Revenue rose 16.1% to $2.67bn, beating estimates of $2.48bn, according to the company’s First-Quarter 2022 Financial Results.
Hershey said demand in response to price increases was stronger than expected but is likely to taper off due to rising inflation and fewer US government benefits.
Consumer buying power has been under pressure from rising food prices as companies look to mitigate soaring costs stemming from supply chain disruptions, the Ukraine war and global inflation.
In a call to analysts and media, Michele Buck, Hershey Company President and Chief Executive Officer, made the following observation:
“…We have seen some changes in consumer behaviour within convenience stores, as gas prices have risen. But what we're seeing is that many consumers seem to be trying to manage the higher price by not fully filling their tanks. So they're making more trips but just not filling as full. And to date, they have not reduced their non-gas purchases in a meaningful way.
“And we haven't seen an impact. Our business remains quite strong in convenience stores. So we haven't really seen an impact on our business … we do expect that these trends will continue to evolve as we see some of those pressures we talked about earlier relative to reduction in government subsidies and the continued persistence of inflation and the impact on consumers.”
North America Confectionery
Hershey's North America Confectionery segment net sales were $2,217m in the first quarter of 2022, an increase of 11.7% versus the same period last year.
Its US candy, mint and gum (CMG) retail takeaway for the twelve-week period ended April 17, 20224 in the multi-outlet combined plus convenience store channels (MULO+C) increased 4.9%. Excluding seasonal products, demand for Hershey's confectionery products remained strong with retail sales growth of 8.1%.
Take-home chocolate sales and accelerating sales of Jolly Rancher and Twizzlers products drove this strong everyday growth.
Despite strong growth across brands, Hershey's said its confectionery share declined 144 basis points as ‘capacity constraints’ limited the company's ability to invest in media and promotions and fully service demand.
But, these declines were in line with expectations and are expected to improve as supportability improves throughout the year, the company said.
Hershey's confectionery share remains approximately 38 basis points higher than pre-pandemic levels.
In a release following the publication of its Q1 results, the chocolate maker said it now expects full-year 2022 net sales growth of between 10% and 12%, compared with its previous forecast of an 8% to 10% growth.
"We delivered strong double-digit sales and earnings growth with ongoing momentum across business units," said Buck.
"Our fast start, sustained consumer relevancy and increased visibility into our recently acquired businesses give us the confidence to increase our full-year net sales and earnings outlook despite an increasingly challenging and inflationary environment."