The Hershey Company (HSY) 2 Feb 232022 Q4 Earnings call transcript

Company Profile

Participants

Melissa Poole	executive
Andrew Lazar	analyst
Michele Buck	executive
Steven Voskuil	executive
Robert Moskow	analyst
Kenneth Goldman	analyst
Bryan Spillane	analyst
Michael Lavery	analyst
Cody Ross	analyst
Christopher Growe	analyst
Nik Modi	analyst
Jason English	analyst
Pamela Kaufman	analyst
Christopher Carey	analyst
David Palmer	analyst
Stephen Robert Powers	analyst
Max Andrew Gumport	analyst
John Baumgartner	analyst
Jonathan Feeney	analyst

Call transcript

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Operator

Greetings, and welcome to the Hershey Company Fourth Quarter 2022 Question-and-Answer Session. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Ms. Melissa Poole, Vice President of Investor Relations for the Hershey Company. Thank you.

begin. may You

Melissa Poole

press Thank on Hershey everyone. I joining today of read us everyone prerecorded to Good remarks, website. management Fourth you Quarter the both our to chance Company's had are session. and XXXX for listen has our available morning, which the for release our Earnings hope Q&A

a replay Q&A the the conclusion At this addition, have session, will In we remarks. we audio posted prerecorded a transcript also call. post today's of transcript live and of of

these Please note Q&A performance. include financial of subsequent company's A today's SEC today's materially uncertainties. various during from those risks projected. such forward-looking press The the statements session, and company's company statements make be based that risks Actual we results update release detailed that events. statements found listing undertakes filings. expectations These to uncertainties regarding operations to and may can no the and in could assumptions are differ and subject on obligation future and

please non-GAAP be believe as results financial refer this to information are information measures to release. in of is for to or substitute GAAP note information financial considered accordance the in with certain not for GAAP. this isolation press we provide useful intended will may a that that presented the morning's Finally, The investors. presentation we Reconciliations in included

Hershey's CFO, are CEO, first Hershey's the will Michele the and today to Chairman With Steve it Voskuil. question. and me that, Vice for Joining operator Buck; over President turn and Senior I

Operator

the Our Andrew first with of Barclays. Instructions] comes from line [Operator question Lazar

Andrew Lazar

potential volume I outlook stay for -- ramp year 'XX, was you're because of what increase if for how sense get sense capacity, down to you to very little? from could guess trying this you're continued or to saw for whether you're the elasticity asked capacity would render in I'm better it top which it you me. has and for one capacity what just in for somewhat thinking some I line conservative elasticity about benign versus guess, been year? And get of flat-to-slightly as And as expecting upside limit were trying percentage a 'XX I the constraints here? a

Michele Buck

Andrew. Thanks, Yes.

at as last price be capacity, as our we than to that historic, see they it. As assuming And not at give they have us good demand year. increases with we some will we we in we closer elasticities, as ability are capacity, do low single-digit to year look but will quite as to last look which were flex

add? anything to Steve,

Steven Voskuil

No, that's fine.

Operator

Robert next from question Suisse. line comes the of Our Moskow with Credit

Robert Moskow

Congrats, everyone, share, in more such above key year rather you've than 'XX And you your raised And could to algorithm. market are the for to are is you wanted market better in conservative. thought, in you for like why gross kind year, aggressive looks is I ago? you 'XX? could a than coming and Maybe you're X also what year. then the drilling gains you normally start guidance drivers It months like maybe wanted normal share why? of know down. explain margin know this I normal, expecting it confectionery on if guiding the to But great isolate compared

Steven Voskuil

start I Can Sure. out?

Michele Buck

Yes, go ahead, Steve.

Steven Voskuil

Yes.

in question, quarters first some that. So efficiencies through to the some driver down a down of benefit we the Michele year from We of and productivity. the that cost looks we the historic and on do gross even part but fourth coming like forward, carrying last more good isn't -- as levels the performance. And we further sort side But in see and year. stabilization as the of that price on elasticity, next the have factoring, just through quite we more and X big of driven, be do see levels the but see obviously, especially line, for effect the last to planning top have of said drop return movers historic quarter saw pricing into elasticity our the P&L. margin something We more visibility

the Now for at have years. that aspiration still But haven't this more year, seen starting something we to we productivity. we're least see X in last

are drivers P&L So the some that far. those through

year. we share do a market share market the expect side, to yes, On have positive next

one that's to this year next think want -- disappointed the and about direction I that other see turn we're year.

