Hershey braces for 2025 challenges amid surging cocoa prices
USA – The Hershey Company is bracing for significant financial challenges in 2025 due to unprecedented surges in cocoa prices.
CEO Michele Buck acknowledged the anticipated strain on earnings, stating, “While we continue to expect the surge in cocoa prices to put significant pressure on 2025 earnings, we will focus on driving top-line and share growth.”
CFO Steven Voskuil provided further insights, noting that despite no immediate concerns about the global physical supply of cocoa, the company expects its adjusted gross profit margin for 2025 to contract by approximately 650 to 700 basis points.
This contraction is attributed to historically high cocoa prices, inflation in sugar and other raw materials, incremental labor costs, and potential tariffs.
In response to these challenges, Hershey is considering several strategic measures to mitigate the impact of commodity volatility.
These include adjusting pricing strategies, reevaluating product packaging, reformulating products, shaping consumer demand, and revising investment plans.
The company emphasizes its readiness to implement these strategies swiftly as market conditions evolve.
Q4FY24 results
Despite these headwinds, Hershey reported robust financial performance in the fourth quarter of 2024. The company’s net sales reached US$2.88 billion, marking an 8.7% increase compared to the same period the previous year.
Net income was US$796.6 million, or US$3.92 per share, representing a 131% increase year-over-year. Adjusted earnings per share stood at US$2.69, a 33% rise from the prior year.
The North America Confectionery segment contributed significantly to this growth, with net sales of US$2.35 billion, a 6% increase from the previous year.
The Salty Snacks segment also performed well, reporting net sales of $278.9 million, a 36% year-over-year increase.
Looking ahead, Hershey projects a decline in adjusted earnings per share by a mid-30% range for the full year 2025, primarily due to elevated commodity costs, increased incentive compensation, and a higher economic tax rate.
However, the company anticipates at least a 2% growth in net sales, driven by higher sales volume, supply chain productivity, and strategic inventory valuation.
The surge in cocoa prices, which have nearly doubled over the past year due to production issues in West Africa, poses a significant challenge for chocolatiers like Hershey.
Analysts have expressed concerns that sustained high cocoa costs could pressure Hershey’s stock and profitability.
In response, the company is focusing on strategic initiatives to navigate this volatile commodity environment while maintaining its commitment to delivering quality products to consumers.
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