HERSHEY, PA. — The Hershey Co. is seeking an exemption from the federal government to help mitigate tariff impacts on its business — particularly with cocoa — that could cost the company $20 million in the second quarter, and $200 million later this year.  

“The unmitigated impact could be up to $100 million per quarter for quarter three and quarter four,” said Steven Voskuil, chief financial officer, senior vice president, Hershey. “If you break that down, two-thirds of it are either cocoa or the Canadian retaliatory tariffs. Those are the two areas where we’ve got the most effort focused on influencing government action, using every lever at our disposal to get those tariffs changed, particularly with respect to cocoa.

“We have other raw material inputs that are imported aside from cocoa. China for us is not huge, but China is still in that calculation as well … we do have raw materials that come from other countries as well that also still have some tariffs impact. And they’re not off the table for mitigation, it's just we’re looking first with biggest impact.”

Addressing cocoa tariffs specifically, Michele Buck, president and chief executive officer of Hershey, said, “As a largely domestic food producer, we are relatively less exposed to tariffs than other industries. That said, the current US levy on cocoa is an exposure that we must manage on top of the cocoa market’s unprecedented recent price swings. Cocoa cannot be grown in the United States and thus, we are engaging with the US government to seek an exemption.”

Buck added that while cocoa prices have retreated over the past few months, cocoa financial markets continue to be disconnected from fundamentals due to a lack of market liquidity, market speculation and government policy changes.  

“We are encouraged by the recovery in the 2024-25 cocoa crop,” she said. “The top three global cocoa markets are tracking to a 20% increase in supply this season. Based on what we know today, we continue to anticipate inflation next year and robust planning is underway to address persistently high cocoa prices. We are readying options to execute, including pricing, price pack architecture, demand shaping and sourcing strategies, to mitigate inflation and protect our margins over the long term.”

Sales slowdown

Hershey also is contending with continued value-seeking from consumers that led to lower first-quarter results. For the first quarter ended March 30, 2025, Hershey posted net income of $224 million, equal to $1.14 on the common stock, a decrease of 71% compared with $797 million, or $4 per share, in the first quarter last year. Net sales decreased 14% to $2.8 billion, compared with $3.25 billion last year. 

In North America, net sales for the company’s Confectionery segment dropped 15% to $2.3 billion, compared with $2.7 billion during the previous year’s first quarter, while net sales for Salty Snacks rose to $278 million, an increase of 1% over $275 million last year. 

Salty Snacks in particular were boosted by strong sales of Dot’s Homestyle Pretzels (up 21%) and SkinnyPop popcorn, which increased retail sales by 6.4%.

“Broader snacking came under pressure in the first quarter due to softening consumer sentiment, weaker trips across channels, and continued value-seeking behaviors,” Buck said. “The late Easter impacted retail trends in the quarter. Hershey candy, mint and gum retail sales decreased 4.2% versus overall category declines of 2.7% in the first 12 weeks of the quarter. This resulted in a share loss of approximately 45 basis points, which was ahead of our outlook. We expect our retail sales and share performance to improve in the second quarter as the full Easter season is reported.”

Buck added that Valentine’s Day consumption increased mid-single digits, and preliminary Easter retail takeaway grew 16%, marking the eighth consecutive period of seasonal market share gains for Hershey.

Looking ahead to the second quarter, the company expects net sales to increase more than 20% due to Easter sales being included, as well as a pFirst quarter sales of Dot's Homestyle Pretzels in North American grew 21%.

Source: ©JAMMY JEAN – STOCK.ADOBE.COMrojected incremental cost savings of $125 million throughout the year due to realized benefits from its recent ERP investment — which the company calls its Advancing Agility & Automation initiative — to digitize and streamline Hershey’s operating processes and expenses.

The company’s full-year net sales outlook remains at least 2% growth, while Hershey’s full-year earnings per share outlook is forecast down high-40%, which includes tariff expenses expected for the second quarter, but doesn’t factor for future tariff impacts beyond that.

Food dyes and SNAP

During the question-and-answer portion of the earnings call, Buck was asked about recent US Food and Drug Administration intentions to phase out all petroleum synthetic dyes from the country’s food supply, and how this might affect Hershey, which manufactures colorful candy like Twizzlers, Jolly Rancher and Shaq-a-Licious gummies.

“It’s largely going to be (in) our sweets portfolio, some refreshments, and then anything else that’s coated chocolate,” Buck said. “It’s a relatively small total percent of our ingredient costs, but we feel good about our ability to be compliant based on all of the work that we have (done) already.”

Regarding recent moves by eight states to apply or indicate applying for waivers from the US Department of Agriculture to exclude candy, soft drinks and processed foods from the Supplemental Nutrition Assistance Program (SNAP) — a federal food stamp program utilized by 40 million Americans — Buck said, “Only about 2% of SNAP purchases are candy, which is well below many other categories like soda, salty snacks and desserts. We see pretty similar buying patterns between SNAP and non-SNAP households, and certainly in salty our portfolio is premium and permissible. The overall category may have an impact, (but) we don’t think that will impact us.”