Michele Buck

Yes.

we've that additional some and incremental capacity marketing of have well. taken will we additional as the And that capacity market be as helped up investment online the by share as certainly

gear. that we opportunity think it a As a spring, but a weren't the once think we about being about share, you and impact the able into fulfill think will of we season beginning see neutralize will year but the the probably given also get relative those of should lost this market part the declines kick the until forward. of from behaviors, then we really we all rebounder the into and that that pacing had know year won't going bit that be refreshment orders, some to we will around We the mix totally we spring slower, little of to hit social

Robert Moskow

follow-up. one Okay. Makes sense. And just

coming more this in margin is inflation or costs costs you thought? productivity just you better On than the really thought is than side, gross like are your accelerating

Steven Voskuil

side. Yes. more productivity the It's on probably

on lot particularly good the the we're expecting material And hedging COGS and inflation so have items those program things through more our costs a bit -- changed the forth, have still with high visibility single-digit year-over-year and We into and outlook, but probably chain that digits on commodities. a pretty little of assumptions think commodities supply don't much like costs. other I from and productivity. logistics labor and mid-single

Operator

the of JPMorgan. line from comes question Goldman Ken next Our with

Kenneth Goldman

level" your thing I there gross a XX.X% for XX% or specifically, this as grow of above? a "normal amount can if what to more such ultimately by year. there see an next healthy I to just back any guess, And curious a can year, this guiding gross you that around environment, if you in I'm inflationary reason get environment? You're is margin coming is do a, margin in of kind guess,

Steven Voskuil

I model growing That's Sure. year, the would gross part the margin algorithm. of that is goal. growth mean really every be our

strategy. had there forward. And in algorithm, so that's based that that do But past the get years we where would we to the the external price X gross drive we've really to of we will had turning agnostic on it's We inflation margins been terms so restoring continuing say challenge. and back now to in and the yes, and a like I change environment. XXXX for How that on see see getting frankly, and

Kenneth Goldman

by just about And we be aware of at consider drivers segment models, segments for how growth then these think necessarily little are in do our glance? breakdown XXXX? a there, and give You of there any we but operating first either of margins as bit maybe apparent sales unusual should the aren't items we that

Steven Voskuil

of have we're also are grow. that. only to up But that different, expecting see the reinvestment to that gross top but if some to margin catch the a see below unusual The in in going salty, business in bit finally seeing room expecting salty go things we'll some We and or Yes. of kind little some remarks, that. I strong is inflation, still pricing that mentioned We're year-over-year. saw line, to fourth quarter of to improvement a some we this

and talked the And next to infrastructure the between the to really activate prepared brands infrastructure to the going up lines going in more so the about some scale we're we that remarks. ERP is do part that against We're year. capability transition investments of

think probably margin drop to a than And so gross normal we probably the pretty traditional OP ] on back other the the are Other segments that, what than those one sales I terms some see capability might that's see growth growth, improvement, margin year [ the area investments. in of less of characteristics. through strong in I

Operator

Our line of the Bank next Spillane question comes with of America. Bryan from

Bryan Spillane

advertising of consumer you One, investing the is I prepared workforce. And spend is about question things questions. the I talked and the remarks just My in one had guess, X around in investments.

people start So I'll I then other something -- then one add And understand, that in merchandisers field to and just like and more that maybe the else? with follow-up. wanted or is

Michele Buck

as this year goals some in of making at employee we're investments key our Yes. integrate really our look our I that to strategic the of is scale we base, mean clearly, business. one salty

all talent in the the that And that we work. so incremental are base to sets we some employee that and and the sure there we talent to adding lifting have right heavy really do make skill have needed

that Some around of our planning systems. improving also

supply resilience supply given the chain, as sophisticated in a chain a invest when of smaller company, to work in we the business we the across capacity have things on then that network, and Some continuing need capabilities investments are made well. buy of we build lot obviously, to the where talent some more you

Bryan Spillane

Okay. it's specifically not salespeople? people like adding merchandisers more -- or frontline But

Michele Buck

Oh, no. No.

