Hershey: Inflation isn't cutting out chocolate

The CPG is boosting advertising spend in 2023.

person holding orange and white labeled pack
Photo by Janne Simoes on Unsplash

During tough times, people turn to sweet and salty snacks.

That idea was reiterated by Hershey on Thursday, as the CPG reported earnings that were headlined by a 16% increase in net sales for the year, and an 18.%% increase in adjusted earnings per share.

While Hershey benefitted from stay-at-home trends during the pandemic, CEO Michele Buck said people continued to turn to the company’s candy as the economic picture grew cloudier in 2022. That’s because chocolate and salty snacks are two of the top three resilient treats that consumers aren’t willing to skip, Buck said. It confirms recent findings by Mondelez that people are continuing to make room in their budget for snacks even as prices go up.

“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,” Buck told analysts. “Salty snacks are another regular companion that consumers are hard-pressed to cut back out of their grocery budget. Not only are they affordable compared to other expenses, but they are key parts of both parents’ and kids’ daily routines.”

One reason for resilience is that chocolate and other sweets tend to be sought out in good times and bad. Buck acknowledged that this was essentially two opposing parts of the consumer brain.

“One is when they are incredibly happy and it's a treat time, and they want to treat themselves and the other is when there are downtimes, and they want a bright spot,” she said. “But they do view these categories and especially chocolate as a part of emotional wellness – what it does and how it makes them feel. “

With demand remaining in place and new capacity constraints coming online that will allow it to make more products to ensure it keeps up, Hershey is aiming to double down despite the economy. It expects to increase advertising levels in the double-digits this year, with a particular focus on Reese’s and Hershey’s, as well as gummies and better-for-you. It also looking to add fuel to salty snacks brands, as Skinny Pop, Pirate’s Booty and Dot’s have nearly doubled in recent years.

“People are connected to our brands. And during the tough times, we know that that connectivity leads to them continuing to buy,” Buck said. “So yes, it is important during an inflationary time.”

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