Overall, organic product prices increased 9.8% in the third quarter, while organic product volumes increased only 0.9%, the company revealed in a statement to the media.
Hershey Third-Quarter 2023 Financial Results Summary
- Consolidated net sales of $3,030.0 million, an increase of 11.1%.
- Organic, constant currency net sales increased 10.7%.
- Reported net income of $518.6 million, or $2.52 per share-diluted, an increase of 29.9%.
- Adjusted earnings per share-diluted of $2.60, an increase of 19.8%
“We remain on track to deliver our full-year sales and earnings commitments after delivering strong third-quarter seasonal sell-in and successfully implementing our new Salty Snacks ERP system in October," said Michele Buck, Hershey President and Chief Executive Officer. "As we exit the year, our retail teams are building impactful displays to engage consumers and drive demand while we increase brand investment and partner with retailers to launch exciting innovation to get 2024 off to a fast start."
Buck said consumers were buying Halloween candy closer to the holiday this year, unlike last year when the unavailability of stock prompted earlier purchases. Its Reese's peanut butter candies and milk candies are a popular trick-or-treat purchase for many US families, which should provide its sales with a further lift.
An analyst told boursorama.com that when supply chain disruptions and the war between Russia and Ukraine drove up prices on everything from transportation to raw materials like sugar, many packaged food companies, including Hershey, increased the prices of their products to offset the impact of these costs.
“However, several rounds of price hikes over the past two years have now hit demand and customers have started turning away from more expensive consumer products, like chocolates and candies, as they face higher interest rates and grocery prices.”
North America Confectionery
Hershey's North America Confectionery segment net sales were $2,457.6 million in the third quarter of 2023, an increase of 9.9% versus the same period last year. Organic, constant currency net sales increased 10.1% as double-digit price realisation more than offset volume declines related to price elasticity.
Hershey's US candy, mint and gum (CMG) retail takeaway in the multi-outlet plus convenience store channels (MULO+C) increased 2.5% for the 12-week period ended 1cOctober, 2023. Hershey's CMG share declined approximately 120 basis points due to unfavourable category mix and increased competitive innovation. The company said organic net sales growth outpaced retail takeaway due to the timing of seasonal shipments versus sell-through and growth in non-measured channels.
Its North America Confectionery segment reported segment income of $847.5 million in the third quarter of 2023, an increase of 19.9% versus the prior year period, resulting in a segment margin of 34.5% in the quarter, an increase of 290 basis points. Gains were driven by sales growth and gross margin expansion, which more than offset higher brand and capability investments.
Third-quarter 2023 net sales for Hershey's International segment increased 4.4% versus the same period last year to $227.2 million. Organic, constant currency net sales decreased 1.2% as mid-single-digit pricing was more than offset by lower volume. This volume deceleration partly reflects planned items, such as the discontinuation of a dairy beverage product line in Mexico and a later holiday season in India, in addition to increased competitive activity and a moderation of growth rates in its categories globally.
Hershey’s International segment reported a $31.7 million profit in the third quarter of 2023, reflecting a decrease of $3.7 million versus the prior year period as sales growth and margin expansion were more than offset by higher brand and capability investments. This resulted in a segment margin of 13.9%, a decrease of 230 basis points versus the prior year period.