The Hershey Company (NYSE:HSY) Q2 2023 Earnings Call Transcript

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Michele Buck: Yeah. So I would say the innovation is up off of a relatively low base. So it’s having an impact based on that. I think many folks have been focused, certainly, we have been focused a lot on execution and meeting demand for the past few years and focused on the core with innovation not playing as big of a role. And I think now we are just seeing competitors in the marketplace start to dial up the innovation more back to historic levels, and as we go forward, that’s certainly an area that we are going to be focused on as we are continuing to increase capacity at the same time.

Ken Goldman: Thank you.

Operator: Thank you. Our next questions come from the line of Max Gumport with BNP Paribas. Please proceed with your questions.

Max Gumport: Hi. Thanks for the question. With regard to the increased chocolate capacity this year and the additional co-manufacturing capacity secured in sweets for next year? Is there any way you can help us dimensionalize how sizable those capacity increases are, just as we try to get a sense of how impactful these additions could be for volumes in the second half and also in 2024? Thank you.

Steve Voskuil: Yeah. We — I think we have said in the past that if you took a look at the capacity that we have coming online this year that’s already gone into place and then what’s coming in the back half, and look kind of year-over-year, you are somewhere in the 5% range of the incremental capacity across chocolate and sweets.

Max Gumport: Great. Thanks very much.

Steve Voskuil: You bet.

Operator: Thank you. Our next questions come from the line of Michael Lavery with Piper Sandler. Please proceed with your questions.

Michael Lavery: Hi. Good morning.

Michele Buck: Good morning.

Steve Voskuil: Good morning.

Michael Lavery: You have got the integration in salty snacks and the transition to SAP that you have been talking about and those never seem to be totally smooth or easy, you mentioned there’s some hiccups that you have seen. But can you just maybe give a little sense of what those look like in a little more detail, and specifically with an eye on just having a sense of what’s to come, what have you learned and how confident are you that the rest of the year can avoid some of those hiccups or just be even smoother still?

Michele Buck: Yeah. I mean, I would say overall, certainly, one of our key focuses as we planned for this year, was that at the enterprise level really focusing on the stellar execution. We planned the business in a way to assume that we would be trying to front-load performance knowing that there are always hiccups in the execution and so in Q4 we do expect to see volumes be down and we put that in our plans. The teams are all over it. It is a focused effort, not just within IT, but across every functional area of the salty business. And so far we have been doing pretty well on salty with household penetration growing, repeat frequency, strong sales. We did have the promotional shift into Q3. We feel good about being able to execute that. But we feel like we are well geared up to be able to execute that. That said, we certainly do believe that there will be volatility in the back half of the year with the ups and downs that’s forward.

Michele Buck: Okay. That’s helpful. And just back to pricing, you have got delays in some of the timing between the announcement and implementation, and then the seasons, of course, have a staggered effect and with just some of the maybe layers to it. Can you give a sense of just what you have announced already or put in place already has as an impact on 2024? It looks like at least the low single-digit, maybe my math, I guesses or estimates close to it, 3 points that you might already have in hand. Is that about right or what are some of the moving parts, just so we have kind of a little bit further look ahead of what’s already put in place?

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