HSY Stock | The Hershey Company Q2 2025 Earnings Call

Leadership Transition and Business Health

• 👏 Michelle Buck is retiring, with Kirk preparing to take over as CEO in mid-August.
• 💡 Michelle believes the company's underlying business health does not require a reset, citing consistent investments in brands, technology (ERP, AI), and a long-term approach to category health.
• 🎯 Kirk was chosen for his three decades of CPG experience (Pepsi), relevant background in snacking/beverage, and focus on consumer-centricity and culture.

Pricing Strategy and Margin Recovery

• 📈 New pricing is expected to have favorable elasticities, especially for less elastic seasonal products, and is a significant step towards margin recovery for 2026.
• ⚠️ The announced price increase does not fully compensate for cocoa inflation up to 2025, but combined with other levers like smart complexity and transformation savings, aims for full margin recovery over time.
• 📊 Pricing is a strategic tool to allow continued investment in brands and drive long-term category health, with 75% of items remaining under the $4 price point.

Cocoa Market and Tariff Outlook

• 🍫 There is optimism regarding cocoa tariffs, with government administration understanding the unique sourcing challenges for cocoa and public statements supporting potential relief.
• 📈 Signs of cocoa market improvement include reduced grinds, lower butter ratios, an expected modest surplus for the current crop, and a strong outlook for next year's main crop.
• 🌱 New origins outside West Africa are expected to play a larger role, and increased fertilizer use in West Africa is contributing to better agricultural practices.

Innovation and Category Performance

• 🚀 Hershey has significantly increased its pace of innovation since 2019, which is crucial for gaining shelf space, competing with insurgent brands, and delivering perceived value to consumers.
• ✨ Non-seasonal chocolate saw mid-single-digit growth driven by innovation, emotional well-being benefits, and strategic partnerships for instant consumables, where the company is now gaining share.
• 🍿 The salty snacks portfolio (Dots, SkinnyPop) continues strong momentum due to its permissible/premium halo, marketing efforts, flavor innovation, and expanding multi-pack distribution.

Future Headwinds and Financial Outlook

• 🛡️ The company anticipates no material impact from GLP-1 drugs or SNAP benefit reductions in 2025-2027, but continues to monitor long-term health and wellness trends and policy changes.
• 💰 For 2026, the company expects "on algorithm" earnings growth and topline growth, with potential for double-digit EPS range if tariff relief or cocoa cost improvements materialize.
• 📊 A 250 basis point headwind on the economic tax rate is expected to carry into 2026 due to cocoa sourcing tax consequences and limitations on tax credits.