The Hershey Company Q2 2026 Earnings Call Summary

Moby Intelligence

Fri, July 31, 2026 at 5:00 AM GMT+3 3 min read

The Hershey Company Q2 2026 Earnings Call Summary - Moby

Strategic Performance and Operational Context

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Management attributed the gap between U.S. confection retail consumption and shipments to non-measured channel growth and the year-over-year concentration of Easter shipments.
Performance in the North American Salty Snacks segment was hampered by 'growing pains' in the Dot's Pretzels business, specifically manufacturing capacity constraints that led to higher spot freight and logistics costs.
The company successfully completed retail inventory replenishment in Q2 following low levels during the April transition to new pack prices, earlier than the gradual recovery originally anticipated.
Strategic positioning remains focused on 'tentpole' marketing events, such as the summer S'mores campaign and upcoming movie tie-ins, to supplement core everyday and seasonal business cycles.
International growth momentum is being driven by strong demand in Brazil, the U.K., and India, though Mexico remains challenged by macroeconomic conditions.
Management emphasized that the category remains resilient despite hyper-competitive dynamics, with innovation serving as the primary driver for both market share and margin recovery.

Strategic Outlook and 2027 Framework

The 2027 framework remains achievable, with management citing high visibility into cocoa deflation next year even if futures remain at current levels.
Volume trends in North American confectionery are expected to improve as pricing elasticities normalize and the company laps high single-digit pricing actions from previous seasonal cycles.
The company expects a significant lift in gross margins in the second half of 2026 as commodity benefits flow through more substantially than in the first half.
Supply chain optimization for the Salty Snacks segment is expected to be fully realized by 2027, with automation and new capacity investments coming online to address current throughput limitations.
Guidance for the remainder of 2026 assumes a robust Halloween season and a heavy innovation calendar, including the launch of Hershey's Cream bars and movie-related merchandising.

Operational Risks and Structural Adjustments

Supply chain challenges in the salty segment resulted in operating margins coming in below expectations due to limited volume throughput and reliance on expensive spot freight.
Management noted that while El Niño speculation is impacting current cocoa pricing, they believe the market is already pricing in these risks and that global supply remains healthy.
International margins are expected to face a temporary drag in the second half of 2026 as the company undergoes optimization work to unlock long-term profitability.
Low-income households are showing signs of increased pressure, though management stated that elasticities across dollar and convenience channels remain consistent with internal plans.

Q&A Session Highlights

Visibility and sustainability of 2027 organic sales and EPS targets

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Management confirmed the 2% to 4% long-term organic growth algorithm remains the target, with 2% as the starting point for 2027 due to a shorter Easter period.
The earnings outlook is not solely dependent on cocoa deflation; it relies on a combination of volume restoration, innovation, and technology-driven productivity savings.

Supply chain constraints affecting Dot's Pretzels and Salty Snacks

The company admitted to 'growing pains' in keeping up with robust demand for Dot's, necessitating increased investment in automation and capacity.
Capacity issues are expected to be largely resolved by 2027, with immediate relief coming from new automation initiatives currently being implemented.

Cocoa supply dynamics and hedging strategy for 2027

Management argued that the current cycle differs from 2023-2024 because inventories are healthier and supply is more diversified.
Current hedging strategies are designed to provide flexibility to participate in further deflation as markets normalize, rather than locking in peak prices.

Impact of SNAP benefit changes on consumer demand

The impact of SNAP waivers has been slightly better than planned, with early-adopting states showing higher impacts than more recent states like Texas and Florida.
Management expressed confidence in their ability to forecast and plan for these specific macroeconomic headwinds.