Customers started their Halloween shopping early last year. However, they’re moving slowly this year. Thus, in order to reach its targets this weekend, Hershey, the company that produces Kit Kat (in the US), Twizzlers, and Reese’s, is depending on consumers to stock up on candies.
The stakes are high, particularly given the decline in regular chocolate sales and the recent spike in cocoa prices.
In prepared remarks on Thursday, Hershey CEO Michele Buck discussed the company’s third-quarter results. “Consumers have returned to purchasing their trick-or-treat candy closer to Halloween after supply chain and availability concerns spurred earlier purchases last year,” Buck said.
“We still have a few key selling days left before Halloween on Tuesday.”
An Important Weekend
It’s too early to predict with certainty how this year will turn out. However, earlier this month, according to Dan Sadler, a principal of client insights at consumer research firm Circana, which specializes in confections, things were “off to a little bit of a rocky start.”
He claimed that 2021 was a fantastic year for Halloween candy sales because everyone was excited to celebrate the closure of COVID-19. It was worse last year. Additionally, he stated that sales so far this season “have lagged even last year’s off performance.” “We are seeing a slight decline in performance for both chocolate and non-chocolate.”
There’s still time to close the difference, particularly since more people are buying their holiday gifts later in the season. Additionally, there won’t be any supply problems this year—at least not for Hershey.
Hershey issued a warning last summer that it wouldn’t be able to meet demand for Halloween. However, Buck stated that “shelves are full” for this season. According to her, trends are currently to Hershey’s advantage. “We are outperforming the category, and our Hershey Halloween retail sales to date are slightly up versus the prior year,” she stated.
Determining the appropriate amount of candy to produce for the holidays is a delicate task. Food producers aim to produce the ideal quantity because producing too little might deter customers and cause them to switch to a rival brand.
An excess of inventory necessitates a discount for its sale. Furthermore, retailers may decide to reduce a company’s allotment after a disappointing season because they are continuously assessing which products receive the most shelf space.
For candy brands, the holidays are very significant. For Hershey, Halloween accounts for between 25% and 30% of the company’s annual revenue.
Additionally, Hershey’s regular chocolate sales are struggling, which puts additional pressure on Halloween merchandise.
Sales of Chocolate Fall
“Everyday chocolate sales growth slowed in the third quarter within North America Confectionery,” according to Buck.
The North American Confectionery segment of the company, which sells candy, mints, and gum, saw a 9.9% year-over-year increase in net sales in the third quarter. However, an 11.1% price increase was the main cause of the increase. Volumes decreased during that time, indicating that consumers were spending more money but purchasing fewer goods.
Nevertheless, Hershey outperformed Wall Street forecasts for the quarter and is the owner of snack brands like Dot’s Pretzels and Pirate’s Booty. But on Friday, its stock dropped by almost 3%.