Hershey is reporting a big profit and revenue spike, this as it promises a big ad spend as well.
The company is reporting Q4 net income of $396.3 million USD in the quarter ended Dec. 31, up from $335.6 million USD the year earlier. Revenue for for the maker of Reese’s Peanut Butter Cup, Kisses and Chipits moved up 14% year-over-year to $2.65 billion USD.
Advertising and related consumer spending increased 3.3% in Q4, the CPG reports, driven by higher levels of media on Reese’s and Jolly Rancher brands as new capacity came online.
According to Hershey CEO Michele Buck, while high inflation contributed to sales growth, the company was also able to grow volume, a testament to its brands and execution in a volatile market.
“We believe snacks and confection trends will continue to pace ahead of other food categories, and our planned increases in advertising levels, supported by higher production capacity, are expected to further bolster Hershey’s growth and help offset price elasticity,” Buck said.
According to Buck, advertising levels are planned to increase by double-digits, with nearly half of this increase dedicated to its largest confection brands and occasions, including Reese’s, Hershey’s and Skinny Pop.
In today’s earnings call, Buck said the company has strong ROIs and a database approach to spending. During tough times, consumer connectivity is important, she says. It reduced spend last year, thanks to capacity constraints and it saw and immediate impact it had to address.
“We are always looking to returns we are getting on our spending, and making decisions as we go forward, based on that,” Buck says. “We are still not quite back to the point we want to be.”
According to Buck, chocolate and salty snacks rank as two of the top three resilient treats that consumers are not willing to forgo. The salty snacks segment, Hershey says, now represents about 10% of net sales. Buck says its adding incremental talent to its salty business to do heavy lifting and is building capacity in its supply chain.
The CPG notes that key white space growth opportunities, including gummies and better-for-you snacks, will also receive greater levels of support this year.
Buck pointed out that Valentine’s Day, a key time of year in the confectionery space, is off to a great start and “all signs point to continued consumer enthusiasm” for Easter. During past few years, consumers have “dialed up their interest in seasons.”
In its outlook, the company expects net sales growth of 6% to 8%, driven primarily by net price realization as consumer demand remains steady behind higher advertising levels and increased capacity.