Hershey adds distribution centers to boost capacity ahead of Halloween

Dive Brief:

• Hershey will add three distribution and fulfillment centers this year and work to install an additional 10 production lines as the candy manufacturer looks to boost capacity and meet growing demand, according to prepared remarks ahead of the company’s Q1 earnings report.
• The company has opened one fulfillment center in Annville, Pennsylvania, Hershey said in an email to Supply Chain Dive. Another distribution center in Brantford, Canada, has started full operations, with a goal of replacing a warehouse shared with another food company. A third center in Whitestown, Indiana, will support the company’s snack business, including brands such as SkinnyPop and Pirate’s Booty.
• Hershey is looking to ramp up production and add inventory ahead of the busy Halloween season, President and CEO Michele Buck said in an earnings call last month. “We are doing everything we can relative to building capacity, investing in new lines, distribution centers, hiring more people to build our supply as much as possible.”

Dive Insight:

Capacity constraints prevented Hershey from meeting strong demand during the Easter season. Now, the candy manufacturer is doubling down on operational investments to add supply and be fully prepared for Halloween.

“We expect that as we go through the year, we will continue to have supply challenges, although they will improve as we progress throughout the year,” Buck said on the call. “And we’re working hard to maximize the opportunity for Halloween.”

Hershey is experiencing greatest capacity constraints within its Reese’s brand, Buck said in the call. The company also expects several products to “remain capacity-constrained until 2023,” according to prepared remarks.

The candy manufacturer is building up distribution of its Dot’s brand, which it acquired in 2021. Distribution within the brand remains skewed toward the West Coast, according to Buck.

“We’ve had a big focus on trying to close the distribution gap on the East Coast in particular and then to also fill in, in some of the key retailers and classes of trades throughout,” he said. “So it’s been a constant build.”

Other snack companies have invested to expand capacity to boost production. Mondelēz said last year it would expand capacity at a 68,000-square-foot facility in Virginia to support manufacturing operations and enable a high-speed Oreo production line.

Beyond adding capacity, Hershey is also investing in automation to add efficiencies within its operations. The company said it’s using automation to “more efficiently package smaller opening price point bags,” according to prepared remarks.

“Across our entire business, not just supply chain, we continue to look at opportunities where technology can allow us to operate more efficiently, give us better insights,” Buck said during the call.