Company Overview - The Hershey Company is the leading confectionery manufacturer in the US, with a growing presence in non-chocolate snacks and a portfolio of popular brands including Reese's, Payday, Almond Joy, and Kit Kat (US only) [1] Analyst Background - The analyst has over 10 years of experience researching companies across various sectors, including commodities and technology, and has researched over 1000 companies in total [1] Investment Focus - The analyst has transitioned from writing a blog to a value investing-focused YouTube channel, where they have researched hundreds of different companies, with a particular interest in metals and mining stocks, as well as comfort in consumer discretionary/staples, REITs, and utilities [1]

Company Overview - The Hershey Company (NYSE:HSY) produces and sells a variety of confectionery and snack products under well-known brands such as Hershey's, Reese's, Kit Kat, and Jolly Rancher [2] Market Position - Hershey is considered to be in an "unassailable position" with commodity prices, particularly cocoa, having peaked, and there is no significant competition threatening its market dominance [1] - The company is viewed as a strong earnings play, especially among food stocks, which are performing well [1] Leadership Changes - The recent transition from CEO Michele Buck to Tanner, who has a brief tenure at Wendy's, raises concerns about leadership stability, despite Tanner's extensive background at PepsiCo [2] Investment Perspective - While Hershey is acknowledged as a potential investment, there are suggestions that certain AI stocks may offer greater upside potential and less downside risk [3]

Core Insights - The Hershey Company has outperformed Mondelez International nearly 2:1 in 2025, despite both companies facing challenges from rising cocoa prices [1][2] - The management of rising costs and the strength of non-chocolate portfolios will be crucial for both companies as peak candy demand approaches during Halloween and the holidays [2] Group 1: Hershey Company - Hershey's stock was one of the worst performers in 2024 due to higher commodity prices and a change in leadership, with Kirk Tanner replacing Michele Buck [4] - The company has successfully implemented a price increase of approximately 26% on popular products like Reese's and Kit-Kat, demonstrating its ability to pass costs to consumers [5] - Hershey has diversified its product offerings, launching new products like Shaq-A-Licious XL Gummies, which sold over 11 million units, and expanding its portfolio of salty snacks [6][7] Group 2: Mondelez International - Mondelez has also expanded its portfolio beyond chocolate but has not shown the same strong gains as Hershey, relying more on cost-cutting measures to preserve margins [8] - The company's earnings report indicated a 15% year-over-year drop in EPS, compared to Hershey's 3% decline, highlighting Hershey's better performance in passing price hikes to consumers [9] - Analysts suggest that while Mondelez stock may have more upside based on conventional metrics, it needs to prove its ability to pass on higher cocoa prices to consumers [10][11] Group 3: Market Sentiment and Analyst Ratings - Recent upgrades for Hershey include a rating increase from Neutral to Outperform by BNP Paribas Exane and a significant upgrade from Goldman Sachs from Sell to Buy, raising its price target to $220 [12] - Analysts expect a 15% gain for Hershey, which is higher than the 13% growth anticipated for Mondelez stock, indicating a more favorable outlook for Hershey [12] - Mondelez currently holds a Moderate Buy rating among analysts, but it is not included in the list of top stocks recommended by leading analysts [13]

Financial Data and Key Metrics Changes - The company reaffirmed its full year 2025 organic sales growth guidance of about 5% despite facing headwinds from U.S. retailer restocking and adverse weather conditions in Europe [9][10] - For 2025, the company anticipates a reasonable top-line growth of 4% to 5% but expects a 10% decline in EPS, indicating a challenging profit environment [6][7] Business Line Data and Key Metrics Changes - Organic sales in North America declined approximately 3.5% year over year in the first half, attributed to retailer restocking and softer underlying trends [14][20] - The company is focusing on optimizing shopping trips and maximizing brand presence, particularly for products like Oreo, which has seen increased penetration but decreased purchase frequency [18][20] Market Data and Key Metrics Changes - In Europe, the company experienced a decline in chocolate volumes due to higher temperatures impacting consumption, particularly in key markets like the U.K. and Germany [12][27] - Elasticities in Europe have increased to around 0.6 to 0.7, higher than the anticipated 0.4, indicating a shift in consumer response to pricing [28][29] Company Strategy and Development Direction - The long-term strategy established in 2018 remains valid, focusing on building presence in key categories and supporting brand growth [5][6] - The company is exploring collaborations with other brands, such as Coca-Cola and Biscoff, to enhance product offerings and market presence without engaging in M&A [21][26] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer spending behavior has not changed significantly over the past two and a half years, with consumers remaining cautious and prioritizing basic necessities [15][16] - The outlook for North America is expected to remain challenging for the next 6 to 12 months, with a focus on adapting to consumer behavior and optimizing product offerings [20][40] Other Important Information - The company is optimistic about cocoa prices decreasing in the future due to increased supply from West Africa and other regions, which could improve margins [30][31][34] - The cakes and pastries category is seen as a significant growth opportunity, with expectations of reaching a $125 billion market by 2030 [52][54] Q&A Session Summary Question: What is the outlook for North America in the next 6 to 12 months? - Management expects continued challenges in North America, with consumers remaining cautious and spending patterns not changing significantly [20] Question: How does the company view its collaborations with other brands? - Collaborations are seen as win-win opportunities that enhance product offerings without the complexities of M&A [21][26] Question: What is the current view on cocoa fundamentals? - Cocoa supply is expected to increase, leading to a potential decrease in cocoa prices, which would benefit the company's margins [30][31][34] Question: What are the growth expectations in emerging markets? - Emerging markets are crucial for long-term growth, with a focus on building strong brands and expanding distribution [36][39]

