The Hershey Company reported fourth quarter 2025 results, highlighting strong momentum in its salty snacks segment, which achieved 18% organic growth on double-digit volume gains. For the full year 2026, management provided confident guidance for 4% to 5% net sales growth and a robust 30% to 35% increase in earnings per share, driven by approximately 10% pricing realization and a 400 basis point improvement in gross margins to roughly 41%. The company is navigating significant headwinds from cocoa inflation and macro factors like SNAP waivers and GLP-1 drugs, but remains focused on aggressive brand investment, including a 'Year of Hershey' campaign, and innovation to fuel demand. Management emphasized that pricing is fully 'sold in' for 2026 and expressed optimism for margin expansion into 2027 as cocoa markets stabilize.
| Metric | Value | Change |
|---|---|---|
| Q4 2025 Salty Snacks Growth | 18% | Organic Growth / Double-Digit Volume |
| 2026 Net Sales Growth Guidance | 4% - 5% | N/A |
| 2026 EPS Growth Guidance | 30% - 35% | N/A |
| 2026 Gross Margin Expectation | ~41% | +400 bps vs 2025 |
| 2026 Pricing Impact | ~10% | N/A |
| 2026 Ad Spend Increase | Double-Digits | N/A |
| 2026 Elasticity Assumption | ~0.8 | N/A |
Management is launching a significant strategic shift termed the 'Year of Hershey,' marking the first major campaign for Hershey's and Reese's in eight years. This includes a biopic on Milton Hershey and a 'your happy place' campaign. This signal indicates a move to aggressively drive demand creation and brand equity to support pricing power and market share gains. The investment is coupled with a double-digit increase in advertising spend, signaling a priority on top-line momentum and consumer engagement.
The Salty Snacks segment is emerging as a critical growth engine, delivering 18% organic growth in Q4 2025 with double-digit volume growth. Brands like Skinny Pop and Dot's Pretzels are outperforming the category, which was relatively flat. This diversification reduces reliance on the volatile cocoa market and leverages consumer trends toward 'better-for-you' and permissible snacking. Management plans to continue fueling this segment with innovation and distribution gains.
A major strategic pivot is the anticipated margin recovery in 2026, targeting a 400 basis point improvement in gross margins to approximately 41%. This is driven by the lapping of cocoa inflation and the benefits of a supply surplus expected in 2025/2026. Management signaled that current cocoa market levels suggest potential 'deflation' or significant tailwinds for 2027 profitability, indicating a multi-year margin expansion story that supports the aggressive EPS guidance.
Capital allocation strategy is resetting to 'normal' following the stress of cocoa and tariff costs. Management indicated that share buybacks are 'back on the table' as cash flow improves, alongside returning dividend growth. This signals a shift from pure survival mode to a shareholder-friendly return of capital while maintaining investment in the business. They also expressed openness to M&A, specifically in the protein space, to complement the OneBar acquisition.
Management emphasized 'agility' as a core strategic capability. They detailed a balanced plan that accounts for upside (better elasticity) and downside (macro headwinds like SNAP/GLP-1). The strategy involves a 'push and pull' approach, balancing demand creation (marketing) with demand fulfillment (supply chain efficiency). This suggests a disciplined, data-driven approach to navigating the volatile cost and consumer environment.
Volume pressure remains a significant concern, with the 2026 guidance embedding a volume/mix decline due to the ~10% pricing impact. While current elasticity is favorable (better than 0.8), management is planning for elasticity to fluctuate and potentially worsen. The narrative that 'once you get through this pricing cycle, you'll be unable to grow your chocolate volumes for several years' was addressed but not entirely dismissed, posing a risk to long-term top-line growth.
Macro headwinds, specifically SNAP waivers and GLP-1 drug adoption, are explicitly factored into the guidance as a 'growing impact.' SNAP waivers restricting candy purchases are active in 12 states, and GLP-1 usage is expected to reduce consumption. Management described these as 'out of our control' and 'noisy,' creating uncertainty around the consumer demand outlook that could impact the recovery trajectory.
The International segment is projected to see organic sales decline by 'low single digits' in 2026. While EBIT is expected to grow double-digits due to pricing and cost cuts, the top-line weakness highlights challenges in premium international markets and cocoa-intensive products. This divergence suggests that the international growth story is currently struggling compared to the domestic salty snacks momentum.
Cocoa volatility remains a risk despite the positive outlook. Management noted that prices have not yet found a 'new normal' and are still volatile. While hedged for 2026, the company remains exposed to spot market fluctuations in the outer years. If the anticipated supply surplus does not materialize or if demand contracts less than expected, the margin recovery thesis for 2027 could be at risk.