Bryan Spillane

to need you're was you've And you level advertising consumers going that really to second, of of consumables. stay just sort of that -- in choices? lot order increases are of price the across Okay. to some make persistent? inflation because making -- a obviously, double-digit partly your lot need pricing, to a product decision the inflation got have the kind just drove increase a else -- -- sort that behind on going start in to advertising kind the to there spend, -- just so of and or related something it that if consumer with but seen you're has increase advertise thinking the of of And consumers the sure a engaged, then Not lines, is seeing to of have own is Or at have rate? been function

Michele Buck

Yes. Absolutely.

the model, know the terms get we in advertising. our long-term advertising seen having We've strong we returns of you on ROIs. and impact in believe that So very

we spending, consumer do. connectivity, So growth. Over databased tough our elasticities connectivity us connectivity approach connected see consumer we that times, -- what to know profitable continuing very leads a advertising during we to what part take to People of is we that, them time, And helps that where the brands. buy. invest media do have know are builds that to and that that, incremental the that, know and we that we to we

validate our we it see that. that you impact constraints. is several then to over of we've And And demand spend as capacity yes, important really due an know, to on So statistics and last we reduced analysis an in year brands. time, inflationary done did during

want we the in really And brands, in really so our where investing this momentum. share, penetration, well a and reinvesting And wide year. the also continue salty better-for-you as we're of household like strengthen to where we're some gaining mode, gaining space market major gummies to that and opportunities as priorities business those are are we our growth

Operator

Our with next line Piper question Sandler. Lavery Michael from the of comes

Michael Lavery

ramping trying until kind of of a if I you give of just still maybe level start ideal as do up sort targets to or to see adjusted spending not limitations. there on recognize to would that following back if last run be your into the with you want But year the to capacity sort or -- restored I quite aligned understand be be us a yet we're or Just by of your this going match better the -- Could sense the to spending. steady you'll optimal year on even XXXX? next well? levels year, rate sense

Michele Buck

we spending mean at and are always our forward on we based go that the on we're as looking I Yes. making that. decisions returns getting

think that in we reasonable a So ZIP code. we're

that wouldn't still think efficiency, Getting historically. that We're that move to to time. above We've we're done the targeting a that have said we've our don't levels so we quite probably job point think to a of I to getting the were we But greater also high which back to go not returns. back we're great not over before be. getting highest very is in exactly this tight the going even mark commit want up we above. at lot we I very

Michael Lavery

prepared comment you Okay. just want That's more, we in bit the can, if remarks growth a a made driver. And about a unpack Seasons being really to little helpful.

to it off set start. went year Obviously, as well. You really a great last well

unfolds and And I that just be how to would to so understand thinking about little that? love a how bit better

Michele Buck

Yes.

continued the Consumers, years, to that even strong have Seasons. see the We in several during We've continue their interest Seasons. the up growth anticipate dialed in very category. past in to

love. a There's with So anchor place part it very is they in events that strong It's there's a place well. a portfolio. those do where our People the brands of a an of event. want lot we emotional where anchor participate to It's connectivity.

that capacity, think be be fulfill position the this mentioned we're we that year. there's fully going capture demand as better will so Seasons we able in a year as that that towards the able weren't opportunity. of and We of now, And more fully share part back be much the to opportunity. And won't a I had the as missed some because to to the we year, we first earlier, we perspective, be strong from anticipate part to of for

Operator

next Ross with of Our line UBS. Cody the comes from question

Cody Ross

I just back question want perhaps on the unpack to last cadence the year. go volume throughout to and

question. first to You on, you you progress a have you this expect to volume for increased capacity year. but That's lapping in my the down? for the Can first flat expect how to half just year, Seasons full the be the slightly coming that also understanding little year you're throughout unpack over-shipment bit

Michele Buck

that can you to talk Steve, then?

