Hershey (HSY) Q3 2025: Double-Digit Salty Snacks Surge Offsets Cocoa-Driven Margin Pressure
Hershey’s Q3 revealed a multidimensional story: resilient core confectionery, aggressive salty snack share gains, and a disciplined approach to pricing amid volatile cocoa costs. The company’s strategy blends targeted innovation, channel-specific execution, and an emphasis on long-term brand investment, even as seasonal softness and international headwinds persist. Management’s focus on balancing core growth with innovation and margin recovery will shape investor expectations heading into 2026.
Summary
- Salty Snacks Outperformance: Volume-driven share gains in SkinnyPop and Dots contrast with broader category sluggishness.
- Pricing Discipline Amid Cocoa Volatility: Management prioritizes long-term margin restoration over near-term pricing reflexes.
- Innovation and Channel Execution: Reese’s Oreo and convenience channel initiatives drive core and new product momentum.
Performance Analysis
Hershey’s Q3 performance demonstrated operational resilience and portfolio balance. The core confectionery business maintained solid momentum, with everyday candy, mint, and gum (CMG) up double digits in the latest four weeks, even as Halloween sales underperformed due to late-season timing and weather. Salty snacks delivered standout results, with 14% year-over-year consumption growth and notable volume-driven share gains in SkinnyPop and Dots.
International operations remained challenged, posting a loss for the quarter, primarily due to cocoa-driven cost pressures and higher elasticity in premium-positioned markets. Despite this, Hershey gained share in all but one international core market, with Brazil highlighted as a bright spot. Pricing actions across the portfolio largely caught up with competitors, and management reported no concerning price gaps overall, despite some temporary pack-level discrepancies in convenience channels.
- Seasonal Softness: Halloween sales lagged expectations, but core everyday brands compensated with strong growth.
- Salty Snacks Momentum: SkinnyPop’s brand refresh and Dots’ category leadership fueled outperformance in a sluggish snacking market.
- International Drag: Cocoa cost intensity and higher elasticity weighed on profitability outside the U.S., despite local share gains.
Margin recovery remains a multi-year journey, with management emphasizing balanced growth, disciplined pricing, and ongoing productivity initiatives as levers for sustainable improvement.
Executive Commentary
"The momentum in the business right now, I'm really delighted with the balanced growth that we're seeing across our portfolio. It's really important that we grow and we are doing exceptional at the category level, building back margin. And so what does that do? It puts us on our long-term algorithm."
Kirk Tanner, President and CEO
"If you look at everyday CMG where the price increases hit, we're up double digits in the last four weeks. So feel good about what we're seeing so far. But more to play. We'll have more to say the next time we talk."
Steve Boskell, Senior Vice President and CFO
Strategic Positioning
1. Portfolio Balance: Core and Innovation Synergy
Hershey’s strategy is to balance core brand strength with innovation-driven growth. The Reese’s Oreo launch is a case study: it drove category-leading innovation while also lifting core brand sales, especially in the convenience channel. Management noted that Q3 core business grew nearly 5% even excluding this innovation, underscoring the success of a “core-plus-innovation” model.
2. Channel Execution: Convenience and Merchandising Focus
Channel execution, especially in convenience stores, is a renewed priority. Hershey rolled out gold standard merchandising and co-merchandising strategies, leveraging loyalty tools and personalized promotions. CMG’s +6% growth in convenience reflects these efforts, with further room for improvement identified by leadership.
3. Salty Snacks: Category Disruption and Brand Investment
The salty snacks segment is emerging as a growth engine, with SkinnyPop’s brand refresh and Dots’ rapid ascension to pretzel category leader status. Permissible snacking and premiumization trends are being leveraged, and management highlighted a robust innovation pipeline for all three salty brands, including Pirate’s Booty.
4. Pricing and Cocoa Cost Navigation
Pricing is being deployed deliberately, not reactively, with management emphasizing consumer-centric cadence and close customer collaboration. Cocoa, still 70% above 2023 levels, remains inflationary for the full year, but recent moderation and layered hedging provide some optimism for 2026. Leadership has not signaled intent to roll back pricing, focusing instead on margin rebuilding and productivity levers.
5. International: Share Gains Amid Profitability Pressure
International remains a long-term play, with current profitability hampered by cocoa intensity and high elasticity. Aggressive pricing and premium positioning create near-term headwinds, but share gains in most core markets and optimism for eventual recovery were emphasized.
Key Considerations
This quarter’s results highlight Hershey’s commitment to portfolio balance, disciplined pricing, and targeted investment. Management is navigating input cost volatility and consumer pressures by prioritizing long-term category health and brand equity.
Key Considerations:
- Input Cost Management: Cocoa remains a major variable, but layered hedging and disciplined procurement provide downside participation if prices fall further.
- Elasticity Watch: Management is planning for minus one elasticity in 2026, but real-time category performance will determine final guidance range.
- Innovation Pipeline: A robust slate of new products in both core confectionery and salty snacks positions Hershey for continued engagement and share gains.
- International Profitability Lag: Expect a longer recovery curve outside the U.S. due to cocoa cost intensity and higher elasticity.
- Brand Investment Efficiency: Digital and co-merchandising initiatives are being optimized for higher ROI, especially during seasonal peaks.
Risks
Cocoa price volatility and tariff uncertainty remain central risks, with potential for further margin compression if inflation persists or hedging proves mistimed. International profitability is likely to remain under pressure until cocoa moderates and elasticity stabilizes. Consumer sentiment and SNAP policy shifts, while currently minimal in impact, warrant continued monitoring given macroeconomic headwinds.
Forward Outlook
For Q4 2025, Hershey expects:
- Continued momentum in U.S. CMG, with additional brand investment to support holiday sell-through
- International top-line impact from shipment timing, with profitability lagging due to cocoa costs
For full-year 2026, management maintained its long-term algorithm outlook (2% to 4% revenue growth), with the possibility of upside on EPS depending on elasticity, cocoa, and tariff dynamics:
- Margin recovery to progress over multiple years, not a one-year event
Management cited several factors shaping the 2026 outlook:
- Elasticity and consumer health as key swing factors for EPS
- Innovation pipeline and brand investment as growth drivers
Takeaways
Hershey’s disciplined approach to pricing, brand investment, and channel execution is allowing it to defend core share and accelerate growth in salty snacks, despite volatile input costs and mixed seasonal performance.
- Salty Snacks Growth: Outperformance in SkinnyPop and Dots provides a counterweight to confectionery margin pressure, with innovation and permissible snacking trends set to drive further gains.
- Margin and Pricing Strategy: Management is focused on margin recovery over multiple years, using pricing, productivity, and brand investment rather than reflexive price cuts as cocoa moderates.
- Future Focus: Watch for elasticity outcomes, effectiveness of international recovery, and the pace of innovation adoption as key signals for 2026 upside.
Conclusion
Hershey’s Q3 2025 results underscore a company in transition—balancing resilient core growth, aggressive salty snacks expansion, and disciplined responses to cost volatility. The outlook hinges on elasticity, cocoa, and continued execution in both innovation and core brand channels.
Industry Read-Through
The resilience of U.S. confectionery and the outperformance of permissible salty snacks at Hershey signal that premiumization and core-plus-innovation models remain viable, even as consumer pressures mount. Cocoa cost volatility is a sector-wide concern, but Hershey’s hedging and pricing discipline set a template for peers. International profitability challenges and elasticity risks will be shared across global snacking players, while channel execution in convenience and digital merchandising emerges as a competitive differentiator. Watch for continued segmentation between companies that can balance core and innovation, and those that rely on price alone to offset input inflation.