HERSHEY, PA. — Even as inflation has impacted American grocery budgets, executives of the Hershey Co. are finding shoppers will still splurge on chocolate and salty snacks. As such, the maker of Reese’s and Skinny Pop plans to accelerate advertising in the year ahead.
“Our largest categories, chocolate and salty snacks, rank as two of the top three resilient treats that consumers are not willing to forgo,” said Michele G. Buck, chairman and chief executive officer, in pre-recorded remarks released ahead of a Feb. 2 earnings call with securities analysts. “Chocolate moments are such a heavily integrated part of consumers’ weekly routines, from rewarding moments to stress relief to self-care, and everything in between, that they indicate they would rather cut back on other expenses to make room for chocolate because they love it so much and it’s affordable.”
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.”
Net income attributable to the Hershey Co. for the fiscal year ended Dec. 31, 2022, totaled $1.6 billion, equal to $8.22 per share on the common stock, up 12% from $1.5 billion, or $7.34 per share, the previous year.
Net sales for the full year increased 16% to $10.4 billion from $9 billion the year before.
The acquisitions of Dot’s Pretzels and Pretzels, Inc. provided a 4.3-point benefit to net sales, partially offset by the impact of foreign currency exchange, which added a 0.2-point headwind.
“With the addition of Dot’s Pretzels and Pretzels Inc. to the portfolio, our salty snacks segment now represents approximately 10% of company net sales,” Ms. Buck said. “Organic growth for the year was 18.7%, with nearly half the gain driven by volume growth as our brands reached even more households and delivered against more consumer occasions.”
Reese’s retail sales grew 10.5% for the year, despite capacity constraints, marking its second consecutive year of double-digit growth.
Fourth-quarter net income was $396 million, equal to $1.98 per share, up 18% from $335.6 million, or $1.67, in the prior-year period.
Net sales advanced 14% to $2.7 billion from year-ago net sales of $2.3 billion.
“As we look forward to this year, we expect continued strength in net sales growth, with reported net sales projected to grow 6% to 8%,” said Steven E. Voskuil, senior vice president and chief financial officer, in pre-recorded remarks. “Price is expected to be the largest contributor to growth, with volumes projected to be flat to slightly down for the year, as higher levels of advertising and increased capacity help offset price elasticities.”
Capital investment this year is estimated to be between $800 million and $900 million, primarily focused on core capacity expansion. Last year, the company announced three new projects, including a chocolate manufacturing plant and line expansion in Hershey and a line expansion at the plant in Robinson, Ill.
“These projects will expand our capacity of Reese’s, Hershey’s and Mounds/Almond Joy, and are expected to be operational in 2024,” Mr. Voskuil said.
Innovation remains a priority across Hershey’s portfolio, Ms. Buck said during the earnings call, citing recent launches of Reese’s Big Cup Stuffed with Reese’s Puffs Cereal and limited-edition Reese’s Creamy Cups and Reese’s Crunchy Cups. A new Hershey’s Kisses addition, called Milkilicious, has a milk chocolate filling. And the Dot’s Pretzels brand recently added a cinnamon sugar offering.
“While innovation is important, and we will support innovation across the board for news and excitement, we really don't want to stray away from a primary focus on our core,” Ms. Buck added. “Our brands that are sustainable, they have been out there for a long time. Consumers love them. The velocities on them will always be stronger than innovation. So, across our entire portfolio, driving our core is job one, and then using new innovation for news and excitement.”Shares of Hershey trading on the New York Stock Exchange closed at $234.42 on Feb. 2, up $9.12, or 4.1%, from the previous close.