Steven Voskuil

Yes.

year, of there. we've got the Going into first the and the Seasons, already part identified shipments the volume

said, still we're the some part you differences in year. So constraints big -- expecting volume. at any quarter we're by dealing into with leading look year the we material Michele overall, not of for as When Seasons the front capacity the

Cody Ross

question one here. And just allocation helpful. Okay. last on then That's capital

end long the leverage upcoming perhaps at additional Are shareholders you term. years? the over You're making target more low at beginning to to of in the return your acquisitions cash look or

Michele Buck

right SkinnyPop, now their us Pirate's potential. we the investing leverage X job amazing we're to Dot's. bought And say acquisitions full just is and I'd integrating for that

market strategies, to it if our continue that balance demand have to However, do available. sheet portfolio do we segments, and into be do expand assets can appropriately our the M&A, be in a becomes advance consumer always to certainly we to high-growth lot in continue of looking the able right flexibility

Steven Voskuil

back That's would that tension want say, to as strategy We no I the M&A giving right. repurchasing shares changes. make part cash we're internal sure our to capital from puts be major best return. and broadly, standpoint, definitely and And on more the of a getting investments good allocation

And lot one we'll so and overall that's taking consideration this We've a thing capital as area an look at year, so balance to we allocation. the continue got of monitor. CapEx of that we're into that's

Operator

Growe line Chris with comes Our the question next from of Stifel.

Christopher Growe

could, certainly quarter? margin in XX%. over I anything to margin and then want a about did investments I want level year, expect in internally throughout a a I just had question the the the fourth but Salty to I quarter throughout as with the in here being to of fourth bit just make, the how fair both particular, And so heard division, first, question, the which earlier understand if advertising to to XXXX, margins the unique strong you the an there follow-on reaching just but quarter? not and Snacks to guess you it in I Was expand,

Steven Voskuil

said we that to of finish we pricing more the Yes. catching maybe little some we earlier, We're over did the the up we that. second, fourth One, and quarter. drove really year. seeing And a pleased of have quarter bit with X fourth inflation laps saw probably course the in the easier then things are

So as we've of little got bit benefit a that a of well.

margins lot to some and for look a office, that Hershey expect we We've back and chain -- of on the we with that streamlining business the continued all next streamlining going forth. gross to into business about systems we've As plans year, and before to still that network, got talked see again, margin, want optimize better so integrating to I advancement. forward of existing supply the our

March that that fact, up margin behind between profile business on get continue about Michele we couple some the still spend in forward but top some next of over the said, that course we aspirations then are Investor high aspirations we look would to accelerate invest investments and as we the takeaway to on have years. lines of and but like the the back over year. But see time ERP, is for the to so we'll going the line our Conference capability to that brands have say the talk when I that, to And more of to reinvest as key

Michele Buck

occur And expansion margin most those We the term. 'XX. expect expansion don't in of longer will over margin significant or

Steven Voskuil

Yes.

Christopher Growe

And quick how to inventory will understand just helpful. fare year. if That's Okay. then on through the could, follow-up, I a

as build about you question to the you does you, of, late -- it hold talked the just You as I then year move convert the it inventory in goes more? or out? the depleting is do some you guess, inventory lower Should or move it this inventory to expect you goes level or Have it -- built grow kind already, ERP deplete and system. through new that year then

Steven Voskuil

Yes.

We not expect how a much to all when between salty be I already. haven't just that limit we build, can significant really to will as pretty we material. it the inventory build. a said, allow cutover probably and built there's depletion some mean But that's get mean quarter, systems. fourth to the I there we we

on so year would And strong look basis, a start year. probably We see that with for like will a to net-net for business. come back that to negative next the that expect a the year,

Operator

Our RBC line comes next Modi the with Capital Markets. from Nik of question

Nik Modi

be? then just capacity. Michele, they have versus, you There's where And of where know rates, labor guys to a kind And that? now I are on I just I a a component could of also kind is that comment was things are been you'd question. bigger-picture you below just fill curious, of, like hoping had historically, to where function

Michele Buck

Yes.

been and able capacity are additional say year So the where been to rates the improvement ground. significant There's invest were. on much we've fill some better get would capital than in they our as I last versus

to impact really, minimal capacity. tied there's It really, very largely from labor. and -- much was So

us to staff way it able but in against But certainly the less to be in seeing up seen not enable improved. to situation it was network to the labor the we all did incremental lines. back than capacity the past, and disruption perfect obviously we've pandemic, execute the before the we're Now

