Can Hershey hold on to share gains as capacity constrains bump against increased demand?

“We have gotten off to a tremendous start to the year with reported sales growth of 16% and adjusted EPS growth of almost 32% in Q1”​ thanks in part to resilient consumer demand despite mid- to high-single-digit price increase across the portfolio and a “Strategic focus on enhancing our offerings and price points to ensure our category remains accessible to all consumers, even in periods of inflation.”​ CEO Michele Buck told investment analysts during the company’s first quarter earnings call yesterday.

She also attributed Hershey’s strong start to the year to excitement to celebrate Easter with sweets, extended SNAP and sustained at-home consumption as consumers look to offset high inflation with “economical food options.”

This sustained demand builds on gains over the past two years that have driven up Hershey’s chocolate retail pounds sold by a 7%, while competitors’ volumes, collectively, have fallen almost 1%, Buck added.

While good on paper, these gains have strained Hershey’s ability to fully service demand – prompting it to pull back on some advertising and promotions while competitors have moved forward with marketing and maintained delivery – allowing them to regain some share to start the year, Buck acknowledged .

“Increasing production, inventory and service levels remain a critical priority for us,”she said. “While we still have the opportunity to further improve, we made progress in the first quarter. Our capacity and labor investments, as well as our proactive approach to moderating media and promotions, enabled us to increase production mid-single-digits in the first quarter and replenished distributor and retail inventory ahead of expectations.”


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