Halloween Weekend Holds Great Risks for Hershey

This Halloween season, Hershey is in a precarious position, with customer shopping trends shifting compared to the previous year. While in 2022, customers embraced early Halloween shopping, this year, they are taking their time. Consequently, Hershey, renowned for its products like Reese’s, Kit Kat (in the US), Twizzlers, and more, is reliant on shoppers loading up on candy this weekend to meet its targets. This is especially critical as traditional chocolate sales are slowing, and the cost of cocoa is on the rise.

Hershey CEO Michele Buck acknowledged the change in consumer behavior, stating that “Consumers have returned to purchasing their trick-or-treat candy closer to Halloween after supply chain and availability concerns spurred earlier purchases last year.” With Halloween just around the corner, Hershey is banking on a successful weekend of sales to boost its prospects.

The current season’s outcome remains uncertain, with early reports indicating a somewhat rocky start to Halloween candy sales compared to 2021, which witnessed robust sales due to people’s enthusiasm following Covid-19 restrictions. The performance last year was comparatively weaker. Sales for both chocolate and non-chocolate items have been slightly lackluster this year.

However, there is still an opportunity to bridge the gap, particularly given the recent trend of holiday shoppers making purchases closer to the season. For Hershey, supply issues will not be a concern this year, as the company has ensured that store shelves are well-stocked. So far, Hershey has reported slightly increased Halloween retail sales compared to the previous year and is outperforming the category.

Balancing candy production for the holiday season is a delicate task. Food manufacturers aim to strike the right balance, avoiding undersupply that might disappoint shoppers and push them toward competitors, while also avoiding excess inventory that requires discounting. Retailers continuously assess the allocation of shelf space, and a disappointing season can affect a company’s prominence.

The holiday season is crucial for candy brands, accounting for a significant portion of their annual business. For Hershey, around 25% to 30% of its annual revenue comes from holiday sales, including Halloween.

Hershey’s regular chocolate sales have encountered challenges, intensifying the pressure on Halloween-related items. In the third quarter, everyday chocolate sales growth within North America Confectionery slowed, with sales driven by price increases while volumes declined.

In response to consumers’ increasing focus on value and affordability, Hershey has expanded its presence in dollar stores, discount outlets, and club locations, exploring options like selling smaller-sized products at more affordable prices. While the overall US candy sales have continued to grow, unit sales in the chocolate category have faced a decline.

Halloween

Cocoa prices have surged over the past year, primarily due to strong demand and supply constraints stemming from poor yields. Although Hershey has long-term contracts for commodities like cocoa to secure prices in a volatile market, the company has expressed uncertainty regarding the market this year. These rising costs could potentially lead to more price increases, though Hershey has not yet announced any additional hikes.