Nik Modi

bigger-picture the it some we especially underlying can on curious, But and research have just chocolate categories? can ago. would COVID. a anyone going I Great. can these question And much does then maybe confectionery is, what's like I'm think the we actually what clearly, say these see think of consumer just categories, look, we than attribute Because renaissance with and the a expected side, your to about research better the of -- I rate internal I on couple has agree all and been trend think years

Michele Buck

goods Well, certainly, is rise cutting rise, the we a And still also has post-pandemic, prepandemic at-home has more to behavior know to been that's a the as behavior, versus folks on going across back on know packaged continued that the that consumer snacking. bit snacking be they're on benefit and certainly, we restaurants.

that connectivity these part hasn't really bright particularly and that We want and especially the time, on happy, they downtimes to in more but emotional interact wellness, also opposed know, state. One we treat with And treat and do consumers, consumers is are is chocolate other they a are interested and and it's kind of parts emotional of I when think and of our in based to brands. on makes emotional how consumers their our there spot, they as of it snacking incredibly confection feel. them changed then, a it diametrically insight, over in are chocolate categories what time, And does want X kind of the course, when a themselves. this they and view

used And some the just of role Our brands They has products time since talking and moments played special the and they them in remember season. timeless all the the even bit experiencing dialed a more that or we with of the They kids letters are I about life. connection. friend -- continues a that when get perhaps Many their in pandemic. special with times, than the about are more people about are were about products. up to their it at think be with a

Operator

comes next line from Our Goldman Jason the English of Sachs. question with

Jason English

a chance get going on didn't apologize through all things. the prepared We I but remarks. a [indiscernible] go I lot this to apologies, My quick had X morning. question,

First, expansion. the capacity

for should quantification to the year. You capacity we What's that gave When online? see cadence? some coming the expect

Steven Voskuil

online of sort we've coming Yes. It's capacity the again, this going discussion year. a to fits throughout on had be expansion. And into broader

the think XXXX you if to in past. the XX%-ish look we've talked And network. for period, a at capacity in XXXX we're increase the I looking of

we're coming to I course it in towards what in going single ratably think so of a kind And XXXX be the is would And low of over that contribution digit about see goal. to the year. going

Jason English

slog. the to the this well? And like Should was a Okay. elevated year expect this as elevated long we level into sounds and it next year CapEx, continue beyond

Steven Voskuil

we'll level, I this for would finishing some tail probably -- at we investment or program the amount have elevated ERP off for from not be least and XXXX some will of still say, -- still Yes, having a but next capacity standpoint. capital, at the

on the So the would to. CapEx time, And that X capacity are we talk about I expansion. targeted the majority all is of those on as point CapEx, the things

growth opportunities, and you efficiency into some some more portion capacity that, improved has driven we and large had another on brands but capacity by significantly, If Reese and fantastic have Reese still is we've capacity. and and click unlock there Reese to the a network

expansion now. And of that investments X plus so CapEx are ERP of will kind eventually biggest drop capacity that components the right out the the

Jason English

your intent considered Understood. question It's it in strategic venture European stand-alone your bit small it to business doesn't -- expansion a business. where for on recently, carved last a kind anything always does of as export I've had you've this be a tactical Europe? in terms opportunistic. me. out Yet, signal of And just

Michele Buck

in to be of that's continues really expansion they made of to in we people small. just at Europe talent to any development changes not If the normal course all. the were reference for No, new that get -- and opportunities.

market growth to seeing our all. there change is in are feel a there. to continue lot But of at no We that great approach making we strides strategic and that

Operator

with next the of Kaufman Morgan line Stanley. comes question Our Pamela from

Pamela Kaufman

Can about you the of you've between key talk innovation existing how about you 'XX? versus are brands drivers innovations planned thinking growth line your been for And capacity constrained? top where

Michele Buck

Sure.

innovation year to And that of lot several think that confection items have launching across highlights business, our we portfolio. Puff. excitement would an consumer we important be be will merchandising. are look if stuffed at And and a continues there our So with Reese's part we this generate core Reese's the

