The paragraph introduces the question-and-answer session for The Hershey Company's third quarter 2023 earnings. The participants are reminded that the call is being recorded and then the host, Melissa Poole, introduces herself and the company's CEO and CFO. The participants are also informed about the possibility of forward-looking statements and non-GAAP financial measures being discussed during the call. The operator then opens the floor for the first question.

At the Hershey's Analyst Day, the company expressed confidence in generating high growth in 2024 despite some changes, such as inflation and shifts in consumer behavior. They anticipate strength in top line growth due to increased capacity and new products, such as Reese's Caramel. The company is confident in their ability to pivot and adjust to changing market conditions.

The company has opportunities for distribution of salty Dot's, and pricing carryover from the previous year. Inflation in cocoa costs is a challenge, but pricing and productivity will help offset it. There may be some one-time pressures related to a transition, but it will be temporary. The company evaluates various factors to determine how to grow the business, including pricing and productivity.

The speaker is addressing a question about the company's outlook for next year, and acknowledges that there are many moving pieces and uncertainties at the moment. They mention positive factors such as productivity and pricing, but also note the changing commodity market. They plan to provide a more comprehensive update on their guidance at the next call.

The speaker discusses a recent trade de-load with a key retailer, which was driven by the retailer's strategy to improve the shopping experience and online order fulfillment. This impacted many categories, including confection, but will not affect holiday sales. The speaker does not expect other retailers to follow suit.

The speaker discusses a retailer's high degree of merchandising and the expectation for Halloween sales to be slightly up this year. They mention that shopping patterns have normalized and there is no concern about product availability. However, there has been some softness in sales from certain groups due to affordability concerns. The company is still aiming for low double-digit growth for Halloween sales. The next question is about cocoa and the speaker asks for an update on the company's hedging and contracting strategy for cocoa, which typically spans from three to 18 months.

The speaker is asked about their expectations for the market and how they are positioned relative to it. They mention their policies on hedging and how they have less visibility on pricing for 2024 due to the high prices. They also mention that nothing has changed in their pricing strategy and that they will have more information on the cocoa market in the future. They hope that the pricing will eventually normalize but will consider all options if it doesn't.

The speaker discusses the topic of buybacks and mentions that they did not have any in the quarter. They also mention that the stock is attractively valued for buybacks and that it will be considered in their capital allocation decisions for next year. The speaker also notes that the company has had a big year of capital spending, but that it will not be the same next year, allowing for more cash flow to be used for other purposes. In response to a question about consumer demand for chocolate, the speaker says that demand has softened across categories, but they are confident in their category and the potential for price realization. They also mention being aware of the current market conditions.

The company is aware of the challenges consumers are facing with their budgets and is focused on providing value and affordability. They have seen some increase in sales in certain categories and are focusing on engaging consumers through targeted media and innovation. The company is also capitalizing on seasonal opportunities and addressing distribution challenges to drive growth.

Michele Buck, CEO of Hershey's, discusses the competitive dynamics in the Salty Snack segment, specifically within Popcorn. She notes that there has been some softening in the overall Salty Snacks category, with growth decelerating due to lower pricing and a shift to non-measured channels. Buck highlights the strength of Pretzels and Dot's distribution opportunities in the category, and mentions that consumers are prioritizing more satiating snacks. In terms of ready-to-eat Popcorn, there has been a focus on private label and merchandising, which has impacted Hershey's ability to execute and invest in branded items. Looking ahead, Hershey's will focus on productivity in the category and continue to invest in their brands to grow household penetration and connectivity with consumers. Buck also notes that the S4 impact has been a headwind for them this year, but they are working to overcome it and move through it smoothly.

The speaker has two questions about the momentum of the business and the implied guidance for the fourth quarter. They ask about the revenue guidance and if the softness in the everyday category has impacted it. They also ask about the lower margins in the fourth quarter and if it is a reflection of potential margin degradation or just timing. The speaker summarizes that the biggest driver between Q3 and Q4 is seasonal timing, with Q3 having a big seasonal benefit at the expense of Q4. There is also a slight inventory headwind on sales. The speaker believes that the full year sales guidance of 8% is reasonable, considering the factors mentioned.

