Hershey records strong North American performance, elevating first quarter results

Hershey brand Reese's is expected to play another key role at it's Sweets & Snacks Expo appearance next month, as it releases a new Olympic Games Medals series. Pic; Neill Barston

An encouraging uplift in first quarter results was recorded by the US Hershey group, achieving net sales of $3.2 billion, up 8.9% year-on-year, as the business prepares for this year’s Sweets & Snacks Expo starting next week, writes Neill Barston.

Confectionery Production has offered an exclusive video preview of this year’s show, running between 14-16 May, in Indianapolis, Indiana, with the company anticipated to deliver a full range of new products across its chocolate and snacks portfolio.

Michele Buck, president and CEO, asserted that the company was ‘off to a strong start’ for the year, as it posted net income for the first quarter of 2024 totalling $797.5 million, up 36% year-on-year, with both is domestic US and international interests registering an upturn in performance.

This comes despite ongoing pressure on the sector in terms of major spikes in ingredients costs, including sugar and cocoa, that have placed pressure on the sector, resulting in consumers feeling the pinch with inflated prices that have impacted on premium segments of the market in particular.

Improved performance
According to the company’s latest results, its US division saw net sales were $2,707.3 million in the first quarter of 2024, an increase of 10.4% versus the same period last year, which was attributed to enhanced resource planning measures. Consequently, it reported that its sales grew low single digits, in line with expectations.

Notably, its US candy, mint and gum (CMG) retail takeaway in the multi-outlet plus convenience store channels (MULO+C) increased 1.1% for the 12-week period ended April 14, 2024. This 12-week period includes the full Easter season in both the current and year ago periods.

Furthermore, the company noted that its North America Confectionery segment reported segment income of $948.2 million in the first quarter of 2024, an increase of 6.8% versus the prior year period, resulting in a segment margin of 35.0% in the quarter. Segment income gains were driven by higher sales, while margin declines were driven by increased commodity costs outpacing price realisation and productivity.

Meanwhile, its  North America Salty Snacks segment net sales were $275.1 million in quarter one, an increase of 1.9% versus the same period last year driven primarily by price increases in the face of rising production costs. However, its US salty snack retail takeaway for the 12-week period ended March 31, 2024 in MULO+C declined 4.1% versus the prior year period.

This included its SkinnyPop ready-to-eat popcorn takeaway recording an 11% drop, reflecting continued category softness, though Dot’s Homestyle Pretzels retail sales increased 11.9% in the quarter.  Overall, its North America Salty Snacks segment income was $38.7 million in the first quarter of 2024, a decrease of 17.3% versus the first quarter of 2023, resulting in a segment margin of 14.1%, a decrease of 320 basis points versus the prior year period. As the company acknowledged, declines were driven by increased supply chain costs and higher levels of advertising.

International turbulence
While the firm’s US business appeared to register notable growth, the picture for its international operations was mixed, registering a 1.8% first quarter sales gain, achieving revenues of $270.3 million, though profits of $42.8m were down year-on-year by $12.2, impacted by higher commodity costs and increased brand investment.

Organic, constant currency net sales decreased 1.3% as accelerated shipments related to the Company’s April resource planning strategy and growth in Europe and Latin America were offset by declines in Mexico related to the discontinuation of its dairy beverage product line in 2023.

Michele Buck, president and CEO, commented: “We are off to a strong start and remain on track to deliver our business strategies and financial commitments for the year,” said Michele Buck, The Hershey Company President and Chief Executive Officer. “Our investments in innovation, marketing and in-store execution are driving consumer engagement and improving market share performance across segments. We are successfully operating in our new ERP system, a major milestone towards achieving our previously announced agility and efficiency targets. As we continue to navigate recent volatility in the business, we remain committed to strategies that drive long-term growth and sustainable value creation.”

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