The paragraph introduces the Q&A session for The Hershey Company's second quarter 2024 earnings. Anoori Naughton, Senior Director of Investor Relations, is the host and reminds listeners that the conference is being recorded. She also mentions that forward-looking statements may be made and refers to non-GAAP financial measures. The CEO and CFO of Hershey are present for the Q&A session. The operator then opens the floor for questions.

During the question-and-answer session, Ken Goldman from JPMorgan asks about the impact of lower retail inventory and the Halloween shift on North American Confectionery. He expresses concern that these factors may indicate weaker demand. Michele Buck and Steve Voskuil respond by stating that the current inventory levels are more in line with traditional patterns and that they have strong expectations for the upcoming seasons due to retailer collaboration. They do not see these factors as a red flag for the company.

Michele Buck is asked about the company's recent pricing announcement and is asked to provide details on which products the increase will cover and the magnitude of the increase. She explains that the company has been experiencing historic cocoa prices and believes that future prices will remain high. They have taken a measured approach to pricing and will only increase prices on certain products. She also mentions that they are seeing some elasticity in the market and are assuming historic elasticities in their price increases. They are not providing specific details on the pricing at this time due to competitive reasons.

Michele Buck and Andrew Lazar discuss market share trends in core chocolate and the factors that may be driving share losses. They anticipate a stronger second half of the year, with new innovation and pricing strategies to help offset any losses. They also mention that the second quarter was weaker than expected, but they have plans in place to improve in the back half of the year.

In the C-store channel, there was pressure due to weakening trends and increased focus on take-home products. The reduction in key retailer merch also had an impact, but this is expected to reverse in the back half of the year. The company is confident in their progress and innovation, and expects to have an advantage in upcoming resets at key retailers. They also anticipate strong sales during the second half of the year due to seasonal events. The company believes that the effects of the reduction in retailer merch will neutralize over time.

Alexia Howard from Bernstein asks a question about the decrease in incentive compensation for the company. Steve Voskuil explains that the decrease is due to the company's overall performance and is trued-up every quarter. Michele Buck adds that the reduction in full-year guidance also has an impact on the compensation. There is not expected to be a bounce back in the next quarter.

The speaker asked about the company's gross margin and input costs, specifically mentioning a 200 basis point decline for the full year and asking about the dynamics of input costs. The company's CFO responded, explaining that there were a few factors that contributed to a positive impact on input costs in the second quarter, including mark-to-market movements and changes to their ERP system. However, they expect these to balance out in the second half of the year. The next question came from a different speaker, who asked about consumer receptivity to the company's price increase and whether there was any normal elasticity. They noted that the company's results showed a shift towards value.

The article discusses the performance of different types of stores and how snack companies are adjusting their prices in response to inflation. Pepsi has cut prices due to poor merchandising results, while Mondelez is trying to lower their price point. The speaker, Michele Buck, explains that they are taking a conservative approach to price increases and are focusing on the consumer. They are also looking at other factors such as value, innovation, and promotional strategies. The article also mentions that the company is beginning to plan for cocoa purchases in 2025.

The company is confident in their gross margin expectation for the year, as they are locked in on cocoa prices. There may be some mark-to-market movements, but they are confident in their commodity basket. The company expects a 6-7% price increase in North America Confection, which may contribute to stabilization or acceleration in the second half of the year.

The speaker asks Shaq about the importance of various factors such as the new Reese's, channel expansion, and restoration of merchandising with a key retailer in driving acceleration. Steve Voskuil clarifies that the 6-7% net price increase for Confection will be phased in and expects mid single-digit growth in 2025. Michele Buck highlights the large retailer merchandising resets, seasonal impact, sweets innovation, and continued salty acceleration as the biggest drivers for the second half. They also mention consumer pullback on discretionary spending and C-store weakness, which has been seen picking up in the last two months.

Michele Buck, CEO of a company, was asked about the current consumer behavior and how long it could continue. She explained that during times of economic uncertainty, consumers tend to be more focused on getting the best value for their money, which can lead to a shift in purchasing habits. She also mentioned that the company is confident in its ability to adapt to these changes and expects to see stabilization and growth in the future. When asked about the expected impact of a price increase, Buck stated that they are anticipating a historic elasticity of around 1, but they are also factoring in other factors that could offset this impact. Another analyst then asked a question, and the call was passed on to the next speaker.

