HERSHEY, Pa. — The Hershey Co.’s U.S. business was on track with expectations for 2020, but COVID-19 changed the company’s financial outlook.
And while Hershey sales in food, mass and dollar channels grew as consumers stocked up in March, convenience-store and drug channels have been soft, Hershey President and CEO Michele Buck said in an April 23 earnings call.
C-stores account for about 15% of Hershey’s sales, and c-store sales are declining about 10% amid the coronavirus outbreak, Buck said. E-commerce is about 2% of Hershey’s sales, and the company is seeing the growth rate double there—at least for now.
“The situation continues to evolve so rapidly that it's difficult to predict the future with much certainty. While comparisons can certainly be drawn to weather-related disruptions or natural disasters or recessions, the reality is that we have never seen so many factors at play at the same time on such a global scale,” Buck said.
Pre-COVID-19, business in the United States was on track both for the first quarter and the full year, Buck said. Hershey benefited from customers stocking up in March, but less so than other meal-oriented categories, she said, with total retail sales growth accelerating 10% in March. This growth was mostly in food, mass and dollar channels.
Consumer priorities changed as the COVID-19 situation worsened in the United States in April, Buck said. Many U.S. households are not working and are experiencing meaningful financial pressures, she said, which has affected traffic into stores, length of time in stores and the amount of discretionary goods people are purchasing.
Hershey syrup, baking chips and cocoa grew about 30% during March as families spent time at home baking, Buck said. Skinny Pop and Pirate’s Booty also grew about 20%.
The gum and mint categories were significantly affected by social distancing—down about 40% to 50% in the past several weeks—because these products are much more functional than emotional, Buck said.
The Hershey, Pa.-based company said it has put in place more stringent operating procedures and safety protocols to ensure the well-being of its employees amid the coronavirus crisis. While all manufacturing plants remain open, corporate and commercial employees who can work remotely are doing so. Hershey also built inventory in both raw materials and finished goods to mitigate risks as the situation unfolded to help meet demand and deliver strong customer service levels, Buck said.
In a move that Buck said was unrelated to the COVID-19 pandemic, Hershey is looking to divest its Krave jerky and Scharffen Berger and Dagoba chocolate brands, Buck said. The move is meant to better prioritize resources against assets that fit the company's business model and scale capabilities, she said.
“These are great brands that continue to resonate with consumers, but they require a different go-to-market model that we believe is better supported by other owners,” Buck said. “These actions will enable us to prioritize our recently acquired scale assets within salty snacks and nutrition bars.”
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