The paragraph introduces The Hershey Company's Fourth Quarter 2024 Q&A session. Anoori Naughton, the Senior Director of Investor Relations, informs participants that a press release, pre-recorded management remarks, and transcripts are available on the company's website. Anoori cautions that forward-looking statements made during the session are subject to risks and uncertainties, emphasizing they may differ from actual results. She mentions that non-GAAP financial measures will be discussed, with reconciliations provided in the press release. The session will include Hershey’s CEO Michele Buck and CFO Steve Voskuil, and the operator will facilitate questions.

In this discussion, Andrew Lazar from Barclays asks Michele Buck about the feasibility of achieving balanced top-and-bottom-line growth in 2026, particularly given the high cocoa prices. Michele defers to Steve Voskuil, who explains that the company intends to get its earnings per share (EPS) back on track by utilizing strategies such as hedging commodities to avoid paying full market prices, implementing pricing strategies, enhancing productivity and cost savings, improving efficiency in selling, general and administrative expenses (SG&A), and optimizing marketing spend. He acknowledges that pricing changes might be challenging, but highlights that 80% of their confectionery portfolio is priced under $4, offering some flexibility.

Michele Buck explains that their company's current observations of market elasticity are meeting or slightly exceeding expectations, giving them confidence in their pricing strategy. They have strategically decided where to implement pricing changes, considering factors like cocoa prices, to balance their approach. They remain vigilant in monitoring these conditions. Ken Goldman from J.P. Morgan questions their approach to adjusting pricing and price pack architecture in response to changes in commodity markets. Michele Buck responds that their strategy considers both underlying market fundamentals and futures market prices, while Steve will provide additional insight into balancing these factors.

The paragraph discusses the diversification and resilience of the global cocoa supply, noting that nearly half of current production now comes from outside Ivory Coast and Ghana. Investments continue in West Africa to enhance resilience, and supply sources have been diversified. There is a recognition that cocoa pricing is currently volatile and not perfectly aligned with market fundamentals, so future plans, particularly for 2026, are being developed with this in mind, touching all parts of the P&L. Additionally, they monitor both exchange prices and actual prices at origin due to potential differentials. Elasticities are mentioned as being stable or slightly improved.

In the paragraph, Michele Buck discusses the company's guidance and elasticities, acknowledging that they've incorporated historic elasticities at a minus one level into their forecasts. She mentions the possibility of some flexibility depending on various factors but believes this approach is prudent given the current consumer market volatility. Max Gumport from BNP inquires about the focus on elasticities as a key factor for 2025, noting that other costs and pricing are largely stabilized. Buck explains that while there could be upside if elasticities improve, they are cautious due to consumer pressures. She also notes that the company's international segment, though smaller, is handled differently as they aren't market leaders in those regions. The paragraph concludes with Gumport mentioning the strong performance in the international segment in the fourth quarter.

The paragraph is a discussion about competitive market activity and margin pressures in certain regions. Steve Voskuil highlights strong fourth-quarter performance due to a favorable market environment and Black Friday sales, particularly noting increased competition in Brazil and Mexico, with Brazil experiencing intense promotional activities. Looking ahead to 2025, they expect heightened competition in these areas. In terms of gross margin pressure, Voskuil states that the company is mostly covered for cocoa for the year, with less pressure in the first half due to hedging, but anticipates more impact in the second half. Robert Moskow asks about the phasing of margin pressure, to which Voskuil responds with the expectation of less pressure early in the year and more in the second half.

The paragraph discusses pricing strategies and sales outlook in the cocoa industry. Robert Moskow asks Michele Buck about competition and pricing actions, noting strategic decisions not yet impacting instant consumables. Michele Buck responds that most major players, including private labels, have taken broad-based pricing actions while cycling through their portfolios strategically. The company is continuously evaluating its entire portfolio and considering pressure in certain channels. Alexia Howard then asks about the muted sales outlook for 2025 compared to past performance. Michele Buck explains that international pressures and market volatility play a role, and they expect consumption to be stronger than shipments due to North American retailer inventory.

The paragraph is part of a conversation during an earnings call, where Michele Buck addresses a question from Alexia Howard about the impact of GLP-1s on their business. Michele states that there is no material impact and they are evaluating data from both external and internal sources, including studies like those from Cornell. They find that users of GLP-1 drugs do not consume significantly less from their product categories. Michele notes a broader consumer shift towards healthier items with nutritional claims, and mentions that the company will adapt its portfolio according to consumer trends. Steve Voskuil then addresses a follow-up question from Peter Galbo about the company's revenue projections, considering factors like a missing shipping day in the fourth quarter and other variables affecting the financial outlook.

The paragraph discusses the impact of fewer shipping days on annual growth, projecting low single-digit growth for the second half of the year. It then shifts to a conversation about cocoa markets, where Michele Buck explains their strategy to capitalize on market dislocations and lower prices in origin to optimize their cocoa supply chain. While they are exploring alternatives due to low commercial participation on the exchange, they remain cautious about discussing specific instruments. Steve Voskuil adds that market dislocations can present opportunities, and they are actively seeking them. The conversation concludes with the operator introducing the next questioner, Todd Palmer from Citi.

