Hershey Battles Commodity Volatility
Hershey is facing intense commodity volatility as it aims for 2026 margin recovery, relying on cocoa hedging amid record cocoa prices but remaining exposed to rising sugar costs. The company's finance team is prioritizing scenario modeling and transparent communication to the C-suite, enabling quick pivots in procurement and pricing. This illustrates driver-based financial analysis in action.
Hershey's 2026 outlook includes a projected 4% to 5% increase in net sales. The company also anticipates adjusted earnings per share to range from $8.20 to $8.52, a 30% to 35% increase compared to 2025. A key element of this forecast involves a gross margin recovery of around 400 basis points for the full year. CEO Kirk Tanner expects "slightly lower volume sensitivity to pricing actions" than previously anticipated. The company's strategy includes increased advertising and marketing investments, along with expansion into healthier, zero-sugar products. Hershey is also targeting $230 million in efficiency savings to offset cocoa volatility and protect margins near 23%. However, Hershey still faces challenges, including volatile cocoa prices and potential consumer pushback against price increases. RBC Capital Markets analyst Nik Modi noted that Hershey has "yet to fully recover cocoa costs". Hershey has steadily increased prices over the past year to mitigate the impact of tariff swings and rising cocoa costs. The company's finance team is using scenario modeling to navigate these uncertainties. Hershey is also focused on supply chain improvements and hedging strategies to manage commodity volatility. Hershey's management is working to improve liquidity in the cocoa exchanges and is investing $500 million in its sustainable cocoa strategy.
