The paragraph introduces the Hershey Company's first quarter 2024 earnings Q&A session, hosted by Vice President of Investor Relations, Melissa Poole. She reminds listeners that the call is being recorded and introduces the company's CEO and CFO. She also mentions that forward-looking statements may be made and non-GAAP financial measures may be referenced. The operator will then open the floor for questions.

During a conference call, Andrew Lazar of Barclays asked a question to Michele Buck, the CEO of a confectionery company. He noted that excluding inventory build, organic sales in North America rose 2%, which was higher than expected. He asked if this indicated a building momentum in the core confectionery segment and if there would be a sequential improvement in volume trends in the second quarter. Michele Buck responded that they were pleased with their first quarter performance, which was in line with expectations, but their market share exceeded expectations. She attributed this to strong performance in seasons and innovation, particularly with Reese's Caramel. She also mentioned an improvement in display activity in the first half of the year compared to the second half of last year.

The speaker asks if the company's recent success can be attributed to their partnership with a major retailer and if they have improved their merchandising strategies. The CEO responds that they are working closely with the retailer and have seen strength in other areas as well, such as seasonal innovation and tie-ins with events like the Super Bowl. The next question asks about the company's cocoa sourcing strategy, and the CFO explains that they have various options and levers to deal with the volatility in the cocoa market, such as hedging and diverse sourcing.

The speaker discusses the company's efforts to diversify their supply chain and the flexibility they have in sourcing ingredients. They also mention the impact of SNAP spending cutbacks on the business and the stabilization of the market. The North America confectionary segment met expectations, but their market share exceeded expectations.

In this paragraph, the speaker is clarifying and discussing the sales trends and performance of the company's products, particularly in the salty and ready-to-eat popcorn categories. They mention that their largest competitor's performance was soft due to a lack of sustained innovation, which impacted the category. They also mention the strong performance of their Dots brand and the expected improvement in Skinny Pop once they lap the Q2 period. The company has invested in media and trade for both brands to drive growth.

The company is expecting growth and share gains in the second half of the year due to flavor and pack innovation. The first quarter was the weakest for profit, but it is expected to improve going forward with increased advertising and profitability. The company is not discussing 2025 pricing or cocoa inflation, but is focusing on other levers such as supply chain savings and transformation savings. More information on the 2025 plan will be available later in the year. The company is also not providing details on gross margin for the second quarter, but mentions cost absorption may reverse out due to ERP cutover.

In the seventh paragraph of the article, Steve Voskuil discusses the expected reversal of fixed cost leverage in the second quarter and the potential impact on inventory mix. In the following question, Nik Modi asks Michele Buck about the performance of C-stores and the company's approach to pricing and competition in the snacking category. Buck notes that the C-store business has been holding up well and that they consider both price gaps within the category and across the snacking category when determining pricing strategies.

In the paragraph, the speaker discusses their company's approach to evaluating price elasticity and how they plan to continue using this method. They also mention the expected decline in EPS for the first half of the year and their strategic approach to investing in their brands and adjusting their budget accordingly.

Bryan Spillane from Bank of America asks about the impact of Easter on Halloween sales and if there will be any changes in approach due to last year's pressure on everyday business. Michele Buck responds by saying that Valentine's Day was strong and Easter declined but still gained share. She expects positive trends for the second half of the year, but growth may moderate compared to last year. Robert Moskow from TD Cowen is next to ask a question.

Robert Moskow asks Michele Buck about the company's strategy for evaluating pricing actions after the ERP conversion and how they estimated the amount of extra inventory customers pulled forward. Buck confirms that they are at the end of the ramp up phase and have options available to them at the end of Q2. She also mentions that they worked closely with customers to understand their inventory needs, but some customers may not have communicated their requirements fully, leading to excess inventory.

The speaker believes that some retailers were influenced by other companies struggling with ERP implementations and increased their inventory levels. However, the company was able to meet the retailers' demands and did not experience much disruption. The speaker also mentions that there was no significant change in price elasticity over the past few months and they expect it to remain at the historical level of minus 1.

The company has seen a slowdown in at-home snacking and believes this is due to a combination of post-COVID effects and reductions in SNAP benefits. However, they have seen strong performance in their C-store, Mass Club, and Dollar channels. The company's gross margin outlook remains unchanged and they are on track to meet their target of 200 basis points down year-over-year, with productivity savings in line with plans.

The company is not seeing any significant changes in their business and the slower category growth is mainly due to innovation from a competitor. They are not commenting on cocoa inflation for next year, but there are other factors that could contribute to inflation. Non-measured channels are driving outperformance in the salty snack category, potentially due to increased velocity or distribution in ecommerce.

The company's views on the cocoa market are similar to those of a competitor, with both structural and transient factors affecting prices. Poor weather and concerns about supply have been major drivers, but there are also other factors such as regulation, speculation, and lack of liquidity. The company is closely monitoring supply and demand in the short-term.

The market is getting signals about the supply outlook for the main crop happening over the summer. Early reads on midcrop look good, and the company has coverage for the next few years. They remain focused on driving growth and efficiency while monitoring the environment. The company has two programs focused on productivity and savings, which will contribute to offsetting inflationary costs in the long term. In the short term, cocoa is causing some stress, but the company's fundamental model is still in place.

Michele Buck discusses the success of Hershey's seasonal products, attributing it to a strong product portfolio, effective merchandising, and increased supply. These lessons will also be applied to other occasional events such as the Super Bowl, March Madness, and the Olympics.

The speaker discusses their plans to leverage certain strategies to make the Olympics a successful event for their company in the summer. They also mention their approach to the European market, stating that they believe their best chance of success is with a differentiated product. They have already brought Reese's to Europe and are currently in a trial period to better understand the market.

The company has had success in the U.K. with minimal investment and is now focused on maintaining strong margins. In the U.S., the company is considering the impact of high inflation on demand drivers and is looking at entry level prices and innovation to drive value. The next question is about cocoa prices.

The speaker, Michele Buck, addresses recent price declines in the market, stating that they are a result of volatility and not new supply and demand signals. She suggests that other factors, such as speculation and regulation, may be playing a role in the decline. The moderator, Melissa Poole, thanks the participants and ends the call.

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