Tom Palmer asks Michele Buck about the sustainability of current cocoa prices and how the recent round of pricing announced by the company will cover longer-term inflation. Buck explains that their strategy for managing cocoa prices remains the same, but it is not a linear process and the current pricing may not fully cover inflation. Steve Voskuil adds that the company is also looking at other levers such as cost reduction, productivity, and formulation to manage cocoa prices. They will continue to monitor the situation and take further steps as needed.

The speaker discusses the impact of recent positive news on pricing and mentions that there won't be significant changes until the fall harvest. They also mention the expected progression of gross margin and underlying sales trends for the third and fourth quarter, including factors such as AAA savings, CI productivity, lapping of costs from last year, commodity inflation, seasons mix, and sweets growth. They also mention timing items that will be reversed in the third quarter.

During a conference call, a question was asked about the company's plans for marketing support. The operator mentioned that the question came from Robert Moskow with TD Cowen. Moskow asked about the increase in marketing support last year and if there were any changes for this year and 2025. The company's CEO, Michele Buck, responded that there will not be a significant change in marketing support and it will be in line with sales growth for this year and next year. Another question was asked by Jim Salera about the strong trends in the salty category for Dot's and the expected improvement for SkinnyPop in the second half of the year. Buck explained that there will be some pressure in the salty category due to promotional activity, but the company is confident in maintaining momentum for Dot's and reaccelerating growth for SkinnyPop.

The speaker discusses the continued growth of Dot's brand and the potential for expanding distribution and investing in marketing and innovation. They also mention some pressure on the popcorn category but feel confident about the opportunities for SkinnyPop through increased innovation and marketing. The softness in popcorn consumption is attributed to the satiety factor, but it has started to stabilize.

The speaker, Steve Voskuil, cannot provide specific information on the company's hedging for cocoa in 2025. He mentions that the company has a policy in place and has some level of coverage, but they are still monitoring the market and volatility. He hopes to provide more information later in the year when visibility increases, possibly during the third quarter call.

In a Q&A session, the company's executives discussed their approach to managing inflation and the impact of cocoa cost pressure on their portfolio. They stated that they are always looking to optimize their portfolio to meet consumer needs and that they have strong capabilities in snacking. They also mentioned that they have already taken some pricing actions to cover inflation and are considering other options as well.

The company is working on various strategies to offset inflation, including product reformulation, price adjustments, and cost savings. They are also focused on initiatives to bring value to consumers and working with retailers. The back half of the year is expected to have 4 points of visibility, with 1 point being seasonal and the rest possibly due to innovation and destocking in Q2. The company is also focused on driving production efficiency through technology investments.

Chris Carey asks about the drivers of the back half guidance for shipment visibility, specifically whether it is due to incremental innovation or other proactive initiatives. Steve Voskuil responds that the guidance does not require an increase in retailer inventory and mentions factors such as more innovation, easier laps in certain businesses, and an easier year-over-year comparison for international due to an ERP implementation. The next question from Rob Dickerson asks about the $700 million in gross savings through 2026.

The speaker is curious about whether the company has any flexibility to offset the rising costs of cocoa. The company is focused on cost savings and is expecting to save $300 million, but the speaker wonders if they could potentially save more. The speaker also asks about the softness in discretionary spending on chocolate, especially compared to the growth in the sweet side of the business.

The question is about the company's long-term growth initiatives that were outlined at the Investor Day over a year ago. These initiatives include upgraded commercial capabilities, digital network and supply chain optimization, and workforce planning. The company has mentioned progress on these initiatives throughout the call.

During an investor call, Michele Buck and Stephen Powers discuss the company's progress in keeping pace with the changes and improvements outlined during an Investor Day. Buck mentions that they have continued to drive hard on digital workforce planning and have made progress on their transformation program, including completing S/4 and implementing technology and automation solutions. They are dealing with the current environment while also moving ahead with their transformation initiatives. The call ends with the moderator thanking everyone for participating.

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