Hershey sales and income increase in Q1 2024 despite high cocoa prices
USA – Confectionary company Hershey Co., has reported a 36% increase in net income from US$587 million in Q1 2023 to US$797 million in Q1 2024 and an 8.9% increase in net sales from US$2.99 billion in Q1 2023 to US43.25 billion in Q1 2024.
Despite high cocoa prices, the company attributed the favorable performance to its investment and innovation strategy.
Michele G. Buck, Hershey Co.’s CEO, said, “Our investments in innovation, marketing, and in-store execution are driving consumer engagement and improving market share performance across segments.”
Hershey has also implemented an enterprise resource planning (ERP) system that has helped improve efficiency.
The ERP system proved especially useful in North America, where net sales increased by 10% due to accelerated shipments.
Accelerated shipments caused higher inventory levels in North America, resulting in an 8—to 9 point volume increase in Q1 2024.
It also caused a volume increase of 6% in North America.
The ERP system also caused supply chain gains in Brazil, Asia, and Europe.
The high cocoa prices were primarily caused by a decline in West Africa in the 2023/2024 season.
International cocoa prices rose to over US$10,000 by mid-April, although they had fallen to around US$8,500 per ton by May 3.
The impact of high cocoa prices is expected to continue well into 2025.
The CEO has expressed optimism over the potential long-term impacts of sustained high cocoa prices.
Buck said, “Farmer prices have increased, enabling them to invest more in fertilizer, pesticides, and other techniques to improve yields.”
The rains currently experienced in West Africa should also increase yields and crop supply moving forward, which is expected to cause a market price adjustment.
However, Buck also cautioned against speculations about the future and the market, insisting the company should remain focused on implementing its 2024 and 2025 strategy.
Buck said, “While our 2025 planning is underway, it is premature to discuss potential financial scenarios or impacts, and for competitive reasons, we will not be discussing our hedging policies or pricing strategies.”
Although the company declined to describe its pricing strategy, it announced the launch of a new advertising campaign and new flavors of brands like SkinnyPop and Dot’s Pretzels.
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