The speaker discusses potential challenges for the company's financial performance, including the impact of inflation on pricing and the potential for lower revenue. They also mention the effects of the ERP timing and shipments on the first half of 2024.

During a recent earnings call, Steve Voskuil, the CFO of a company, discussed the shipment movement for the first half of next year. He mentioned that there will be some inventory build in advance to mitigate risks, similar to what they did for Salty in the current year. This will result in higher sales and fixed cost absorption in the first quarter, followed by a reversal in the second quarter. The company's CEO, Michele Buck, added that this is similar to what they experienced with Salty this year. In response to a question about the category, Buck stated that the company's outlook for the Salty category has not changed in the medium term, and they expect consumption trends to improve in the next two to four quarters due to lapping comps and increased promotional activity.

Michele Buck, CEO of Hershey, discusses the company's strong presence in snacking and confection as well as its participation in savory snacking. She also mentions that the company expects similar trends in Q4 as it saw in Q3, with a focus on takeaway rather than shipments. She also notes that seasons account for 25-30% of the company's total business and about a third of its growth in the back half of the year.

Michele Buck, CEO of Hershey, discussed the company's expectations for growth in their Seasons business in 2024. She mentioned the importance of analyzing sell-through data for the current year's season and noted that the shorter Easter in 2024 may impact the season. The next question from an analyst asked about market share trends in the U.S. chocolate market, and Buck acknowledged that they have been weak recently, but they are hopeful for improvement against an easy comp on Halloween.

Buck discusses the company's short-term success in winning share of Halloween and the need to wait until 2024 to see improvement in the everyday business. She also mentions the early days of GLP-1s and the company's efforts to plan for potential impacts on their business.

Michele Buck, CEO of a company, is proud of the emotional aspect of their categories and brands, especially during moments of celebration. They will continue to adapt their portfolio to meet consumer needs, including products, ingredients, and innovation. They are also focusing on portion sizes and packaging, as well as potential M&A opportunities. In response to a question, Buck mentions the importance of value in their products, particularly in the perimeter of the store, such as fresh bakery and satiating foods. This is driven by consumer demand for more value at an appropriate price, even if it means choosing a different product, such as a cupcake instead of a candy bar.

In the paragraph, the speaker discusses the company's focus on society and how certain categories like pretzels, meat snacks, and tortilla chips have been performing well due to their filling nature. They also mention an increase in fruit consumption, possibly due to a perceived value. The International segment saw a slowdown in volume, which can be attributed to a shift in non-U.S. holidays and the rationalization of the company's beverage business in Mexico. This decision had a significant impact on the company's top line in Q3.

The speaker discusses the impact of market share in the chocolate industry and the company's strategy for addressing it. They mention the negative impact of category mix and the potential for innovation to drive merchandising and promotional efforts. The company is also working closely with a retailer to adhere to their direction while still recognizing the impulsive and expandable nature of the category.

The company has invested in their brands and will continue to do so in the future. They do not anticipate a significant change in their investment levels. They are focused on allocating resources between trade and media and have not seen a big increase in premium or private label categories. The recent merchandising adjustment at retailers was not limited to Confectionery and no category benefited from it. The decision was made to improve the consumer experience and support omni-channel and digital business. The company is working closely with retailers to drive the category and increase everyday velocity.

The speaker, Michele Buck, discusses the success of Dot's distribution in clubs and how it has helped increase household penetration. She also mentions the potential for further distribution and innovation. The brand seems to be insulated from demand elasticity and is popular due to its satiating qualities.

The speaker states that their product is a premium one with high prices, but it delivers on its value and has strong societal impact. The product is also highly differentiated. The moderator thanks everyone for joining the call and the speaker looks forward to catching up with them in the future. The call is then concluded.

This summary was generated with AI and may contain some inaccuracies.