Overall: Management displayed a high level of confidence and enthusiasm regarding the company's momentum and recovery trajectory for 2026. Kirk Tanner, the CEO, was particularly bullish on the strength of the portfolio and the 'Year of Hershey' strategy, while CFO Steven Voskuil provided detailed, reassuring data points on margins and cost control. They acknowledged external risks like cocoa volatility and SNAP changes but framed them as manageable within their guidance.
Confidence: HIGH - Management provided specific, wide-ranging guidance (30-35% EPS growth) and repeatedly used definitive language regarding pricing execution ('sold in') and market resilience. They articulated a clear strategic pivot back to brand investment and margin recovery.
4% to 5% organic growth
30% to 35% growth
Approximately 41% (400 bps improvement)
Around 3% organic growth
Mid-single digit organic growth
Down low single digits
Hedging & Uncertainty: Management utilized hedging language primarily regarding external factors and long-term projections, while remaining firm on 2026 execution. Terms like 'likely,' 'potential,' and 'if current levels hold' were used when discussing 2027 cocoa benefits and macro impacts. For example, Steven Voskuil stated, 'I think we all agree the external factors... seem to be improving,' and 'if that is slower or less impact, I think that's upside.' This suggests a prudent, risk-balanced approach to guidance, leaving room for volatility while maintaining confidence in internal controls.
Heading into 2026, I am confident. Our portfolio is resilient. - Kirk Tanner, CEO
We're looking at 4% to 5% net sales growth and meaningful earnings recovery. - Kirk Tanner, CEO
The pricing we took in '25... does not fully cover our cocoa cost inflation in 2026. - Kirk Tanner, CEO
We have flexibility to respond to what's gonna change and challenge. - Steven Voskuil, CFO
We're not gonna warehouse the shareholders' money if we can't wisely invest it... we're gonna give it back. - Steven Voskuil, CFO
The category remains very rational from a pricing standpoint. - Kirk Tanner, CEO
Analyst Sentiment: Analysts were highly focused on the sustainability of pricing power and the specific mechanics of the margin recovery, asking detailed questions about cocoa hedging, elasticity, and the 2027 outlook. There was a clear interest in understanding whether the current momentum is durable or if volume will collapse under the weight of price increases.
Management Responses: Management responses were direct and data-rich, frequently emphasizing that pricing is 'sold in' and that the guidance includes a 'balanced' view of risks. They effectively deflected specific 2027 questions to the upcoming Investor Day but provided enough detail on cocoa tailwinds to maintain bullish sentiment. They appeared well-prepared to discuss elasticity and macro factors.
Cocoa Cost Inflation & Hedging: Extensive discussion on the trajectory of cocoa prices, hedging positions for 2026 vs 2027, and the potential for deflationary benefits in the out-years.
Price Elasticity & Volume: Analysts probed the durability of volume trends given the price hikes. Management stressed that elasticity is currently favorable but planned for a 0.8 factor.
Macro Headwinds (SNAP & GLP-1s): Detailed Q&A on the impact of SNAP waivers in 12 states and the adoption of weight-loss drugs, with management noting these are 'out of control' but monitored.
Brand Investment & Innovation: Discussion on the 'Year of Hershey' campaign, the return of big brand marketing, and the innovation pipeline (e.g., Reese's Oreo).
Salty Snacks Performance: Focus on the 18% growth in the salty segment, driven by Skinny Pop and Dot's, as a key diversification driver.
Hershey is poised for a significant earnings recovery in 2026, driven by successful pricing realization and a major margin expansion as cocoa inflation abates. The 30-35% EPS growth guidance is robust and supported by 'sold in' pricing and strong cost controls. While volume pressure and macro headwinds (SNAP/GLP-1) present risks, management's confident tone and the diversification provided by the high-growth salty snacks segment (18% growth) mitigate these concerns. The strategic pivot back to heavy brand investment ('Year of Hershey') should further support pricing power and market share. The setup for 2027 looks increasingly attractive as potential cocoa deflation could drive further margin expansion.
Management anticipates a supply surplus in 2025/2026, leading to a new equilibrium price that is lower than recent highs but potentially above historical norms. This creates a tailwind for 2027 margins.
SNAP waivers restricting candy purchases are being implemented in 12 states. Management views this as a 'manageable headwind' but acknowledges it will impact consumption, particularly in the lower-income demographic.
The adoption of GLP-1 weight-loss drugs is expected to have a 'growing impact' across quarters. Hershey has a dedicated team monitoring this and is factoring it into guidance, focusing on 'better-for-you' options like protein to offset the risk.
Tariffs are 'fully understood' for the year. Q4 benefited from lower-than-expected tariffs on supplier materials, providing a slight upside to gross margins.