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

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Steve Voskuil: And we have got a lot more tools and sophistication today to look at the ROIs for how we are deploying things like promotion and there’s no intent to get into an arms race of bad returning investments like that. We will have — we want to win with innovation, which we talked about in the remarks not just spending.

Melissa Poole: Yeah. I think, Jason, if it helps a little, too. We had the past, call it, two months or so, multiple price increases, three different price increases hitting retailers at the same time, which is kind of what drove that 20% Michele mentioned as kind of some of we were at the tail end of lapping some and some new ones we are going in. So we would expect that pricing number to come down and with that the volume declines to moderate as well. So in the next couple of months we would expect that to normalize a bit.

Jason English: Okay. And I am going to cheat with one quick follow-up related to that question. But to my point on how are you been sending the organization, your sales force in particular, is the market share component to the bonus or is it just deliver the revenue?

Steve Voskuil: Yeah. Today market share is not a component of most bonuses, it’s about delivering the revenue, but we have other metrics around quality of delivery and how it’s delivered and where…

Melissa Poole: Sales activity based margins that enable a balance between sales and profitable sales.

Steve Voskuil: That’s right.

Jason English: Got it. That is helpful. Thank you very much. I will pass it on.

Steve Voskuil: You bet.

Operator: Thank you. Our next questions come from the line of Connor Rattigan with Consumer Edge Research. Please proceed with your questions.

Connor Rattigan: Good morning. Thanks for the question. So I guess as we think about the pricing environment and increasing elasticity going forward, should we view your on capacity is just meeting existing underlying demand or is there may be an opportunity to allocate some of that newfound capacity to take advantage of some strategic revenue management opportunities, such as package resizing or bar weights to drive net price realization going forward?

Michele Buck: Yeah. We have been very focused on strategic revenue management and pack price architecture on both confection and the salty categories. I think a few years ago, we talked about evolving our pricing approach from just list pricing to how we look more holistically at strategic pricing. And in these categories in particular, it’s a big opportunity. We continue to focus there in confection and on salty it’s certainly something that as we acquired these businesses was a real underdeveloped area of opportunity.

Connor Rattigan: Great. Thank you. I will pass it on.

Operator: Thank you. Our next questions come from the line of Rob Dickerson with Jefferies. Please proceed with your questions.

Rob Dickerson: Great. Thanks so much. I just have two questions. I just want to circle back to some of the comments you made, Steve, just on cocoa and sugar inflation that Ken asked. It sounds like there clearly are other offset besides pricing that you can act to kind of help alleviate, let’s say, soften some of that pressure over the next two years given your hedging schedule, but clearly, cocoa has also inflated fairly materially over the past few months. I am just curious like when I try to combine the comments from the offsets, but then the comments, I think, or which — in the prepared remarks about potential more promotional activity next year and all the pricing you have taken is like, do you feel like you are kind of reaching this point such that maybe market share is a little softer, maybe that’s driven by capacity, capacity is coming online or maybe you need to promote, but also maybe you kind of have kind of hit certain price points that you have to be like very careful with at this point on the everyday side of the business and maybe you don’t really want to take more pricing, but if you hadn’t, you would?

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