Seeing no letup in consumer desire for chocolate and salty snack indulgences, The Hershey Co. will increase advertising spending this year and double down on innovation for the Reese’s and Hershey candy brands.
Fueled in part by acquisitions over the past year, Hershey’s salty snacks posted a 71.4% net sales increase in North America in the year ended Dec. 31, while sales of confectionary items rose 9.7%, the company reported last week.
Despite price increases across most CPG categories, consumers still want their sweets for “two diametrically kind of opposed parts of their emotional state,” according to Chairman and CEO Michele Buck.
“One is when they are incredibly happy and it's a treat time and they want to treat themselves, and the other is when there are downtimes and they want a bright spot,” Buck told financial analysts last week.
“But they do view these categories, and especially chocolate, as a part of kind of emotional wellness -- what it does and how it makes them feel.”
Hershey expects 2023 net sales to increase between 6% and 8% driven by price increases and a double-digit boost in advertising spending.
Asked by Bank of America analyst Bryan Spillane whether increased advertising and marketing -- including a 3.3% uptick in the most recent quarter -- is needed to keep consumers engaged amid ongoing price increases, Buck said the company’s long-term model is “we believe” in advertising.
“We've seen the impact and the returns that we get on advertising in terms of having very strong ROI,” Buck said, adding, “People are connected to our brands. And during the tough times, we know that that connectivity leads to them continuing to buy.”
Since 2017, when Hershey began to transform its product portfolio, it has made at least one acquisition yearly beginning with Amplify Snack Brands.
In 2021, the company acquired the Dot’s Pretzels brand, pretzel manufacturer Pretzels Inc. and Lily’s Sweets, which markets candy bars, baking chips and other confections.
Chocolate innovations under way include Reese’s Big Cup Stuffed with Reese’s Puffs Cereal, Reese’s Creamy Cups, Reese’s Crunchy Cups and an iteration of Hershey’s Kisses called Milkilicious containing a milk-chocolate filling.