We have Crunchy a Reese's Creamy is and limited which a edition, Reese's product. then a

limited that then So let kiss texture they new chocolate flavor a line And of editions which consumers Kisses milk is pick their like. an is a favorite Milklicious, filled have that exciting called filling. a which we with

salty sugared addition Cinnamon business, a limited our this year, launched, as a Dot On time flavor. we

folks so in very see successful. it's been as market And the that will

So some the biggest innovations. those of the of highlights are probably

with and to we the for that that's innovation important, our will is is top continue from strategy our we helped several -- ago across core. to We support want our focus line board we years accelerate don't primary stray news really employed excitement, and innovation on while away which really growth, a

innovation. a they been there be core our Our velocities brands time. Consumers will The are always stronger out that on them. sustainable, -- for them have love long than

using our So core driving portfolio, news X innovation then is new entire excitement. across for and job and our

Pamela Kaufman

for you just snacks behind could of for your XXXX, salty key America on between growth salty some in touch drivers maybe just you North business if the the about 'XX? are organic outlook snacks? terms of thinking growth And how confectionery And growth the Great. and

Michele Buck

and So talk have part I your a then some growth about bit little can Steve about the let of talk other drivers question. the me of

businesses investing as look in our be, those continue household expand marketing really penetration. So growth and and snacks, we to as will mentioned, at continue Steve to we salty brands in

that is will So that drive growth. an clearly investment

then that have we counts go going of We as XXXX, some more item increased especially and we'll 'XX. Once be to we'll distribution upside to upside, price well continue On saw to velocity growth we think continue as level and beyond through we architecture on see get that, in Dot's, we as distribution start increases opportunities. of pack Dot's. some

in growth the biggest SkinnyPop as continue those potential. So some unlock to are Investments will advertising we of ones. well, in

business. some those of growth think salty are the I across the drivers biggest

Steven Voskuil

Yes, going high media primary line just as of to components top high are a very underneath seasons, be the driver big at investment season and talked being there. that. confection And we're that pouring behind price standpoint, From single-digit the then we about level. earlier expecting brands a

growth, should Michele the expect side, volume. And what a On but have salty the as more double-digit also said, that price distribution as as we some brand, investing business well, too is behind and opportunities, which from we we and there we're there of again, mentioned.

international the On well side, as of and pricing mid-single-digit volume, distribution, back some a solid performance the innovation. on some

are a high of the So at targets. sort big level, those

Operator

comes line from question next Our with Chris of the Carey Wells Fargo Securities.

Christopher Carey

you probably this the what just landscape, single-digit on is which outlook. in in labor, on across staples so a if that see you frame to over this your that something gave the the commodities into commodities Steve, seeing sticky inflationary have mid-single-digit you costs. going for year, It's year. inflation. I'm striking we're locked trying little high a next of is be namely for good the cadence volatile drivers, the own and of Or information with is is on And is, I commodity that just are environment there guess to a impact inflation visibility ranges wondering the outlook? outlook, QX changes clearly, change I'm that good gross margin dynamic bit to but

quick a on -- have I in, now have consideration follow-up. is and we a point, locked we're a fairly visibility of And from or year year, that know, something and good this At like you more the from that's that. really

Steven Voskuil

Sure.

across been where parts. that in some ingredients and bitten X hedge if us dairy that things packaging pretty and the that and volatile, things On in we've resins last the cases, -- and I'd visibility, hedging I is say visibility. look the gives you commodities. Though at the caveat some in have program been years, COGS have general, of specialty the don't we like even say, have some good would we been and

So material movements few movements of those we at the those I in last movements some we of needle, material on that eye think the those are and an can saw some -- move years. keep ones and

I expectation settle to and our it's with for potential picked still COGS, into feel that volatility, we agree to guidance think you, is our volatility. that but rest some of visibility down of with range that I of down the we've try will settling most of accommodate the sort and

Christopher Carey

even confident up, One this today follow-up medium snacks in sounds that Okay. the saw business. that's improvement. commentary in positive with on better and we something but clearly, perhaps makes Day the quick inflection to an then business long-term coming term And Investor on sense. That margin suited the

long-term the when this So holistic side, would the you that and be what between organization margin over or about do just you target for is think segments of the those that driving have snack a sense time? confection any more between of