Financial Data and Key Metrics Changes - The company reaffirmed its full year 2025 organic sales growth guidance of about 5% despite facing headwinds from U.S. retailer restocking and adverse weather conditions in Europe affecting chocolate demand [9][10] - For 2025, the company anticipates a reasonable top-line growth of 4% to 5% but expects a 10% decline in EPS, which is considered acceptable given the current cocoa circumstances [6][7] Business Line Data and Key Metrics Changes - Organic sales in North America declined approximately 3.5% year over year in the first half, attributed to retailer restocking and softer underlying trends [14][20] - The company is focusing on optimizing shopping trips and maximizing brand presence, particularly for Oreo, which has seen increased penetration but decreased purchase frequency [18][20] Market Data and Key Metrics Changes - In Europe, the company experienced higher elasticities than anticipated, with current levels around 0.6 to 0.7, compared to the expected 0.4 [28][29] - The cocoa supply situation is improving, with a 7% increase in cocoa pot counts in West Africa compared to the last five-year norm, suggesting potential price reductions in the future [31][32] Company Strategy and Development Direction - The long-term strategy established in 2018 remains valid, focusing on building presence in key categories and supporting brand growth [5][6] - The company is exploring collaborations with other brands, such as Coca-Cola and Biscoff, to enhance product offerings and market presence [21][26] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer spending has remained stagnant over the past 24 to 30 months, leading to cautious shopping behavior [15][16] - The outlook for North America is expected to remain challenging for the next 6 to 12 months, with consumers becoming increasingly careful in their spending [20] Other Important Information - The cakes and pastries category is projected to grow from $95 billion to approximately $125 billion by 2030, with the company aiming to enhance its position in this fragmented market [52][54] - The company is maintaining a disciplined approach to M&A, focusing on smaller assets that align with its strategic goals [48][50] Q&A Session Summary Question: What is the outlook for North America in the next 6 to 12 months? - Management expects continued challenges in North America, with consumers remaining cautious and spending levels stagnant [20] Question: How does the company view current cocoa levels and supply dynamics? - The company believes current cocoa prices are unsustainable and anticipates a surplus in the market, leading to potential price reductions [30][32] Question: What is the strategy regarding M&A and share buybacks? - The company remains disciplined in M&A, focusing on smaller strategic assets, while being pragmatic about share buybacks given current stock prices [46][50]

Core Insights - The Hershey Company has appointed Natalie Rothman as Chief Human Resources Officer, effective August 18, 2025, to lead its global HR function [1][3] - Rothman has over 25 years of HR experience and is recognized for her ability to build high-performing teams and modernize HR operations across various industries [2][3] Company Overview - The Hershey Company is a leading snacks company with over 20,000 employees globally, generating more than $11.2 billion in annual revenues from over 90 brand names in approximately 80 countries [5] - The company is committed to ethical and sustainable operations, with a long history of supporting education through initiatives like the Milton Hershey School [6] Leadership Experience - Rothman previously served as CHRO at Inspire Brands, where she implemented business process automation and AI tools to modernize HR operations [3] - At Advance Auto Parts, she led efforts to drive cultural change and enhance organizational capabilities through technology [3][4] Professional Affiliations - Rothman is a member of the New York and New Jersey Bar and the Human Resources Policy Association, and serves on the boards of Udemy and Pearce Services [4]

