Hershey reported a strong Q2, but management emphasized that EPS grew less than expected due to supply chain issues in the Salty segment and higher logistics costs. The company raised its full-year guidance only modestly, citing prudence. Key themes include robust innovation pipeline, confidence in cocoa deflation for 2027, and a selective approach to buybacks. US confection retail consumption of about 3% understated real demand by ~2 points due to non-measured channel growth (e.g., food service) and Easter shipment timing.
Buzzberg readHigher second-half growth expected despite tough compsHershey reported a strong Q2, but management emphasized that EPS grew less than expected due to supply chain issues in the Salty segment and higher logistics costs. The company raised its full-year guidance only modestly, citing prudence. Key themes include robust innovation pipeline, confidence in cocoa deflation for 2027, and a selective approach to buybacks. US confection retail consumption of about 3% understated real demand by ~2 points due to non-measured channel growth (e.g., food service) and Easter shipment timing.Read full analysisCollapse analysis
Hershey reported a strong Q2, but management emphasized that EPS grew less than expected due to supply chain issues in the Salty segment and higher logistics costs. The company raised its full-year guidance only modestly, citing prudence. Key themes include robust innovation pipeline, confidence in cocoa deflation for 2027, and a selective approach to buybacks. US confection retail consumption of about 3% understated real demand by ~2 points due to non-measured channel growth (e.g., food service) and Easter shipment timing.
Q2 EPS and sales beat consensus, but FY guidance was raised only slightly, partially due to planned reinvestment in innovation and a tough H2 comp.
Salty Snacks (Dots, SkinnyPop) faced supply chain issues, causing higher costs and volume constraints, but are 'largely behind us'.
Management reiterated its 2027 long-term framework, citing visibility into cocoa cost deflation despite current high futures.
Cocoa deflation expected in 2027 even at current prices
US confection retail consumption of about 3% understated real demand by ~2 points due to non-measured channel growth (e.g., food service) and Easter shipment timing.
03
Supply
DOTS supply chain challenges largely behind us
Q2 EPS and sales beat consensus, but FY guidance was raised only slightly, partially due to planned reinvestment in innovation and a tough H2 comp.
04
Demand
Non-measured channels and Easter timing mask real demand
Management expressed confidence in second-half growth and reiterated their medium-term framework, citing strong innovation pipeline and visibility into cocoa deflation.
Demand & capex
Demand
Bookings & conversion
Non-measured channels and Easter timing mask real demand. Management expressed confidence in second-half growth and reiterated their medium-term framework, citing strong innovation pipeline and visibility into cocoa deflation.
Capex
Investment and capacity
Management discussed increased investment in automation and capacity for the DOTS business, with capacity coming online in 2027 to address strong demand and supply chain growing pains.
Tone · Confident
Management expressed confidence in second-half growth and reiterated their medium-term framework, citing strong innovation pipeline and visibility into cocoa deflation.
Bottlenecks
Logistics & labor
Hershey's saltier snack business (Dots, SkinnyPop) experienced meaningful supply chain challenges, incurring higher spot freight and logistics costs and limiting volume throughput, though the issues are now 'largely behind us'.
This explains a specific source of gross margin pressure in Q2 and the near-term view for the Salty segment, distinguishing it from the broader cocoa-driven margin expansion story.
“And as a result of that, We had to use more spot freight usage, a little bit higher logistics cost, and some limited volume throughput versus what we had planned.”
Logistics or labor availability is delaying throughput
“On the margin side in particular, you're seeing the higher COCO costs flow through with a little bit of a delay in international, as well as some higher logistics and freight impacting that segment as well.”
Hershey noted that a little over a point of Q3 merchandising shipments were pulled forward into Q2, which was slightly ahead of plan, but will be neutralized by an extra shipping day in Q4.
“So there was a little over a point of shipments for Q3 merchandising that happened in Q2. That was just a little bit ahead of our expectations. However, that impact will largely neutralize against the extra shipping day in Q4, which is why…”
Hershey's saltier snack business (Dots, SkinnyPop) experienced meaningful supply chain challenges, incurring higher spot freight and logistics costs and limiting volume throughput, though the issues are now 'largely behind us'.
“we've had some growing pains in keeping up with strong demand, particularly the DOTS business, and that is largely behind us... we had to use more spot freight usage, a little bit higher logistics cost, and some limited volume throughput v…”
Hershey management explicitly discounted current cocoa futures, attributing the recent price spike to El Nino speculation that is already priced in, and reiterated expectations for cocoa deflation in 2027 based on healthier inventories and more diversified supply.
“El Nino speculation is certainly impacting pricing today and lately. But we do not expect cocoa to remain at current levels long term for a few reasons... We believe the market is already pricing it in. There is plenty of cocoa supply glob…”
The 'non-measured' channel, with food service as its largest component, contributed about two points of growth in U.S. confection consumption during the first half.
“The biggest component inside that non-measured channel is food service, and we did see a pretty big pickup on the food service side.”