Hershey plans job cuts as consumer spending, cocoa costs weigh on business

Dive Brief:

• Hershey plans to cut jobs, the confections and salty snacks company said in an SEC filing. It expects to incur employee severance and related separation benefits of up to $60 million.
• The Reese’s and Dot’s manufacturer did not disclose how many jobs would be lost or when the cuts would take place. Hershey currently employs about 19,000 people around the world.
• The planned reduction in staffing — part of a broader multi-year productivity initiative at the CPG giant — comes as Hershey and other food makers face sales pressure from consumers looking to curtail spending amid high prices at the grocery store due to inflation. 

Dive Insight:

Hershey said Thursday that sales rose a scant 0.2% to $2.7 billion in its most recent quarter and projected sales will grow 2% to 3% in its 2024 fiscal year, due in large part to higher prices. Organic net sales rose 7.2% in 2023.

“We continue to operate in a dynamic environment,” Michele Buck, Hershey’s CEO, said in a statement. “We are elevating our focus on productivity and transformation to strengthen our business and deliver peer leading performance over the long-term.”

In addition to the reduction in staffing, Hershey plans to identify ways to rein in spending across many faces of its business, including its supply chain and manufacturing, while leveraging new technology and other practices to further simplify and automate processes. 

Hershey estimates the initiative will lead to pre-tax costs of $200 million to $250 million through 2026, and contribute to ongoing annual savings of approximately $300 million once the program is completed.

Hershey’s business also is being weighed down by sugar and historic cocoa prices that are “expected to limit earnings growth this year,” Buck said. 

In a call with analysts, the executive didn’t rule out the possibility of further price hikes. “We can’t talk about future pricing,” Buck said, according to a transcript. She added that “given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business.”

After years of price increases, consumers are showing signs of pushing back. Mondelēz sales growth slowed considerably in its most recent quarter. The Oreo and Ritz producer forecast even slower growth in 2024.

General Mills noted that its sales dipped 2% in its quarter as consumers put less of its snacks and cereals in their shopping carts. And Conagra Brands reported that its price mix fell into negative territory. It’s evidence that shoppers are cutting back on some of Conagra’s higher-priced items.