Financial Data and Key Metrics Changes - The company reported a 26% increase in net sales compared to the same period last year, with organic constant currency net sales growth of 26.3% driven by net price realization of approximately five points and volume growth of approximately 21 points [26] - Adjusted gross margin decreased by five to ten basis points to 38.1% due to commodity inflation and incremental tariff expenses, although gross margin was higher than expected due to timing of cocoa hedges and lower tariff expenses [30][37] - Adjusted earnings per share declined by 4.7% year over year, impacted by incremental commodity costs and a higher tax rate [34] Business Line Data and Key Metrics Changes - North America Confectionery segment net sales grew by 32%, with volume increasing by 25%, benefiting from Easter timing and inventory changes related to ERP system implementation [27] - North America Salty Snacks segment net sales increased by 8.8%, with volume growth of over 4% driven by brands like Dots and Skinny Pop [28] - The International segment saw a 4.4% increase in net sales, but volume growth was below expectations due to category softness in Mexico and lower export demand [29] Market Data and Key Metrics Changes - Hershey's U.S. retail sales for candy, mint, and gum increased by 21.8%, outpacing the category growth of 17.9% [8] - The company gained approximately 90 basis points in market share, with everyday chocolate retail takeaway accelerating to 6.7% [9] - In the International segment, constant currency net sales increased double digits in Brazil, while growth in Europe was mid-single digits, led by the U.K. [18] Company Strategy and Development Direction - The company aims to be a leading snacking powerhouse, with a focus on balanced growth and mitigating cocoa inflation through productivity and strategic pricing [7][19] - Hershey announced a new price action on its U.S. Confection portfolio, which represents roughly 80% of total net sales, expected to deliver an estimated 16 points of pricing contribution [23] - The company is implementing a Smart Complexity initiative to simplify packaging and optimize manufacturing efficiency, raising its savings target to $400 million [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying trajectory of the business, expecting robust results to continue in the second half of the year [19] - The company anticipates adjusted earnings per share to decline between 36% and 38% for the year, reflecting higher cocoa costs and tariff expenses [37] - Management remains hopeful for improvements in tariff conditions over time, although no relief is planned for 2025 [36] Other Important Information - The company announced the appointment of Kirk Tanner as the new President and CEO, effective August 18, following Michele Buck's retirement [5][6] - Hershey's advertising and related consumer marketing expenses increased by 35.5% in the second quarter, reflecting the timing of expenses in prior years [30] - Capital expenditures for the second quarter were $231 million, with full-year expectations between $425 million and $450 million [34] Q&A Session Summary Question: What are the expectations for cocoa prices and inflation? - Management indicated that cocoa prices remain volatile and elevated, with expectations of inflation in cocoa input costs year over year in 2026 [20][21] Question: How is the company addressing tariff impacts? - The company has embedded incremental tariff costs in its full-year outlook and is taking steps to mitigate tariff exposures over time [36] Question: What is the outlook for the International segment? - The full-year constant currency segment net sales growth outlook for the International segment remains low single digits, with expectations for reacceleration in the second half [18]