Steven Voskuil

all Yes. across Investor say, the That want is a what of is see our Conference. the margin to business, one And segments. improvement for we parts great I all will expectation

And grow, a to in same that's in sustainably And we to a improvement so way but that years, lot going seen expectation we've optimize there. continue and of that, recent but going grow profitable also. the international we're in have the

to in given things those extract a to always on business side, the drives the that as probably that impact on business and we've confection that opportunities margin still future opportunity, touched accretion. has and private on look the model deployed want capital margin more the of we have Salty expectations the and that we the out acquisitions label we to like

Operator

Palmer comes next the with David Our question line ISI. from of Evercore

David Palmer

was it to multiyear color asking quarter rather gross is basis, third looks third biggest quarter. might fourth the I'm end year-over-year versus about quarter improved, because like the the this been margin and quarter, than of what pricing it similar yet trend reason was on question XXXX. actually one in have The latest fourth that quarter, that in higher quarter was fourth margin especially your unlocks for A the

So unlocks any gross on helpful? color be margin would about

Steven Voskuil

absorption just said, Michele that we supply way we're think of the productivity chain the an had on, not but that back did chain touched have and ramped up dropping some biggest I we efficiency, Yes, as all supply we that driver see through efficiencies in quarter. terms uptick better private, side, some on Those P&L to couple the the are and of I'd point too. a as ones helping point the And but growth just I'll say things, in the those the are cost volume fourth dropping then fixed through well. elasticity

Christopher Carey

a COVID era, just this clearly, And I've big question, during picture did been at-home about thinking well. snacking is, one

with have you You seem doing made and thunder Seasons good and visibility in guys you're Seasons. to your what have into year each your pretty smores own

going poised you're have pretty you're like And so it to XXXX. a to -- good looks

not sustain of But snacking this about about just there helpful. energy I'm growth be well. can you other wonder would I overall an terms as have the -- think as that do whether you just in wondering view but as companies Hershey, just about occasion, for Any rate. for a at-home its comments for

Michele Buck

Sure.

consumable with business snacking, let at-home by saying our our start take-home been benefited strong. instant business quite me So has also as much have on as we

expect what really say we've forward. all of going going all and don't even segments volume segments we're -- to growth X instant business, that our So consumables. lose We on take-home seen those across we

we consumers normal may behavior. into we say So don't moderate, growth where a a ongoing their shake to the that bit in trend. moderate would we little it's versus been would But just see it expect reversal out as

Operator

the comes Bank. with Steve of question from line next Deutsche Powers Our

Stephen Robert Powers

Yes. you A&P I back the and X workforce wanted topics the investments. to go talked about the to investments already,

little those. Just a bit into beyond drilling

of notable any side, could? A&P just you spending the And of that phasing, on if incremental that -- drivers so, if planning? any the you're the Just phasing

as in the year of through where the you are a side the near-term makes about that year you I question Michele, layers and hires -- up goes they're guess sense there pipeline on? anticipate, and Is I intriguing. forward? Just investments walked it think priorities, in that Southeast earlier? on have talked the And the those of that on that the you carry in frankly especially is side, making should the show more and the something is, is spending are those kind it and early something Or number progressively then you we where builds with workforce on you hires?

Michele Buck

Yes.

investments the the -- our because investments investments towards in spending, being the at think stable we're will marketing fairly the about So should as On year more we doing year. conversion. you Salty, front end look throughout confection of the is the of during year the the SX be when loaded

the at beginning that spend, see we QX. the to going SG&A harder and harder at really the quarters those in we're across volume especially drive So investments the beginning and of will year. beginning the

Operator

Gumport Max the question from of Paribas. next comes line BNP with Our

Max Andrew Gumport

me, one it's gross and on margins. Just for

just up last levels and XX expect to related to year-over-year margins you impact? be like XXXX, for points could given close a realization net to in pressured valuation of 'XX a frame higher to if But which inflation. benefit are lapping be I'm it XQ to price the you margins due XQ trying gross magnitude sense productivity, gross timing XX offset of So get to expected sounds 'XX year? will inventory that basis

Steven Voskuil

Yes.

right. So you're exactly

most that X, pressured our will gross quarter For be margin quarter.

first In year-over-year the laps. of mention margin our specific still guidance that. did the be that as we'll I gross as for And because know most those -- But I fact, exactly quarter. expect down that quarter be will get I don't right, pressured you're for

Operator

John from Baumgartner line Our with Mizuho comes next the of question Securities.

