Candymaker Hershey Co, last week, warned that it will likely fall short of meeting the demand for holiday candy this year. As is the case with many manufacturers—and across many industries—Hershey is dealing with supply chain issues. The extended conflict in Ukraine is making it harder for Hershey to transport the ingredients they need to make their treats, things like cocoa and some edible oils.
In their second-quarter earnings call, Hershey CEO Michele Buck explained, “Seasonal consumer engagement is expected to remain high, and we expect high single digit sales growth for both our Halloween and holiday seasons. Despite strong growth, we will not be able to fully meet consumer demand due to capacity constraints.”
Effectively, there is a little more to it than simple supply restraint issues. Buck has also said that their ability to meet demand during non-holiday periods will deplete their stock of ingredients and the inability to replenish this—because of supply chain limitations—are the cause. That said, however, Buck adds that sales will still most likely top the numbers from last year.
Indeed, she goes on to say, “We have a strategy of prioritizing everyday on-shelf availability. It was a tough decision to balance that with the seasons, but we thought that was really important.”
And it is an important decision, after all, the time period leading up to Halloween is the company’s biggest season of the year. As a matter of fact, sales made leading up to that late October holiday makes up roughly 10 percent of Hershey’s annual sales, including not only popular chocolate bars like KitKat but also confections like Jolly Ranchers and Twizzlers.
But even as Hershey revealed this complicated news, share value for the chocolatier jumped nearly 3 percent last week, on the heels of profit and sales beats. Of course, price hikes amid strong demand can easily result in such stats. Still, net sales are up 19 percent, to $2.37 billion for the quarter (which ended July 3, 2022), which beat the analyst consensus estimate of $2.22 billion; hence, the positive stock outlook.