February 27, 2024

Hershey CEO Michele Buck opened up the company’s earnings call (pdf) Thursday (Feb. 8) by talking about “historic” cocoa prices. Thanks to speculators taking advantage of back-to-back West African rains and droughts, a metric ton of the brown stuff costs more than $5,400 for one contract traded out of New York, more than double what it was the same time last year. The chocolatier is maneuvering to keep from raising prices too much.

“I do want to be very clear that there’s no change to our pricing strategy,” she told investors. “And our commitment to use pricing to cover inflation and to support the investments that we think are critical to drive the business. So, given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.”

A kernel of concern

But big food companies don’t buy commodities on the spot markets that get the headlines—they buy in advance and hedge those locked-in numbers. Prices might stay higher by the time Hershey needs to line up more cocoa supplies, but CFO Steven Voskull confirmed that the company has its costs taken care of looking out a year in advance. But one development worrying analysts was a downturn in Hershey’s SkinnyPop popcorn sales: The North American salty snacks department, which usually makes up about a tenth of overall business, reported revenues nearly 25% lower than the same time in 2022.

Buck said that even though consumer confidence is on the rise and a US employment is looking up, but people are still trying to save money where they can. “We did start to see some pressure in the category related to value,” Buck said on the call. “Popcorn doesn’t quite have as much satiety as some other snacks, and we saw some private label entries also get some focus.”

Translation: SkinnyPop isn’t as filling as people want, and they’re buying other snacks to ballast their tummies. Or they’re buying cheaper store-brand popcorn instead.

But Hershey’s isn’t going to take this lying down. “We are the no. 1 or no. 2 player depending on the timeframe in the category,” Buck bragged. They’re going to start selling bigger bags, bigger packs of mini-bags, and they’re going to start spending more money to make sure you notice SkinnyPop on store shelves. They don’t think they’ll be salty about their slump for long.

Hershey stock is up 6% in Thursday trading.

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