In the discussion, Michele Buck explains the approach to pricing and growth assumptions, stating that they consider the elasticity effect and use programming to enhance brand growth and consumption on a detailed level. The "Long Easter" provides a starting growth point, but added programs can improve this. Todd Palmer inquires about a $40 million timing benefit in Q4 linked to a new ERP system, which offers more precise inventory cost allocation. Steve Voskuil notes this precision might bring slight variability across quarters but won't significantly alter their models or future projections.

In a Q&A session, Michele Buck discusses the company's focus on innovation in their non-chocolate portfolio, highlighting new product launches like Jolly Rancher innovations, Shaq-a-licious Gummies, and the acquisition of Sour Strips. These initiatives are expected to drive growth into 2025, with additional products like JR Freeze Dried recently launched and more to come. Buck emphasizes the opportunity to gain incremental distribution and consumer occasions in the sweets category, where the company is currently underdeveloped. The aim is to gain new retail space rather than merely swapping it with existing chocolate products.

The paragraph discusses the strategies being employed to address market share declines in everyday chocolate, as mentioned by Michele Buck in response to a question from Leah Jordan of Goldman Sachs. Michele Buck notes that everyday chocolate is showing improvement, with significant advancements in sweets and take-home categories. She attributes some of this progress to overcoming previous retailer-specific challenges and emphasizes the importance of innovation, particularly to compete for shelf space. They are enhancing innovation across different packaging types to foster growth, with plans to sustain growth next year by focusing on sweets, season-specific products, and everyday chocolate improvements.

In the paragraph, the speakers discuss improvements in Reese's product offerings and strategies to enhance their presence in convenience stores, despite some ongoing market pressures. Michele Buck mentions a significant upcoming innovation for Reese and notes improvements in the variety portfolio from Q3 to Q4. They are implementing a "gold standard" planogram, which has shown positive results in testing, although it requires time for retailers to reset. More impactful results are anticipated in the mid-year to second half of the year. Leah Jordan and others express optimism about these developments and look forward to further progress.

In the discussion, Steve Voskuil and Michele Buck talk about the company's approach to reformulating products while maintaining the taste and quality of their iconic brands. They acknowledge market trends, such as increased demand for cocoa alternatives, but emphasize that any changes they make undergo extensive consumer testing to ensure there's no negative impact. Michele Buck notes a shift towards using cocoa butter alternatives due to market pressures but stresses the importance of brand integrity. Additionally, they are monitoring cellular agriculture as a possible long-term solution, though its role in the near future remains uncertain.

The paragraph features a discussion during a conference call, where Michael Lavery moderates questions from analysts. Chris Carey from Wells Fargo Securities inquires about the company's gross margin projections for Q1 and the remainder of the year, specifically questioning whether cocoa inflation is the main factor affecting margins. Steve Voskuil confirms that cocoa prices significantly impact inflation, alongside other costs like labor and warehousing. Chris Carey also asks Michele Buck about her announced retirement and the succession planning process. Michele explains that a robust search process for her replacement, led by a board search committee, is underway.

The paragraph discusses the company's approach in selecting a suitable successor with the right skills and focus to navigate the fast-evolving industry. The current leader is focused on executing a '25 plan and transforming the company for future growth. In a Q&A segment, Rob Dickerson from Jefferies questions how changes in cocoa prices and supply-demand dynamics might impact the company's financial performance by 2026. He seeks clarity on whether earnings might increase significantly if cocoa prices drop or whether they would rely more on algorithmic growth. He is interested in scenarios where the company could see substantial earnings recovery.

The paragraph is part of a conversation between Steve Voskuil and Rob Dickerson regarding the company's outlook for earnings per share (EPS) growth in 2026, even amidst fluctuating cocoa prices. Voskuil highlights potential aggressive actions being planned for execution, particularly in the first half of the current year, to achieve balanced growth. Rob Dickerson inquires about the company's hedging strategies for cocoa prices, and while Voskuil cannot disclose specific plans for competitive reasons, he assures that their team is closely monitoring market trends and will adapt as needed. The conversation concludes with the introduction of the next question from John Baumgartner from Mizuho Securities.

The U.S. chocolate category has seen a 5% decline in volume in 2024, slightly worse than 2023, despite decreased pricing. While GLP-1s aren't a major factor, health and wellness trends may impact sales. Michele Buck highlights several factors affecting chocolate sales, including a shift towards sweets for their different taste and value, evolving sales channels, and a focus on health and wellness. The growth of zero sugar and protein product lines reflects this health trend, and there's an emphasis on adapting to channel changes and exploring growth opportunities in emerging markets.

In the discussion, David Palmer from Evercore ISI inquires about growth prospects, focusing on seasonal opportunities and channel performances like convenience stores. Michele Buck responds by expressing optimism about seasonal growth, attributing it to strong consumer emotional connections and traditions, particularly with brands associated with family rituals. She notes that this year's late Easter could boost seasonal performance and expects overall growth and market share gains. Buck also indicates confidence in the performance of other seasons, providing a solid foundation for future success. Regarding the convenience store channel, she suggests it will align with their broader forecasts.

The paragraph discusses the forecast for convenience, expecting continued pressure in that channel until it stabilizes. The pressure is anticipated to ease in the summer, leading to improvements. Michele Buck and David Palmer conclude the conversation, and the operator closes the question-and-answer session.

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