Raise your hand if you’ve snacked your way through this challenging year.
You would be far from alone in the pursuit of small pleasures as the pandemic surges on. Data from the NPD Group reveals that the stress and chaos of 2020 contributed to an 8% increase in snack (both sweet and salty) consumption and a 4% increase in in-home snack breaks.
With many working remotely indefinitely, it’s also no surprise that the research firm found that people were partaking in twin popular pastimes, baking and consumption of carbs, reflected in rising sales of cookware and appliances. The National Confectioners Association (NCA) also reports that consumption of premium chocolate especially has risen 12.5% since March as more people satisfied a sweet tooth amid the chaos and uncertainty of COVID.
All this was good news for Hershey’s business. As many food brands filed for bankruptcy or shuttered entirely — while still others had to pivot sharply to retain customers — Hershey’s is leaning in to growth thanks to all that baking and snacking.
“We’ve definitely seen chocolate sales increase,” Hershey’s chief sales officer Phil Stanley told CO—. But he didn’t sugarcoat the challenges. “There were also parts of our business that were impacted,” he said. Amid stay-at-home orders, the brand lost business from closed airport shops and vacant concession stands at shuttered movie theaters.
And Hershey’s saw a 19.2% slowdown in its refreshment category.
However, these hits proved no match for the “really strong growth, especially in chocolate,” happening at retailers like grocery and dollar stores, said Stanley. NCA’s data revealed that grocery stores primarily drove chocolate and candy sales to a 16.6% lift as consumers across the country were often restricted to shopping at these essential businesses during the pandemic. For its part, Hershey’s has already sold nearly one billion pounds of chocolate this year, and over 1.5 billion candy bars (king and regular size).
But it’s not just about the candy. Hershey’s Chocolate Milk six-packs are the single fastest growing Hershey item in 2020 and the company confirmed that Hershey’s baking products such as cocoa and baking pieces (chocolate chip or peanut butter cookies, anyone?) are also up significantly, Stanley said. Overall Hershey’s logged a 4% increase in net sales to $2.22 billion in the third quarter.
Consumers are amazing. They just found unique ways to celebrate with more at-home activities, baking and the creative ways that they handed out candy for trick-or-treating.
Phil Stanley, chief sales officer, Hershey’s
A sweet spot for consumers through crises — from the 1918 influenza to COVID-19
This shouldn’t come as too much of a surprise considering that Hershey’s long history illustrates how sturdy the snack and candy business can be. After two unprofitable ventures, confectioner Milton Hershey struck gold with the success of his caramel company in 1886. He began distributing chocolate to the masses—then considered a luxury reserved for the affluent—as an affordable treat around the turn of the 20th century. Over the course of more than a century, Hershey’s company weathered the influenza pandemic of 1918, the Great Depression, two World Wars, and more recently, the most recent economic recession.
Despite the threat of COVID, the company launched new products this year and some of them have been hits. Top performing Kit Kat Duos raked in $62 million in sales, while sales of Hershey’s White Crème With Almond topped $19 million. And let’s not forget limited edition Kit Kats, which were largely driven by new flavors like Birthday Cake and Apple Pie. (Hershey’s perennial bestseller is its Reese’s franchise which brings in over $2 billion in sales annually.)
Consumer behavior hasn’t been predictable at all this year and it could have posed a problem particularly at Halloween, historically one of the holidays responsible for huge candy sales. No one really knew how this Halloween would play out with social-distancing mandates and gathering restrictions varying by region, Stanley said.
A bold pandemic play pays off
“Early on in the pandemic, we had to make a decision if we were going to lean into Halloween or pull back,” he recalled. “We decided that we were going to lean in with our retail partners.” That would prove to be a smart strategy. “Consumers appreciate and value chocolate and candy during these uncertain times because of their uncanny ability to boost moods and lighten perspectives,” according to a statement from the NCA. What Hershey’s couldn’t have anticipated was how early people would start prepping for the Super Bowl of the candy-selling season in an unprecedented year.
“The other part that was really interesting is that we saw almost 38% of our Halloween growth happen in August,” Stanley explained. This might have posed a nightmare for manufacturing and fulfilling all those unexpected orders. But Stanley credits the strength and agility of Hershey’s supply chain and the team that runs it. “Our case fill to customer was almost 99%,” he pointed out. For context, that percentage comes from the number of orders placed versus the number that a company like Hershey’s is able to ship. Industry standards in inventory fulfillment range from 92% to 98%. “So, we not only worked closely on building the strategies and the plans [to meet demand], but we’re able to execute that by delivering it to our customers,” said Stanley. “And, you know, we continue to do that each and every day.”
Hershey’s also managed to make good on fulfilling orders from its retail partners by listening carefully to customers through market research and across social channels like Facebook, Instagram and Twitter. That gave the company the information needed to anticipate an unusual but promising season. “Consumers are amazing,” Stanley said. “They just found unique ways to celebrate with more at-home activities, baking and the creative ways that they handed out candy for trick-or-treating.”
Stanley himself heard anecdotes of unique ways to celebrate with candy, from socially distant parking lot “trunk or treats” to parents who drove around neighborhoods and dropped off candy to kids’ houses so they wouldn’t have to risk going door to door. These measures helped Hershey’s have a strong sell-through (meaning there weren’t a whole lot of bags of candy and chocolate left on the shelves virtual or physical) after November 1, which allowed Hershey’s to get out to a fast start for the holidays.
Leaning into e-commerce and work-from-home trends in 2021
Hershey’s is now poised to leverage the reality that consumers are still largely staying home and finding different ways to have fun. Stanley said game nights, movie nights and backyard barbecues are all great places to enjoy a variety of Hershey’s products. Indeed, it’s just as easy to make a S’more over a gas grill as it is around a campfire in the woods.
Stanley also noted the continued shift from shopping in-store to online. “We’re well positioned to meet the needs of consumers there, and we’ll continue to work with our retail partners [like Amazon],” he said.
Looking ahead to 2021, Stanley admitted there is no crystal ball to illuminate how consumer spending will trend, but he’s sanguine. “Hey, it’s going to be a year that we’re going to have to do the same thing we did this year,” he said. “We’re going to have to be super agile, constantly listening to consumers and how their behaviors are changing and then pivot quickly.” That’s what Hershey’s did this year as an entire company. And that’s why he believes the business is doing so well. “We’re just continuing to find new ways to excite consumers,” Stanley said. “The good thing is they’re voting with their wallets and they’re buying some of our great brands.”
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Published January 05, 2021