“We will not be able to fully meet consumer demand,” for the October holiday, warned Hershey CEO Michele Buck in prepared remarks about the company’s second-quarter results Thursday.
The problem? Consumers are demanding more regular and Halloween-themed candy than Hershey can make, at least right now.
Many consumer goods manufacturers have been struggling to meet surging demand for their products during the pandemic, especially with the ongoing supply chain issues. That’s meant that they’ve had to reduce production of certain less popular items or, as in the case of the late, great Choco Taco, cut them altogether.
Hershey is in the same boat.
Demand for sweets surged during the pandemic and has remained high. Meanwhile interest in Halloween has only gotten stronger. That’s bittersweet news for Hershey, which has seen its sales spike — the company reported double-digit sales growth in the quarter compared to last year -— but it has also had to make some production sacrifices.
The chocolate maker uses the same manufacturing lines for its regular and seasonal products. That means it can’t amp up production of both regular sweets and Halloween or holiday items. Instead, it has to do one or the other.
“We had a strategy of prioritizing everyday on-shelf availability,” Buck said during an analyst call discussing the company’s second-quarter results. “That was a choice that we needed to make,” she said. “It was a tough decision.”
That likely means ceding ground to competitors such as Mars Wrigley, which makes M&Ms, Snickers, Skittles and other candies, and Brach’s, during the busy Halloween season. Hershey is adding more manufacturing lines and hoping that it will be able to meet demand in the next couple of years.
But it has other issues.
In addition to capacity constraints, the company is still struggling with disruptions along its supply chain, including higher dairy prices and scarce ingredients. In order to get the ingredients it needs, Hershey has to source them from other suppliers, which is costly.
These issues are largely related to the war in Ukraine, Buck said.