Hershey approaches White House for exemption on US tariffs
The Hershey stand at this year's Sweets & Snacks Expo. Pic: Neill Barston
The Hershey group has reportedly appealed directly to the White House in the US to be made exempt from its tariffs, which could cost the business $200 million this year, according to its estimations, writes Neill Barston.
As per the Wall Street Journal’s coverage, the confectionery giant has expressed concerns that the tax burden upon it would be up to $20 million this quarter alone, and much higher leading into the autumn months.
Notably, the company released its first quarter results last week, which showed sales results of $2.8 billion, down 13.8% year-on-year, against a backdrop of challenging market conditions.
CEO Michele Buck reportedly claimed that it is moving to make itself more resilient to geopolitical factors, but the company is still exposed to financial risk from the tariffs with its third party cocoa purchasing chain, with financial tariffs being placed on the US by Canada in response to those initially introduced by its neighbouring country, also set to impact.
Despite the tests in the market, the company’s leader believed there were some bright spots to consider. She noted: “I am pleased with the progress we are making on our key strategic initiatives for the year.
“Consumption in the quarter exceeded our expectations in both U.S. Candy, Mint, and Gum and Salty Snacks, driven by the strength of seasons, sweets, Dot’s and SkinnyPop. Despite heightened cost pressure, our strong balance sheet gives us flexibility to invest in the business and participate in recent strategic acquisitions that further expand our better-for-you portfolio and drive long-term value creation.”
However, on the issue of tariffs, Confectionery Production reported that their introduction last month was projected to have a considerable negative influence on businesses across sectors, with companies operating across the food and drink sector being particularly vulnerable to additional taxation.
According to national media reports, Hershey, which next week heads for a key appearance at Sweets & Snacks Expo event, has made its direct appeal to the US government over the incoming tariffs on the basis that cocoa is not grown in the US, so it does not believe it should face such taxation.
However, as Donald Trump indicated last month, he stated there would be no exemptions made to the new policy, after claiming that the US “had been ripped off” for many years over export taxes, which he said was a key contributing factor in establishing the new tariffs – many of which were paused for a 90-day period last month, leaving much industry uncertainty.
Notably, cocoa growing territories had been hit hard by the initial tariffs, with Ivory Coast singled out for 21% “reciprocal rates” – which have, along with the majority of other new tariffs, been held at 10% for a limit period of three months.
One segment that has already gained a taxation exemption is that of electronic components for phones and other related tech – which is presently largely sourced from China, though Apple customers in the US may soon find that their hardware is manufactured locally, as per national reports on the issue.
Hershey has stated that it “will use every lever possible to get the tariffs changed,” though how it will accomplish that is uncertain, given the blanket nature of the freshly introduced taxation, which has drawn major concern from nations around the world.
According to the International Monetary Fund, US growth for the next year has in fact been lowered by nearly 1%, from 2.7% to 1.8, as a direct result of the introduction of tariffs.
