.
The salty snacks division, including popcorn was affected by a 24% decrease in sales to $205 million for the quarter, following a period of reduced advertising and merchandising for the segment. Notably, the wider confectionery market has seen considerable emphasis on confectionery options offering health and wellbeing credentials, as well as lower sugar alternatives.
Meanwhile, in the fourth quarter internationally, Hershey’s sales increased 12.7% over the previous period last year, to $231 million in sales. The volume improvement reflects double-digit growth in Latin America, World Travel Retail, and Europe, and high-single-digit growth in India.
“We continue to operate in a dynamic environment, but we are encouraged by the resilience of seasonal traditions and the consumer response to innovation within our categories,” said Michele Buck, The Hershey Company President and Chief Executive Officer.
“While historic cocoa prices are expected to limit earnings growth this year, we believe our strong marketing plans, innovation and brand investments will drive top-line growth and meet consumers’ evolving needs. We are elevating our focus on productivity and transformation to strengthen our business and deliver peer leading performance over the long-term.”
In its outlook, the company said it has projected net sales growth of 2% to 3%, driven primarily by further product pricing adjustments, and reported earnings per share to be relatively flat as higher cocoa and sugar costs play their part in the financial performance of the business.