Financial Data and Key Metrics Changes - The company reported a 26% increase in net sales compared to the same period last year, with organic constant currency net sales growth of 26.3% driven by net price realization of approximately five points and volume growth of approximately 21 points [29] - Adjusted gross margin decreased by five to ten basis points to 38.1% due to commodity inflation and incremental tariff expenses, although gross margin was higher than expected due to timing of cocoa hedges and lower tariff expenses [33][40] - Adjusted earnings per share declined by 4.7% year over year, impacted by incremental commodity costs and a higher tax rate [37] Business Line Data and Key Metrics Changes - North America Confectionery segment net sales grew by 32%, with volume increasing by 25%, benefiting from Easter timing and inventory changes related to ERP system implementation [30] - North America Salty Snacks segment net sales increased by 8.8%, with volume growth of over 4% driven by Dots and Skinny Pop [31] - International segment net sales increased by 4.4%, but volume growth was below expectations primarily due to category softness in Mexico and lower export market demand [32] Market Data and Key Metrics Changes - Hershey's U.S. retail sales for candy, mint, and gum increased by 21.8%, outpacing the category increase of 17.9% [8] - The company gained approximately 90 basis points of market share in the non-seasonal candy, mint, and gum category [9] - Constant currency net sales in Brazil increased by double digits, while growth in Europe was mid-single digits led by the U.K. [20] Company Strategy and Development Direction - The company aims to be a leading snacking powerhouse, with a focus on balanced growth and mitigating cocoa inflation through enhanced productivity and strategic pricing [7][21] - A new pricing action on the entirety of the U.S. Confection portfolio is expected to deliver an estimated 16 points of pricing contribution to overall company sales [25] - The company is implementing a Smart Complexity initiative to simplify packaging and optimize manufacturing efficiency, raising its savings target to $400 million [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying trajectory of the business, expecting robust results to continue in the second half of the year [21] - The company anticipates adjusted earnings per share to decline between 36% to 38% for the year due to higher cocoa costs and tariffs [40] - Management remains hopeful for improvements in tariff conditions but does not plan for relief in 2025 [39] Other Important Information - The company announced the appointment of Kirk Tanner as the new President and CEO, effective August 18 [5] - The Pokémon program has shown strong initial velocities, significantly outperforming other limited-time offers [14] - Capital expenditures in Q2 totaled $231 million, with full-year expectations between $425 million and $450 million [37] Q&A Session Summary Question: What are the expectations for the second half of the year? - Management expects an acceleration in performance to 2% to 4% growth, supported by strong innovation and merchandising plans [38] Question: How is the company addressing cocoa inflation? - The company is implementing pricing actions and hedging strategies to manage cocoa costs and restore margins over time [22][28] Question: What is the outlook for international markets? - The full-year constant currency segment net sales growth outlook for international markets remains low single digits, with expectations for reacceleration in the second half [20]

Company Overview - The Hershey Company is an industry-leading snacks company generating over $11.2 billion in annual revenues and operating in approximately 70 countries with a workforce of more than 20,000 employees [4]. - The company's portfolio includes well-known chocolate and confectionery brands such as Hershey's, Reese's, Kisses, Kit Kat®, Jolly Rancher, Ice Breakers, and popular salty snacks like SkinnyPop and Dot's Homestyle Pretzels [4]. Leadership Transition - Kirk Tanner has been appointed as the new President and Chief Executive Officer of The Hershey Company, bringing extensive experience from his previous role as CEO of PepsiCo Beverages North America, where he oversaw a $28 billion business [1][2]. - Tanner's leadership is expected to focus on core brand growth, innovation, operational excellence, and accelerating new unit growth globally [2]. - Mary Kay Haben, Lead Independent Director, praised Tanner's proven leadership in driving growth in complex global businesses and his commitment to engaging with employees, the community, and stockholders [3]. Strategic Vision - Tanner emphasized the importance of understanding and delighting consumers, building strong partnerships with customers, and investing in colleagues as the three pillars that will guide Hershey's strategic decisions [3]. - The company aims to advance its ambition of becoming a Leading Snacking Powerhouse, leveraging Tanner's experience in snacks, beverages, M&A, and innovation [3]. Legacy and Future Direction - The previous CEO, Michele Buck, was recognized for her exceptional leadership and for guiding Hershey through multiple phases of transformational growth, leaving a legacy that positions the company well for the future [3]. - Tanner expressed his honor in leading a company he has long admired and his commitment to making a difference with beloved brands [3].

Core Insights - The Hershey Company is facing significant cost pressures due to rising cocoa prices and tariff impacts, potentially incurring up to $100 million in unmitigated costs per quarter in the latter half of 2025, with two-thirds of this risk linked to cocoa and Canadian tariffs [1][7] - Hershey is adopting a consumer-centric approach called demand shaping, focusing on lower-cocoa segments and utilizing pricing strategies to maintain consumer demand without overt price increases [2][4] - The company is also innovating to reduce reliance on cocoa-heavy inputs, with new product developments expected to support growth while managing cost pressures [3][4] Cost Management Strategies - Hershey is shifting its focus towards lower-cocoa products, such as sweets and salty snacks, which have shown strong growth [2] - The company is implementing price pack architecture to enhance value perception among consumers, particularly in value-sensitive retail channels [2][4] - Management is exploring sourcing strategies and tariff engagement as additional measures to mitigate costs [4] Financial Performance and Market Sentiment - Hershey's shares have increased by 12.2% over the past month, outperforming the industry growth of 9.7% and the broader Consumer Staples sector, which declined by 0.9% [5] - The stock is currently trading at a forward P/E ratio of 27.68, higher than the industry average of 22.55, indicating market expectations of stability and resilience in navigating cost challenges [12] - Recent downward revisions in EPS estimates reflect cautious sentiment, with the consensus estimates for the current and next fiscal year declining slightly [15]