John Baumgartner

brand in off, the are shelf shelf was you confection, taken First checkout and for move with in-store the had king there well, I you you're an in think different aisle size the focus think and some spending at lines, you sets. about increasing increased Then to pre-COVID, as non-consumables. some space magazine bringing how thinking back going capacity activation more I point? Michele, but this online,

I forward? as are XXXX, guess you going So you see still you point, activation if beyond from levers from what most and about even impactful at -- benefit think the here? Where we can this

Michele Buck

are we needs. unable were There shelf fill always capacity, shelf to we we lighter levers managing have across where So a activation some always is distribution, some that were of to drive priority. looking to as entire optimize mix on space areas, distribution the were the we of those

back we talked pulled see we us lighter were we where little opportunity about ahead bit capacity. had of on as So service. marketing again, of the an have a some improved because as earlier we spending We that

a we front-end looking always that, return strong there's the that. Reinvesting space. that retailers optimize on very front are know they reinstating end, at So how

continue we've so look important drive that getting those partner to able visibility to And display And at we be That is we where and that as in them, our our see in-store opportunity is do levels, business and we levels to store with there. promotional we in believe we've promotion today. to spending the are promotional COVID said, below business. continued seen our spending,

not a key priority that's back reinstate to So to the past.

John Baumgartner

of there Okay. snacks margin, noise a And was on Steve, lot year. salty then this the

mentioned catch-up on the You pricing.

Or thus maybe is think what Is advertising there underlying exiting had had it mid-teens? from the think the 'XX? those possible high-teens? we think QX warehousing bucket you margin sequential do rate to for and versus tailwinds far. increase you moving Is about run is margin spending. Just to elements? reduced in to different But pieces You the in segment improvements the some it QX, the promo it across structural about trying the QX,

Steven Voskuil

quarters. been question. fair the There a a lot of movements It's Yes. have across

it. you probably operate when still we transition especially be baseline the about there we in talked movement from. good look across -- as that run probably, that's think mid-teens, ERP a that this half rate I back And the with as of to say, to the I about quarters, think year

give that's further mid-teens, some starting As we you year, a spot. think get of But color into we'll probably if about more that good variability. to the

Operator

question comes Jonathan next of with the Consumer from Feeney line Edge. Our

Jonathan Feeney

of -- from costs was just the curious costs? just work pricing have by some was a much down? the if go start about It's -- is you the category? if rising costs, I the the to retailer could decline? know if past driven in characterize grow continue to data-driven. conversation some been -- that's over that about if should if together costs I risk you moderate of narrative all fact, of that in And just this how we and this expect moderate decline, to you -- how years even to about XX change been characterize X I'm away pricing. let's I And wondering points-or-so expectation But or wonder Or that much goes has how

Steven Voskuil

Sure.

Michele Buck

rollbacks. benefit move categories in the is or We that hasn't together category growth. Historically, that a premise, always That from and is the especially really try all execute category in declines there we are will feel the to retailers that of our with growing, leaders growth. really maximize to category we fundamental price being If price worked good in. been we

marketplace. tended prices the they As to have up, have in stick gone

of that matter dynamics a how category have As principle of worked.

to some to consumer for interruption to the in And smarter about holistic investment. new is leverage then of in of price try is model incremental that get them do growth, to find favorability what managing with in whether we really our that's retailer, to reinvest helping whether that reinvesting or the capabilities shelf points

Operator

our concludes Ms. call back I'll Poole comments. session. for final question-and-answer that any gentlemen, to the turn and Ladies

Melissa Poole

so you this for joining us much morning. Thank

you questions have. follow-up any a for available be will We Have great day.

Operator

Thank concludes you. This conference. today's

Thank at participation. time. your You your disconnect this you for lines may

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