Hershey’s profit surge masks deeper struggles

Hershey recovery: What’s driving profits and what comes next?

• Hershey reported 93% profit growth in Q1 2026 after weak 2025
• Growth was primarily price-led while volumes declined showing clear demand pressures
• Margin recovery is expected in 2026 but dependent on cocoa costs
• Strategy is shifting towards pricing discipline, snacks, and reduced cocoa exposure
• Long-term performance depends on balancing pricing power with sustainable volume growth

The Hershey Company took many by surprise last month, when it announced a whopping 93% jump in profits.

This comes in the wake of a tough 2025 for the American multinational, where profits plunged 60% overall.

And granted, the figures only represented the first quarter of 2026, but they do point towards a potential shift in fortunes for the confectionery giant.

So what’s behind the change and is it set to last?

Is Hershey bouncing back?

“Hershey’s latest earnings performance should be seen as a partial recovery rather than a full turning point,” says Nandini Roy Choudhury, principal consultant for food and beverage at analytics group Future Market Insights. “The company’s Q1 2026 performance was strong at the headline level, with net sales rising to around $3.1bn (€2.6bn), supported by double-digit pricing and better profitability. However, organic growth was still largely price-led, while volume remained under pressure."

This indicates that, while Hershey has managed to protect its pricing and margins in the near term, it has yet to fully revive underlying consumer demand.

A genuine turning point, says Choudhury, would require more balanced growth, with pricing, volume, mix, and innovation all contributing to performance. At this stage, the recovery looks more like a disciplined pricing and margin management outcome in a still-challenging confectionery environment.

Volume decline

While strong pricing has helped underpin Hershey’s recent performance, underlying volume declines are proving problematic.

Why? Because it shows that even in confectionery, where demand is generally resilient, consumers are not immune to repeated price increases – Hershey’s Q1 organic sales were supported by roughly 10% pricing, while volume declined by around 2%.

“This doesn’t mean consumers are abandoning chocolate, but it does show clear elasticity,” says Choudhury. “Shoppers may be buying smaller pack sizes, reducing purchase frequency, shifting to value channels, waiting for promotions, or trading across brands and formats.”

In other words, there’s a tipping point at which higher prices can and will erode sales volumes.

Margin recovery

Hershey has said it expects margin recovery to build through the second half of the year, but that recovery is unlikely to be easy or straightforward.

“Hershey has already shown margin improvement in Q1 2026, with adjusted gross margin reported at 40.4%, and the company reaffirmed its full-year outlook,” says Future Market Insights’ Choudhury. But cocoa prices remain a major issue.

“Even if spot cocoa prices ease, manufacturers won’t benefit immediately because of hedging, forward contracts, inventory positions, and timing lags.”

Margin recovery will therefore depend on how quickly lower cocoa costs flow through profit and loss sheets, how much pricing Hershey can retain, and whether volume pressure remains manageable.

At the same time, the pressures behind that uneven recovery are forcing a broader strategic shift. Structurally higher cocoa costs are reshaping Hershey’s approach, limiting its ability to rely on traditional chocolate volume growth in a persistently volatile and expensive input environment.

As a result, it’s placing greater emphasis on pricing architecture, pack-size optimisation, productivity, premiumisation, non-chocolate confectionery, and its wider snacking portfolio.

Hershey’s snacking strategy

The maker of major brands including Reese’s Pieces and Hershey’s Kisses is, like many of its competitors, making progress in becoming a broader snacking company, with acquisitions like LesserEvil helping to strengthen its position in the space.

That said, chocolate remains the company’s primary profit driver and its biggest source of brand equity.

“Hershey’s transition is real, but incomplete,” says Choudhury. “It’s not yet a diversified snacking company. It’s better described as a chocolate-led confectionery company building a stronger snacking adjacency.”

In this context, innovation also becomes more focused.

Innovating for growth

In the current environment, innovation can’t be limited to new flavours or short-term launches, it needs to support pricing, improve margin mix, and sustain consumer engagement despite higher shelf prices.

“The strongest opportunities are likely to come from permissible indulgence, portion-controlled formats, seasonal innovation, premium gifting, zero-sugar and better-for-you lines, cross-category snacking, and texture-led formats,” says Choudhury.

It’ll also be important in non-chocolate and salty snacks, where Hershey has more room to reduce cocoa exposure while still participating in impulse and treat-led occasions.

Beyond the rebound

Looking ahead, Hershey’s trajectory depends on its ability to balance pricing, volume, and cost management.

It’s shown it can protect profitability in the short term, but sustaining growth will require a more diversified portfolio, where snacks play a greater role alongside confectionery.

For investors and the wider market, the big question is whether this recovery can be sustained, or if ongoing commodity volatility and consumer pushback will weigh on performance.